B-l U55 AUGUST 196B ECONOMIC TREND in Texas Cattle Feecli TEXAS A&M UNIVERSITY Texas Agricultural Experiment Station R. E. Patterson, Director, College Station, Texas Contents Acknowledgment ...................................................... ._ 2 Introduction ..................... ........................................ .. 3 w Structure offthe ‘Cattle lndustry .............................. .. 4 Cattle Beef Production ............................. .. 4 lntegratiiilfil of Feeding ..................................... .. 6 Growth of Cioiftttle Feeding ....................................... .. 8 Types Fed ...... ...................... ............................ .. 9 Steers vs. Heifers ............ .............................. .. 9 Weight Ranges ................................................. .. 9 Importance of State Regions”; ........................... .. ll District Variations ............................................. ..l2 Seasonal Differences ........................................ ..l2 Size of Operations and Location ........................... ..l3 Large vs. Small Feedlots ................................ ..l3 Capacities ......................................................... ..l5 Feedlot Marketings ............................................. ..‘ .... ..l7 Feeding Margins ....................................................... ..l9 Slaughter Calves .............................................. .. 2O Feeding Profits ................................................. .. 2i Break-even Cost Charts .................................... ..23 Feeder vs. Slaughter Grades ........................... .124 Federal Grades ................................................. ..24 Feeder Cattle Grades ....................................... .27 Summary and Conclusions ......................... .......... ..28 References ................................................................. .29 Appendix Tables ...................................................... ..3O Acknowledgment Appreciation is extended to the Texas Cr“ Livestock Reporting Service, USDA for their t’ tion and efforts in making information. availa) this publication. All basic data for this stu provided by that organization. A special than’ to Cary D. Palmer, state statistician, and to Fra Galloway and Robert S. McCauley, agricultural l ticians. ' omic trends ‘plexus cattle feeding Edward Uvacek, J r.* ‘tock marketing specialist and assistant professor, Department _ Agricultural Economics and Sociology, Texas A&M University. THERE HAVE BEEN many marked changes in the live- stock and meat industry in Texas during the last few years. Cattle feeding has been only one of a long line of adjustments which the industry has had to make to keep up with current demands of the modern and dynamic meat marketing industry. The population of Texas has risen from 3 mil- lion persons in 1900 to almost 10 million by 1960. The tremendous expansion came after 1940. During this same period the typical Texas consumer’s tastes and. preferences have been changing rapidly. Real incomes have risen, and the population has shifted - from a historically rural one to principally an urban- oriented life. To meet the new demands of this modern consumer, structural adjustments came about in the livestock and meat industry of Texas. The rapidly growing metropolitan areas stimu- lated the expansion of large volume retailing estab- lishments which resulted in mass buying of meat and rigid purchasing specifications. Adjustments to this new type of merchandising caused shifts in slaughter- ing locations, integration and the development of commercial cattle feeding. Traditionally, the slaughter of beef for Texas consumption consisted of grass-fat steers, slaughter calves right from the ranches and beef cows. The more modern Texas consumer, however, had more money to spend and demanded the higher grades of meat. This, together with the retailers’ desire to reduce quality, variation, caused them to rely heavily upon USDA Good and Choice heavy ‘beef in their buying specifications. Such carcasses were rare in Texas, so retailers were forced to obtain this type of beef from other slaughtering points such as Denver, Kansas City” and Omaha. Purchases through local plants of national packers and large independents who brought in beef from the north proved to be the most convenient method of buying these higher grades. For example, Texas packers reported that in 1959, two-thirds of their dressed beef purchases were from outside the state. This increased demand for heavy beef, as well as the stimulation received from abundant feed sup- plies, available quantities of feeder animals and a mild climate, have brought about a phenomenal growth in the cattle feeding industry of Texas. Marketings from Texas feedlots reached 1,094,000 head in 1965, a percentage increase of 270 percent above the 1958 level. It is the purpose of this publication to gather together into a concise form the information avail- able on cattle feeding in Texas. The bulk of this material was obtained from reports of the Texas 3 Million head naive uéao s90 ueloo iéuo 1920 rsao s40 léso nseo Year Figure l. Number of Texas cattle and calves, January l. (See Appendix Table 2). Crop and Livestock Reporting Service, SRS, USDA, in Austin. This data is analyzed to provide the reader with a candid economic view of the trends in the Texas cattle feeding industry. Areas of growth within the state and types of animals demanded also are °°°’ All cattle 80D- 700p fProclucllon ,/'/ 500' 500 4-00 - 300L- 500 -' é I Million pounds dressed weight \ a 0 ' ' iii-ki-nnn September, 1962. 4 ./\{C0mmerclal s|au.9.l|¢er_>'~' " l i Trend i" - _v_‘__ ./-' “\ . . i . . 0 . ‘2¢'=-—---'-'-'=-“"”L Consumption , t‘ L 1 1 1 1 1 1 1 1 1 r 1 1 1 1 1 1 1 1 1 1 1 1 .1‘ ‘ |s41 ‘48 ‘49 ‘s0 ‘s: ‘s ‘s3 ‘$4 ‘s5 ‘se ‘s1 ‘sa ‘ssreo ‘s: ‘are; ‘e4 ‘es ‘were Year Figure 2. Texas production for slaughter, commercial slaughter and purchased ‘consumption of cattle and calves, 1947-60 with 'l trends. Source: Marketing Potentials for Feedlot Cattle in Oklahoma and Texas; Processed Series P-426, Oklahoma State Univ 1 examined in detail to provide additional inf’ tion for the industry to use in their decision-m,‘ processes. " rug,- wv- t STRUCTURE OF THE CATTLE INDUSTRM Although the principal adjustments have re q from the changes at the retail level and gra worked their way to the cattlefl-"iproducer, let usi with livestock production and work through th tern to the distribution and consumption of ‘ This section is offered merely as an outline y‘ industry structure, since a more complete pre tion will follow in a later publication. 