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Market conditions, feed costs affect price

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By Rick Greenwell

This article came from Kevin Laurent, Extension Associate, University of Kentucky and we thought we would share it with you all.

There were no CPH-45 sales held during the mid-December to mid-January time period.  This month we have included an historical summary of estimated net added returns for 600 pound steers selling in the Guthrie/Hopkinsville sales from 1993-2010.
The Guthrie/Hopkinsville sale is the oldest continuously operating CPH-45 sale in the state.  The CPH-45 program began in Hopkinsville in 1980 and was known as the PennyrileArea CPH Sale.  In 2005, the Pennyrilecommittee moved the sale to Guthrie and renamed the sale the KY-TN CPH-45 Advantage Sale to reflect the addition of TN producers.  
Since 1993, estimated net added returns per head have been calculated each year to determine the profitability of selling a 6 weight steer in the Guthrie/Hopkinsville CPH-45 December sale vs. selling the same calf as a 5 weight at weaning in October.
The profitability of holding 5 weight steers from October until the Guthrie/Hopkinsville December CPH-45 sale is estimated in the following table.  Market conditions and feed cost are two critical factors affecting profits in short term preconditioning.  The average price reported by KDA for October 500-599 lb. LM1 steers from 1993 -2010 was $88.11/cwt.  The average price received for 600-699 lb LM1-2 steers at the Guthrie/Hopkinsville CPH-45 sale during that same time period was $88.80/cwt.  This means, on the average, the heavier 6 weight steer actually sold at a slight positive margin in the CPH-45 sale as compared to the lighter 5 weight steer in October.  
Cost of gain fluctuates with the price of feed.  Estimated feed cost per lb. of gain ranged from $0.27 to $0.52during this time period.  The average feed cost per lb. of gain was $0.34.  Veterinary expense/sale tags increased from $12 to $15 per head.  Interest rates have fluctuated between 6 and 9 percent.  Estimated net added returns for a 665 lb steer in the Guthrie/Hopkinsville December CPH-45 sale ranged from -$19.46 (2008) to $100.34 (2005) with an average return of $59.36per head.  Negative returns only occurred in 2 years (2006 and 2008).  In 16 out of the last 18 years, it is estimated that producers benefited from selling these calves in the December CPH-45 sale instead of selling at weaning in October.