4 Cattle and Beef Production Cattle and calf inventories in Texas and i, nation are estimated on January l each year. Texas, the inventories have indicated a rela level trend prior to the late l920’s, except for cy variations. Since 1928, however, numbers of and calves have gradually trended upward and _ reached new record levels (Figure 1) . On Jan ....... .. wigs; non’ W . . . . . . . . - - -- . s . . - . . . . . . - - - - ' ' ' ' ' .. .. ""“~I o " iere were 10,239,000 head ot cattle and calves is farms and ranches, or about 10 percent of . total. Appendix Table 1 contains the U. S. txas data on cattle numbers, slaughter and lnce 1940. "n though Texas leads the nation in total of cattle produced, it is exceeded by Iowa, A ia and Nebraska in number of cattle com- ply slaughtered. Such slaughter represents all animals except those slaughtered on farms “for use”. Consumption of beef and calf in Texas, Jr, has been far below these commercial slaugh- ‘els except for short periods in the early and 0's (Figure 2) . Texas, therefore, has been left l surplus of beef and almost a balance between jughter and consumption. This would indicate any cattle slaughtered in Texas are being y out of state for consumption. It was esti- Mthat 28 percent of the beef volume of Texas was represented by sales outside of Texas. Julk of these sales, however, probably are cow boned beef and boneless frozen beef} ui.“<-i- ‘yclical changes in cattle and calf numbers are consistent throughout the nation. The buildup of the cycle usually takes about 7 years, while iquidation years, or reduction of herd size, have ‘ ally shortened in each succeeding cycle. n addition to these cyclical adjustments in cattle Irs, factors such as wars, severe weather condi- J A depressions, recessions and other economic '5 influence the holding or liquidation of herds. ‘Cu g periods of drought, for example, as occurred 7%- Southern Plains States during 1952-56, the ' fer of cattle and calves moving to slaughter in- ‘id substantially. iFigure 3 illustrates the relationship of cattle ibers or inventory count to total slaughter of h, Raymond A. et al., The Texas-Oklahoma Meat In- f , Agricultural Economic Report No. 39, USDA, July 1963. no " lrlvenforyy l 9O »i w w ~ 4O 3° g\s|auqh+er .11 20 I941 '50 ‘53 ‘56 ‘59 ‘62- ‘65 9 Year Figure 3. United States cattle inventory and slaughter. _ e and calves on farms at end of year. A 1 cattle and calf slaughter. TABLE 1. TEXAS MARKETINGS OF CATTLE AND CALVES Total Percent Fed cattle and state marketings fed marketings Year calf marketings cattle and calves of total — — -- — 1,000 head — — — — 1955 227 4445 5.1 1956 307 5048 6.1 1957 291 4066 7.2 1958 296 3584 8.3 1959 403 3682 10.9 1960 477 4300 11.1 1961 548 4505 12.2 1962 756 4587 16.5 1963 896 5178 17.3 1964 971 4 5374 18.1 1965 1094 5270 - 20.8 cattle and calves. In general, the number of head slaughtered during a year coincides fairly well with the inventory count of numbers at the beginning of each year. Consequently, as the buildup phase of the cattle cycle occurred from 1949 to 1955, the slaughter correspondingly increased. The additional year of high slaughter levels in 1956 represented a combination of increased cattle movement caused by drought and heavy first-year liquidation of herds. Slaughter levels during the first year or two of the buildup phase of the cycle are affected by holdback of animals and generally are somewhat lower. These cyclical changes are, therefore, fairly comparable. A gain in cattle numbers causes larger slaughter and the increase of beef supplies forces prices to lower levels. There exists, as a result, an inverse relationship be- tween cattle numbers and prices. The number of cattle and calves on feed is reported quarterly for the major feeding areas of the country. In adition, details are available on the number “placed” on feed during the previous quarter, as well as a breakdown of “length of time” and “weight classifications” of cattle on feed as of a certain date. Cattle and calf numbers “marketed” from feedlots during the previous calendar quarter and “intentions” to market in the next quarter also are recorded. The growth of cattle and calf feeding in Texas, of course, has caused its relative importance to change considerably. On January 1, 1960, numbers of cattle and calves on feed represented only about 3 percent of the state total inventory of all cattle and calves, but by January 1, 1965, this figure had increased to 5 percent. Even more spectacular is the proportion of fed cattle and calf marketings from feedlots to the total Texas cattle and calf marketings. In 1955, market- ings from feedlots represented only about 5 percent of the total state marketings, while the 1965 propor- tion reached approximately 21 ‘percent (Table 1). 5 The feeding of cattle and calves thus is becoming an increasingly important part of the Texas cattle in- dustry. This increased feeding will, in turn, cause heavier carcass weights and more total meat produc- tion in the state. Total marketing figures, of course, represent all types of animals, including feeders, stockers, feedlot cattle and any other cattle or calves ready for slaugh- ter. A recent feedlot study in the southern plains has attempted to separate Texas cattle and calf marketings into the slaughter and feeder-stocker categories. The estimates of marketings for slaughter also included outshipments for immediate slaughter as well as Texas-slaughtered stock. The marketings, thus broken down, indicate that cattle for slaughter TABLE 2. CATTLE AND CALVES FED BY MEAT PACKERS‘ form the major portion of total Texas cat, calf marketings? It must be remembered Texas many calves move directly to slaughter. out further feeding, in response to the strong to satisfy the slaughter calf trade. Such mark, however, are quite seasonal. i Integration of Feeding "L. » The term “integration” in the cattle 1 industry is dificult to define?’ The numerous WVilliams, Willard F., Marketing Potentials for Feedloli in Oklahoma and Texas, Processed Series P-426, Dept“; Econ., Oklahoma State University, September 1962. l aUvacek, Ed, “Integration of Cattle Feeding in Texasf’. Feed Service Report, No. 25, Texas Agri. Experiment Sta, Station, Texas, September 1962. 1962 1963 1964 Fed Total Percent Fed Total Percent Fed Total by fed fed by by fed fed by by fed packers marketings packers ' packers marketings packers packers marketings — 1,000 head ~— — 1,000 head — — 1,000 head — NORTH CENTRAL Ohio 6.9 289 2.4 7.1 297 2.4 5.8 293 Indiana 2 291 2 315 7.1 366 Illinois 8.1 1,181 .7 8.6 1,245 .7 8.5 1,240 Minnesota 10.7 592 1.8 10.4 626 1.7 12.4 703 Iowa 17.9 2,650 .7 8.0 2,862 .3 15.8 2,969 Missouri 19.8 436 4.5 16.7 415 4.0 13 .4 496 North Dakota 2 170 9.0 189 4.8 16.6 222 South Dakota 14.2 451 3.2 11.2 446 2.5 13.4 591 Nebraska 56.2 1,822 3.1 55.9 2,012 2.8 66.6 2,436 Kansas 36.7 543 6.8 59.3 617 9.6 64.9 686 SOUTH North Carolina 10.4 3 15.6 a 12.1 3 Georgia 8.1 121 6.7 11.1 97 11.4 7.6 126 Florida 11.5 3 16.9 3 30.6 121 Kentucky 7.2 3 11.3 a 10.1 93 Tennessee 2 3 2 3 6.0 66 Alabama 2 64 12.9 58 22.2 7.7 56 Mississippi 2 3 5.2 i‘ 6.5 45 Oklahoma 18.2 186 9.8 23.8 216 11.0 27.5 270 Texas 102.3 756 13.5 187.2 896 20.9 160.0 971 WESTERN Montana 14.8 100 14.8 15.6 100 15.6 16.4 128 Idaho 57.4 221 26.0 73.9 233 31.7 55.6 251 Colorado 3] .8 822 3.9 64.5 900 7.2 52.0 945 New Mexico 22.7 129 17.6 32.4 145 22.3 ‘ 27.4 166 Arizona 67.2 568 11.8 75.7 608 12.5 65.7 597 Utah 17.4 111 15.7 19.8 114 17.4 18.6 131 Nevada 8.5 31 27 .4 2 30 5.0 35 Washington 72.2 258 28.0 78.5 267 29.4 A 110.1 290 Oregon 6.1 148 4.1 5.9 135 4.4 6.2 147 California 313.0 1,814 17.3 273.4 1,899 14.4 217.3 2,061 Hawaii 6.1 3 8.9 3 16.0 i‘ 30 States 945.4 1,118.8 1,082.9 Others 36.1 57 .0 43.9 TOTAL 981.5 1,175.8 1,126.8 ‘By or for meat packers. Data summarized from annual reports of packers filed with Packers and Stockyards Division, Agri f Marketing Service, USDA, July 1964. ‘Fewer than 5,000 head. “Data not available. 6 £~1\°+her CalifOrnia and Colorado I950 i960 Year figure 4. United State cattle on feed, January l. of contractual arrangements that may occur rely degrees of integration. To assume that a sharp distinction between a forward con- le and an integrated unit is a decision which V" ssible to make in the industry. Custom feed- ntracts, forward selling or buying and cattle is trading can each be interpreted as being degree of integration. Probably the more com- .001" \ '\\V , i955 i956 i951 \95$ i959 mon usage of the term represents direct ownership and custom feeding. It is normally assumed that a high degree of integration exists in cattle feeding among packers and retail food chain stores. Recently released figures from the Packers and Stockyards Division of USDA, however, indicate that only about 3 to 4 percent of the cattle commercially slaughtered in the U. S. can be traced to integrated units of packers or retail food chains. This does not, however, include any separate feeding activities of owners, officers or meat packer employees. In 1964, the ten major meat packers accounted for 1.2 percent of the cattle slaughter and .5 percent of the calf kill. The trend has been for increases in packer feeding, both in absolute numbers of cat- tle and the proportion of their cattle kill. The number of cattle and calves fed by major packers has increased from 262,000 head in 1960 to 410,000 head in 1964. Since onlyiabout three-fourths of the total slaughter of packers is steers and heifers, the o JA:oJAJoJAJ0JAJoJA1oJAJQJAJQJAJQJAJOIAIOIAIOIAI I960 I96! I967. V963 I964 was 196s Year Figure 5. Texas cattle and calves on feed. proportion of packer feeding of these types actually will be considerably higher. This relationship is even more important for the other packers because a smaller percentage of their slaughter consists of steers and heifers of the high grades. Retail food chains, contrary to popular belief, have not increased their proportion of cattle feeding in a relative sense, but have enlarged the absolute number fed. In 1960 and 1964 they accounted for 27,000 and 36,000 head respectively. The major packers, four retail food chains, and other packers combined, increased feeding of cattle and calves from 856,700 head in 1960 to 1,126,800 head in 1964. About 46 percent of all packer feeding of cattle is accomplished in California, Texas and Arizona. In 1963, Texas was the second largest packer feeding state in the nation, with 21 percent of its fed cattle marketings directly accounted for by integrated packer feeding. Heavy feeding by packers seems to be the general rule for most of the western cattle feeding states where the supply of slaughter cattle is more directly related to feedlot production. In contrast, the north central states have only a small proportion of packer feeding (Table 2). GROWTH OF CATTLE FEEDING Even though the cattle feeding industry his- torically has been concentrated in the Corn Belt, the south central region of the U. S. has shown tremendous increases since 1956. Since this region represented only a small proportion of the total in the past, such states are included in the “all other” category in Figure 4. Texas represents a large propor- tion of this subgroup. 240 8 Q 2 _ Thotisand head t x .8 00o 800 60o - I Fed ca’r’r1e and calF marltefings 400 - Z00 Commercial caHIe and calf slaughfer “Williams, 0p. cit, p. 17. v I When considering the growth of Texas, it is necessary to first present the t, problem encountered in the data — the dis between cattle and calves. Since Texas is’ state, it has a diverse population with vari different tastes, preferences and habits regard' products. In many areas of the state, the it nant type of beef consumed is really “slaugh _ In retail stores it is labeled calf, heavy beef, young fed tender beef, Jr. beef and ot_ appealing names, but all are slaughter calf. siderable portion, then, of the Texas cattlei industry is based upon the production of '1. for this slaughter calf market. This problem‘ borated upon in the Types Fed section. z The growth-of the cattle industry in Te“ increased the quantity of all marketings o‘ and calves at a rapid rate. The increased t‘ upon cattle feeding, however, has substantially. the proportion of fed cattle and calf marketin feedlots to the state total. By 1964, 1s p6 the state marketings of cattle and calves t9 accounted for by marketings from feeding op This large growth in Texas cattle feed' caused considerable speculation about the fu the industry (Figure 5). A study comparij consumption of beef against the production cattle in Texas indicated that the needs of t would be reached fairly rapidly if cattle feedi tinued at its present growth ratef‘ Fed; marketings from Texas feedlots, however, w’, assumed to be heavy beef in this study an; Figure 6. Texas fed calf marketings and “ i (See Appendix Table 2 4 1955 1956 1960 1961 Year 19.57 1958 1959 1962 1:163 T964 ties .~ Percentage distribu- lle and calves on feed (See Appendix Table I \ I . a ~\\’o \ I’! \ I i‘ \ I Cows O a y, the production may be overinflated some- ‘klevels higher than those that actually exist. sic contention, however, that state fed cattle exas demands for fed beef is valid. This does _; course, mean that cattle feeding could not to increase, but that markets for the fed necessarily have to be found in other Zf-‘seems valid to make a comparison of the of fed cattle marketings with the level of _ cially slaughtered cattle and calves in the state. F. feedlots, particularly in the Panhandle, al- jiarket a large number of animals to packers states. The importance of fed cattle market- commercial slaughter in the state must, re, be based only upon trends of the absolute (Figure 6). TYPES FED ittle and calf on feed reports provide informa- l to the class of cattle fed, weights of animals i e length of time on feed. Unfortunately, in Zr 1958, the clalssxbreakdown was revised and porting on a separate basis was discontinued. ’ port now divides the total cattle and calves ’ into only three categories (1) steers and steer (2) heifers and heifer calves and (3) cows and ion will soon be in a position to supply the. “F9585 Uésé '1 ‘I960. '1 "m." i 'l9'e2' Z ‘s6; '1 ‘s64 I Uses‘. ‘(ea r Steers vs. Heifers Heifers on feed have become increasingly important in Texas during recent years with the result that the proportion of steers has dropped sub- stantially (Figure 7). This shift, however, may be an indication of the increased quantities of heifer calves being fed for the slaughter calf market, an increased acceptance of heifers in the beef market, and also a result of the general buildup of cattle herds in the state. Cattle on feed data prior to October 1958 dis- tinguished calves from steers and heifers, and indicated that about 23 percent was in the calf category. Under the present reporting system no accurate method can be used to separate calves from cattle in feedlots. Some general directions of empha- sis, however, can be derived from length of time on feed and weight range breakdown. Weight Ranges The percentage of cattle and calves on feed in each weight group during the last few years is illustrated in Figure 8. Particularly noticeable is the rather general decline from 1958 to 1963 in the proportion of cattle reported in the 700-899 pound and the 900-1,099 pound ranges. In contrast, the lighter weight ranges were accounting for a larger proportion of the total in each of these years. Since 1963, this trend has reversed itself, and the lighter weights decreased substantially. The under 500 9 50f -P @ I OJ @ I Pe rcenTage '83 5 I I‘\ i ,' ‘\4’Ul1¢l€l" 31800 pounds = \ ."'. "" “v X ’ 700-899 pounds ~-_/ R- 90o - 1099 pou fi- Over IIOO p0 O 1 1 1 1 1 1 1 1 1 *1 1 1 1 1 1 1 1 m 1 1 1 1 1 1\—-1 o AJOJAJOJAJO AIoJAJoJAJQJA-TQJ I958 1959 I950 |96l I961 I963 1964* 1965 f Year Figure 8. Percentage of Texas cattle and calves on feed by weight groups. (See Appendix Table 3.) pounds and 500-699 pound groups combined have indicated these two directional changes (Figure 9). The lighter weight cattle are normally more prevalent in feedlots during fall and winter. Con- sequently, October and January reports show the highest percentage in these categories. On January 1, 1960, the under 500 pound and 500-699 pound groups represented 62 percent of the total cattle and calves on feed, but by January 1964, they accounted for 69 percent. During 1962 and 1963, these two weight groups alone had reached or exceeded 70 percent of the total cattle and calves on feed in three separate reporting periods. Since then, they have moved back down in their level of importance. This increased emphasis in the lighter weight ranges during this 6-year period indicates that either the feeder calves were being placed on feed at lighter weights, or that there had been a shift toward more feeding for the slaughter calf trade in Texas. Of course, both of these alternatives were probably cor- rect, and are in most cases inseparable. This trend toward an increasing proportion of slaughter calves in Texas feedlots may not have altered in recent years, even though the lighter weight ranges have decreased in relative position. Slaughter calves in the state have, since 1963, been gaining sub- stantially in weight as illustrated by the fact that the average weight of calves killed in Texas rose from 419 pounds in 1954 to 542 pounds in 1964. l0 8° Combination or u r 500 pounds and p» 50o to 699 pound 3 7O " <1) m g 6o c o: u L- g 50 4O 3O w. ma} ' 659' J '|éso' J‘ '\e's|' J '|9'ez' l} H665 J '|ée4' J Year Figure 9. Percentage of lightweight Texas cattle and call feed; combination of under-500-pound and 50040-699- weight groups. (See Appendix Table 4.) i TABLE 3. TEXAS CATTLE AND CALF SLAUGHTE Commercial Commercial Per slaughter slaughter calves Year cattle calf to . ‘" —-——l,000head———— 1955 1744 1090 1956 1 891 1 1 17 1957 1655 1077 1958 1266 829 1959 1222 720 1960 1492 860 1961 1526 778 1962 1539 728 1963 1723 592 1964 2180 640 1965 2383 594 isirici number iThousand head i966 (Top number) ‘Percent change - 1960-66 (BQHQm number) m- “mm-nu Figure l0. (Iattle-feeding areas in Texas. proportion of calves in the total commercial ter of cattle and calves in Texas was 38 per- in 1955, but this figure declined to 20 percent Q65 (Table 3). Even though this would indicate apparent conflict in trends, it probably is caused the difficulty in establishing universal terminology all reporting levels of the industry in dis- these slaughter calves from cattle. Data from the Cattle Feeders Division of the and Southwestern Cattle Raisers Association that approximately one-third of the cattle i‘ calves on feed in those Texas feedlots that report the organization are in the category of slaughter calves. The definition of a slaughter calf used by the Association is: an animal intended for marketing at 650 pounds or less. Efforts must be strengthened to establish standard terminology separating slaugh- ter calves from cattle on a live basis to correspond to dressed meat tradings. Until this is accomplished, numerous problems of analysis will remain. IMPORTANCE OF STATE REGIONS Information as to the location of cattle on feed in Texas is reported by Crop Reporting Districts or combinations of Districts. Figure l0 shows the boun- daries of these Districts, the number of cattle and ‘u m l) .2 “Q. c m m a o _: l- -°IIIIIIIIIIIIIIIIIIIIIII‘ JIQGOJ |96IJ IQGZJ I963; l964J I965 Year 2100. 2 l-S "u §5o_ m s 53 | ollllllll I||||I|II| J 1960 J 19s: J I962. J I963 J r964; I965 Year “UIOO- a 4*?» 4: T! c $50- 3 o i olll Illlllllll lllllll‘ J i960; 19m; l967-J was; m4, |965 Year Figure ll. Number of cattle and calves on feed by Texas Crop Reporting Districts, 1960-65. ll I00‘ I00‘ "g Z+3+7 6 .2 ‘250- 50- N d! J O f- .. O IIIIIIIIIIITIII III Tllllllllllllwlilll’ J I960; I96! j I962 3' I963 5 I964-Jl965 J I960 J \96l 11967. J I963] I964 1.1;; I Year Year I00" I00- ‘53 IO 8t9 _: "gso- so- m J O f . O IIIIIIIIIIIIIIIIII IIIIII Ill lllll 3' I960 3 I96I j I962. 3' I963] I964] I965 Yea r Figure ll continued. Number of cattle and calves 0n feed by Crop Reporting Districts, 1960-65. (See Appendix Table if calves on feed in each 0n January l, 1966 and the present change since 1960. District Variations All Crop Reporting Districts except N0. 6 have shown some increase in actual numbers of cattle" on feed during the last 6 years. During this same - period, the state total of cattle and calves on feed gained 112 percent. District l-N in the Panhandle and Districts 8 and 9 in the Gulf Coast are the two largest feeding areas in Texas (Figure ll). The two Panhandle area Districts, 1-N and 1-S, also show the least amount of seasonal fluctuations in feeding. This may be due to the type of cattle fed. This area of the state has more feeding of the heavy beef type of cattle, and such feeding continues all year long. In the eastern portion of Texas, and the southern areas particularly, the preference is for feeding of the slaughter calf types. These areas feed most heavily during the fall and winter and refrain from feeding large numbers in the summer. District 6 has shown a real decrease in number of animals on feed. All other areas have had sub- stantial gains in the feeding of cattle and calves except District 1-S, which increased into 1964 and has since reduced numbers considerably. 12 J I960; I961; 1962.; I963; I964]? Year ii The relative importance of each district state total has been changing rapidly. Growtlrt since 1960 have been substantial for Districts, 2+ s+7, 4+5 and 8+9, while Districts 1-s an ticularly 6, have indicated a rapid decline in J‘ position. For example, District 6 represented f l2 to l3 percent of the state total of cattle and g on feed in early 1960, but by January l, 196 percentage had dropped to about 2 percent. D l0 has shown only a slow increase in the n‘ of cattle fed, consequently, it now represents a s smaller proportion of the state total (Figure Seasonal Differences Comparing one district with another in ance is difficult, since there are wide season ferences which cause this relative position to’, To improve our accuracy in examining the dig we should analyze each during the same sea, the year. For example, 30 percent of the I cattle and calves on feed on January 1, 1966, l‘ District 1-N, while only 16 percent were the January 1, 1960. This area of the state, ho " has not always been the most important di as we can see from the previous January re‘ In fact, for three out of the last seven Janu reports, District 8+9 has accounted for the ‘ rtion of cattle and calves on feed in Texas. ‘pectacular gains in relative position of Dis- +9 also have placed it foremost in July 1963, cond in importance on numerous occasions. i. ts 1-N and 1-S have, however, been the major jbutors in most of the reports. ' general, Districts 1-N, 2+3+7, 4+ 5 and 8+9 consistently tended to improve their relative ’ on in each succeeding quarterly period since s Offering a contrast to this, Districts 1-S, 6 and ve almost consistently shown a decrease in their ‘lrtion during each of the different seasons (Table jlZE OF OPERATIONS AND LOCATION ‘(Feeding operations in Texas are growing rapidly, in numbers and size of units. In 1955, approxi- ly 62 percent of the cattle and calves on feed exas were handled in feedlots with capacities of _ head and over. The latest figures indicate that Loximately 88 to 90 percent of the cattle and calves id in the state can be accounted for by large Hots with 1,000 and over head capacity (Table 5). (l feeding operations seem to be retaining about tsame number of cattle and calves on feed, with siyprincipal growth in the state being attributed to 9- commercial feedlots. :- vs. Small Feedlots The January 1, 1966 report shows 88 percent of #526,000 head of cattle and calves on feed in the i 45¢ in the 245 larger type feedlots. In 1956, there . e only 63 such large feeding establishments in it as, but by 1964 this number had increased to 20s. fie growth of these large commercial feedlots in each ithe crop reporting districts is quite different. In rict 1-S, for example, the number has increased bout half the rate of the state as a whole. The est percentage gain in number occurred in District i, and the smallest occurred in District 6. The aining districts, except for 1-S, have increased at te slightly greater than the state growth (Figure . i In actual numbers, Districts 1-N and 8+9 added l 311d 36 large feedlots, respectively, from 1956 to i6. This represents about 45 percent of the 182 Dal state increase during this period (Table 6). though the larger type feeding operations are still ogre common in the Panhandle, the southern portion iresented by Districts 8+9 and 10 have shown a jbstantial increase in these larger type operations. Due to poor profits and considerable losses during 1: - 1962-63 cattle feeding season, a number of feed- i_i s in Texas were forced to cease operations or remain idle. Consequently, 1964 was the first year in which there was not an increase in the total number of large feedlots. Absolute decreases actually occurred in Districts l-S, 4+5 and 6, while District 8+9 main- tained the same number of large feedlots and Districts 1-N, l0 and 2+3+7 gained. Improved feeding margins in 1964 then brought about another expan- sion in 1965 and 1966. Since the cattle feeding industry has grown so rapidly, and its growth has such far-reaching impli- 30-, 25- Z+3+7 i?’ 61" 1 Percen+ m a '0' l l O llllllllllllllllllll‘ I960 \96l I962. I963 I964- I965 Year‘ N) m 3 l I ZO~ G l Percenl- U1 5 l l O IIIIIIIIIIIIEII nut ||| 1960 \96l \96l 1963 1964’ l965 Year 301 h’ V1 n 4+5 K) Q n G l Percent o1 5', I l O Ill lllllllllll 156i: ‘éel I967. tees \96+ toss Year Figure 12. Percentage of Texas cattle and calves on feed by Crop Reporting Districts, 1960-65. 13 _ TABLE 4. PERCENT‘ OF TEXAS CATTLE AND CALVES ON FEED IN EACH CROP REPORTING DISTRICT DU 2s- 6 15- 8 + 9 + 20- Z0— 5 1 2 15 15- 5 ,1’ I01 y 1°- 55 5'- Q . III Tfil IIITIIII III III III III III Tilllll 4 1960 I961 I967. I963 I964- 1965 I960 1961 I962 I963 I954 30- Year 35_ ‘(ear ‘ ZS- 30- IO I- N *5 20- 2s- 0) 2 15- zo- o) a. I04 15* 5- 10- o I I I I I I I I I I | I 1 I.‘ I I I | I 1W 5" I960 I961 1962. I963 I964- I965 Year 1925a nag. ‘sew was was; Year I Figure 12 continued. Percentage of Texas cattle and calves on feed by Crop Reporting Districts, 1960-65. (See Appendix Tab X CERTAIN Q UARTERS‘ January 1 WINTER October 1 Crop Reporting Districts Crop Reporting Districts 2+3 2+3 ' ' Year 1-N 1-S +7 4+5 6 8+9 l0 Year 1-N 1-S +7 4+5 6 — — — — — —— Percent —————-'————— ——-———— Percent ————-”;_ 1960 16 18 8 14 13 20 12 1960 18 22 7 9 13 16 1962 18 18 8 12 9 22 12 1962 19 20 11 11 9 19 1964 22 18 1O 15 6 20 9 1964 28 14 14 13 1 20 l 1966 30 13 12 13 _ 3 20 9 1965 29 14 13 13 2 20 April 1 SUMMER July l Crop Reporting Districts Crop Reporting Districts 2+3 2+3 j, Year l-N 1-S +7 4+5 6 8+9 10 Year 1-N 1-S +7 4+5 6 8-|-9 ; — — — — — —— Percent —————-—— ——————— Percent ————-; l960 20 24 6 l0 12 16 12 1960 22 27 3 7 l3 13 i 1962 21 22 8 7 11 19 12 1962 24 26 7 6 8 17 1964 27 19 10 13 5 17 9 1964 27 15 12 12 2 21 71 1965 34 14 ll 13 2 18 9 1965 33 14 12 13 1 18 i ‘Detailed figures for each district by quarters in Appendix Table 6. l4 5. NUMBER OF CATTLE AND CALVES FED BY LARGE AND SMALL FEEDLOTS IN TEXAS (quarterly 1955-1965) - and size J t 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 — — — — — — — — — — — — — — — — ——— l,000head ————--——————-———-—-——— 66 87 104 84 138 196 204 267 380 420 438 50 60 53 71 118 136 179 228 308 314 329 37 59 49 83 128 155 162 189 240 268 327 66 109 70 94 158 181 192 280 362 349 396 66 61 50 38 40 52 50 56 70 58 50 34 37 19 35 32 25 39 44 50 35 35 ~ 13 20 16 24 19 18 21 27 28 29 27 1 20 29 17 16 24 25 27 _ 45 40 37 38 f-ty of 1,000 head and over. of less than 1,000 head. if s, the Texas Crop and Livestock Reporting - of the USDA started reporting cattle and calves id on a monthly basis in January 1964. icities i- detailed account of the total capacities of all i: of feeding operations in Texas is complicated _i lack of a uniform method of classifying the fer feeding ventures. The difficulties of such of 1 inations and the overwhelming importance of arger feedlots, when comparing volume handled, q: the need to further examine feeders with ities of less than 1,000 head. §Table 7 compares the number of feedlots in ' . by size groupings that report to the Texas Crop ' Livestock Reporting Service. Of the 145 feed- ~ with capacities of 1,000 head or more on January 962, only 59 percent were in the 1,000 to 2,499 i“ capacity category. By January 1, 1965, this lpgory had increased to include 142 lots and repre- ted 61 percent of the larger feedlots. (The location of the larger feeding operations in i state is scattered (Figure 14). The number of lots in each of the different capacity classifications shown by county or groups of counties. The figure jeach indicates the number of feedlots within the i’ lined area. There are three maps—one showing * (pumber of feedlots with 1,000 to 2,499 head atcity, another indicating the 2,500 to 4,999 head acity lots and a third locating the feedlots with jpacities of 5,000 head and over. For example, lberson, Reeves and Pecos Counties have four feed- fis with a capacity 665,000 head and over, while Jeves County alone has three feedlots with a capacity i, 1,000 to 2,499 head. These maps illustrate the concentration of the J large feeding facilities in only a few areas of g state. In contrast, the feedlots of 1,000 to 2,499 head capacity are fairly well distributed throughout the state and are particularly prevalent in East and South Texas. Data on the capacities of feedlots in Texas has been reported monthly since October 1963 for the large operations with 1,000 head or more capacity (Table 8). This information indicates that there was a slight trend toward larger capacities up until late 1965. The addition of 30 new facilities to the list reduced the average size on January 1, 1965, but it has been increasing since then. The feedlots of 1,000 60 55 50 45 Number ‘IIll‘IIIIlllll|llll\lllI|ITII‘IIII‘IITII1IIII 1956 1951 I958 I959 I960 I961 I967. 1963 1964 I965 1966 Year Figure 13. Number of Texas feedlots of 1,000 or more head capacity, January 1, 1956-66. 15 TABLE 0. NUMBER‘ or TEXAS FEEDLOTS OF 1,000 HEAD AND OVER CAPACITY (January 1, 1956-00) CROP REPORTING DISTRICTS Year 1-N 1-S 2-3-7 4-5 6 8-9 10 State total 1956 13 9 6 8 l7 8 2 63 1957 14 l0 6 9 16 8 8 71 1958 16 9 6 12 17 l3 8 81 1959 17 1O 6 18 17 16 l0 94 1960 22 l0 6 19 18 15 12 102 1961 29 ll l0 22 18 19 l5 124 1962 35 12 12 26 17 24 19 145 1963 4O 23 23 i 39 20 34 24 203 1964 43 20 24 38 18 34 26 203 1965 53 20 34 41 18 42 26 234 1966 58 21 34 42 19 44 27 245 head and over capacity on January 1, 1966, had an average capacity of 3,609 head with a total reported capacity to handle 884,000 head at one time. These capacity figures, when compared with utili- zation or occupancy of numbers of cattle and calves on feed, indicate that only 52 percent of the present capacity of these large feedlots is actually in use. It would be unrealistic, however, to assume that all the capacity could be used at one time. A certain portion of the capacity must remain unused because of cattle turnover, marketing and buying decisions, sickness and disease and weather conditions. The main prob- lem is that the basis used to calculate capacities is quite different in many cases. A fairly large capacity for feeding cattle and calves evidently still exists in Texas without the addi- tional construction of further facilities. Because of relatively favorable profit margins, in general, during the last few years, except 1962-63, cattle feeding opera- tions have grown substantially in the state, and addi- tional capacity has been added each year. At first there seemed to be some conflicts in the basic reasoning behind this phenomenal growth in feedlots in the Southwest, particularly in Texas. Profits have been fairly good since 1958, yet, even in the two relatively “bad” years, capacities continued TABLE 7. NUMBER OF TEXAS FEEDLOTS BY SIZE, JANUARY l, 1962 AND JANUARY l, 1965‘ Size, January 1, 1962, January 1, 1965, capacity in head Number Number Under 500 1330 1440 500 to 999 70 60 1,000 to 2,499 86 142 2,500 to 4,999 32 44 5,000 to 9,999 16 34 10,000 and over 11 14 1543 1734 ‘Source: Texas Crop and Livestock Reporting Service, Statistical Reporting Service, USDA, Austin, Texas. 16 Number of feedlots with 1,000 102,499 head capacity Total in State: 1'12 ~~~~ 1- nnsl-cql “,- Numln-r of fl-c-wlluls villi 2,5111! In 111579 lie-ail cuymviq Sluts". ll Total in Am mntv 1m. “mu ___ nanny M... "-1 1n ,4... Nunbl-r of feedlots Ililll illliulllllrvrr lmni i-npuc-ily Toull in Stair: 1H Same: This information provided for usr through llw Toms (Ii-up unll Livesloutli Ilnrporling Srrvicr, USDA, Ans! in, Texas. Figure 14. Location of large Texas feedlots, by capacity, ary 1, 1965. crease and volume consistently increased. This some question as to the real economic determi- behind certain feedlot expansions. It may be Z-the enlargement or expansion of this industry has ‘been based on increased profit potentials, but pf to combat heavy losses. This alternative ex- tion for the continued feedlot growth is elabo- I upon in the section dealing with feeding W.‘ IlS. FEEDLOT MARKETINGS addition to the number of cattle on feed, the Crop and Livestock Reporting Service collects I on the number of cattle marketed from feedlots. are referred to as “marketings.” To provide fgindustry with a look into the future, feeders are asked their “intentions” to market cattle during y ext calendar quarter. Due to adjustments in l er conditions, price levels, inaccurate estimates 1 e part of the feeder and just plain changing their s, these figures are sometimes misleading as to but are quite good indicators of direction. The principal problem is to develop some criteria to determine when the cattle and calves that are on feed will be marketed. In Texas, where slaughter calves (fed only 90 to 120 days) are included in the cattle-on-feed reports along with heavy cattle (fed sometimes more than 160 days), this time element becomes a compounded problem. Total numbers of cattle and calves on feed, therefore, provide little information as to when the animals can be expected to reach the market, so “intentions” to market in Texas are elevated to an even more important posi- tion for estimating marketings. In analyzing these intentions to market, a slightly improved correlation between intentions and actual marketings was obtained when marketings were adjusted for short feds (animals placed on feed and sold within l calendar quarter). This relationship, illustrated in Figure 15, emphasizes that the short- time feeding of animals often is a spontaneous decision and not wholly anticipated. Until recent years a fairly close relationship could be obtained by comparing cattle “placements” on feed TABLE 8. NUMBER, CAPACITY AND UTILIZATION OF LARGE TEXAS FEEDLOTS, BY MONTHS‘ Number, Number on Proportion Reported large feed, having cattle total Average Percent feedlots large lots on feed capacity capacity utilization” Number Number Percent Number Number Percent ober 197 362,000 76 681,000 3,457 53 uary’ 203 420,000 82 704,900 3,472 60 '1, ruary 205 387,000 82 707,600 3,452 55 ‘ hrch 202 353,000 82 704,000 3,435 50 ril 200 314,000 83 708,600 3,543 44 ‘f y 200 290,000 81 7 08,600 3,543 41 _ ne 200 286,000 80 7 08,600 3,543 40 1y 202 263,000 75 716,300 3,543 37 j gust 202 303,000 75 716,300 3,546 42 f - tember 202 320,000 74 716,300 3,546 45 "tober 204 349,000 77 723,300 3,543 43 vember 204 405,000 80 723,800 3,548 56 1 ember 204 424,000 80 732,800 3,548 59 *1 uary” 234 433,000 32 305,200 3,441 54 _' bruary 234 402,000 81 805.200 3,441 50 l .rch 234 359,000 79 805,200 3,441 45 QR ril 235 329,000 76 809,650 3,445 41 " ay? 235 313,000 73 890,650 3,445 39 g 235 319,000 69 809,650 3,445 39 l= ly 236 327,000 67 815,150 3,454 40 ,, ugust 236 355,000 65 815,150 . 3,454 44 ‘ tember 236 357,000 67 815,150 3,454 44 j tober 237 396,000 71 835,750 3,526 47 ovember 237 444,000 74 835,750 3,526 53 Y ember 237 451,000 77 335,750 3,526 54 “y uary’ 245 463,000 79 884,200 3,609 52 _lots with 1,000 head and over capacity. 170d for feedlot numbers and total capacity. A occupancy. 5 p January 1 of each year, cattle feedlots are reclassified according to capacity which accounts for sharp change from previous 17 325 " Z15 - . Ma kei n (Minus ‘sphorfiadgsé i,‘ 2 ‘l, l’! N 8 1 \ ,' _ Figure 15. Fed cattle ; vzlnfenhons ings minus short feds tentions, 1960-65. (See A Table 7.) h {L5 § a1 I l I\) U1 I ,__... y- H- o. 44L l l I I l I i I I 1 l L l l l l I I J A J o J- A J’ O J A I 0 J’ A I O J" A J O I960 I961 I962 I 963 I964- I965 TABLE 9. “INTENTIONS" AND "PLACEMENTS" SERIES AS INDICATORS OF ACTUAL FEEDLOT MARKETINGS (Ianuary 1960 to September 1965) r placement§ (X1) Placements (X2) Weighted series of placements (x1) &(x2) (x3) (preceding (2 quarters Intentions quarter) earlier) 50-50 33-67 30-70 25-75 Regressions Y ,—_~ bX b z 1.08047 .94389 .99740 99950 1.00863 1.00946 1.00850 r’: .99108 .92185 .97815 .98334 .98856 .98886 .98878 r z ' .9955 .9601 .9890 .9916 .9943 .9944 .9944 Sy: 20.1906 59.7747 31.6072 27.5934 22.8581 22.5641 22.6463 Difference from marketings p) - _ - - - - - - _ - - _ _ - - - -- 1,000head ---------_----e-? Average difference izo i115 :26 $21 :18 :17 11s A Sum of difference _362 -2 -l29 _40 __84 _90 --l03 a Range of differences _50to+15 -106to+140 -57to+47 _43to+61 __41to+36 _42t0+35 _44to+33 ‘_ (65) (246) (104) (104) (77) (77) (77) ‘ Out of 22 changes 4 12 4 4 5 6 5 Number of wrong directions (Indicated direction of increase or decrease in marketing from previous quarter) Multiple regression equations ? Z h1g1 + b2X2 AY I a+b1x1+b2x2 fr: (28286) x1 + (72572) x2 i? = 23.9669+(22540)x1_|-(.67l10)x2i R’ z .98895 R’ z .80943 R z .99446 R z 94363 S, z 22.47438 Sy z 21.65652 First differences‘ Intentions Multiple regression series’ R’ z .6252 R” z .7712 R z .7907 R z .8782 S, z 88.4892 S, z 54.0358 ‘Percent changes from actual marketings during same quarter, a year ago. ’Through origin. 18 . —r »»r arketings” l quarter later. This reflected frt feeding periods of slaughter calves. An Wed correlation was obtained in the l960’s, how- using placements of cattle 2 quarters earlier, pared to marketings. This change in lag can fined by the increased feeding of heavier cattle 1s since 1961. However, neither of these place- iseries independently is more accurate than the intentions for predicting cattle marketings edlots. i.’ ce the types of cattle fed and the length of ing period in Texas seem to have been severely in recent years, an analysis of data from only 1 5 years may be the best guide for future fore- Available data indicate that it may be possible gstruct a series more indicative of actual fed finarketings including these short-fed animals. ith the assumption that most calves placed on quarters earlier will be marketed during a lar calendar quarter, we can arrive at an ‘ximation 0f animals ready for marketing. This fries is simply a weighed average of placements i, ters earlier and placements l quarter previous. average deviation of these figures from actual “(tings is considerably less than the intentions i or each of the placements series taken alone. ‘ of the constructed series, however, yielded a tion coefficient as high as the intentions te. ft. Table 9, several series of combined weighting ‘cements are analyzed along with intentions esti- ("- Also shown is the multiple regression equation i the placements l quarter earlier as X1 and place- ' i 2 quarters previous as X2. It is obvious that various proportions of the placements measure the historical relationship which has existed. leconomic reasoning emphasizes that this ratio ‘change in line with factors such as price trends, t ratios, feeding margins, feed costs and changing d specifications for beef carcasses. A further sis, examining these factors and their effects on iroportion, is planned for a later publication. fYAlthough results are fairly close for numerous ‘Jweighted averages between 50-50 and 23-75, the ‘satisfactory in terms of practical use seems to ie 70-30 relationship. This series is constructed ‘Assuming that 70 percent of the placements of a ‘cular calendar quarter will be marketed 2 i ers later, and that‘? 30 percent, or the remainder A ose animals placed on feed, are marketed in the quarter. When the two placement series are actually com- d in a multiple regression equation, the results (l somewhat comparable. Forcing the regression ? through the origin provides us with a weighting (in this case, regression coefficients) of 28 percent and 72 percent. Even though the actual level of predic- tion does not seem to be improved, the first-difference approximations (percent change from marketing) are more accurate estimators than intentions. The rela- tive change indications from quarter to quarter, a popular comparison, are substantially improved when using the calculated series of placements as predictors of marketings (Figure 16). This new concept, based on analyzing placements, rather than on feed figures, provides some further indications beyond the inten- tions estimate of the expected marketing levels. FEEDING MARGINS The question of the length of the feeding period adds considerable difficulty to an analysis of feeding margins or price spreads between feeder and fed slaughter animals. In the previous section, it was determined that the most accurate relationships be- tween placements and marketings could be obtained by comparing a weighted series of placements 2 quarters earlier plus placements 1 quarter previous to the marketings of a particular quarter. Margins, therefore, may be examined from two viewpoints: (1) feeder prices with a 6-month lag, or (2) feeder prices only 3 months earlier. These two 40o _ 350 _ 300 - 3/». Placement series,’ ‘ m, 250 . 27.5 . ZOO . H5 . I25 . 8O Ratio scale 50 IlllllllllllIllAIll,Ll1An5 i960 l96l i967. I963 i964 i965 Year Figure 16. Placement series and intentions compared to feedlot marketings, January 1960 to October 1965. (See Appendix Table 7.) A ‘Y z .28386 (placements one quarter earlier) -|- .72573 (place- ments two quarters earlier). 19 lags coincide with feeding periods indicated by place- ment versus marketing data. Since the majority of the cattle in Texas feedlots are marketed in the USDA Good grade, with usually USDA medium grade feeder calves being placed on feed, these two grade classifi- cations are used for price comparison? The month in which the slaughter animal is marketed is used for all margin comparisons. The price relationships which existed between Good steers and Medium feeder calves at Fort Worth during the last 4 years, using a 6-month lag on feeder prices can be seen in Figure 17. The price spread remained positive throughout 1962 and averaged $3.19 per hundredweight. In contrast, the price data showed positive margins in only 4 months of 1963, with a resulting average of $.38 per hundredweight. Since mid 1964, the margins have been positive, and at one time in the summer of 1965 it reached a level of $10.00. There seems to be a strong relationship be- tween slaughter steer price levels and these margins. As prices decrease for slaughter steers, the price spread between feeder and slaughter animals moves lower. The high prices of 1965 resulted in an average margin of $6.10 per hundredweight. Data used for Figure 18 is comparable to the previous chart, but is calculated with only a 3-month lag on feeder calf prices. The same basic price pattern emerges with, again, 1962 registering all positive monthly price spreads. Averaging the price margins “Feeder grade names and specifications were as yet unchanged in reports used for this analysis. 27. 2.6. - 2s. - 24. - 23. - n.- 2.l. - Slaughler sleers lU-5-GOOd) ’ I \ \ \ \ \ l l I Wv/\vl Feeder calves (Medium) g DOllaFS/flrvl- .Ll l l] l96| 196?. I963 1964- Year I965 Figure 17. Comparison of slaughter steers and medium feeder prices with a 6-month lag. 20 for 1962 with this shorter lag, however, yie $2.59 per hundredweight or slightly less ii spread for the longer feeding period. Simil” ties of positive spreads occurred in 1963 us” series. Considering the entire period under anal price margins of cattle fed under either time l, almost identical averages. The? 3-month lag .'* $2.23 per hundredweight for the 56 months consideration while the longer feeding period a. $2.20 per hundredweight for the 53 months’ feeding comparison. Since the desirable wei feeder calves in each of these two feeding o is quite different, these margins do not sh light on the relative profit levels of these two programs, but only give us broad indicat potential profit periods. Slaughter Calves The feeding of calves in Texas for the s1 calf trade is a unique and important industrygl spreads or feeding margins for this class of cat, therefore, of equal interest. Since the bulk ? calves can be fed within a 3-month period, the will be made only on the shorter time lag. When compared in a similar manner '7 previous section, there are few months du ' study which indicated a negative price spr' the feeding of slaughter calves. Only if November and December of 1963 and Jun showed such negative margins. The average .5 1 Price spread I,’ WV -4 a | 1961 1967. I965 Year Dollars/wt N s» 11> s" s» >1 9° >0 T Feeder :- r » l I964 I9, ifth period was $1.97 per hundredweight, indi- gfTthat, in general, there existed a slightly lower spread for such calves than in the feeding for Lfvier types. The profit situation for slaughter ,ding is, however, improved by: (1) lower costs und of gain, (2) less negative price spread, and re, less risk in feeding, faster turnover, and fuivalent capacities can handle larger numbers _ves (Figure 19). Profits 1 mparing each of these margins, we find there ifairly close relationship among each of them. i t price spreads seem to be common for all three _s during most of the 1963 and the first part 4. Fluctuations are erratic about the zero level for each, however, there seems to be some ct seasonal differences between the classes. he average differences obtained during each of lendar quarters is illustrated in Table l0. Also p, on this table are the percentages of months is had negative margins during the period under “eration. Slaughter steers fed only 3 months indicate poor- argins in the second quarter of the year, while v fed 6 months had lowest margins during the Tj-flquarter. In contrast, the largest average differ- p, quarter, with the short-fed slaughter steers’ Ins favoring the first and last quarters. iThe proportion of negative margin months was ntially greater in the second quarter for the ‘lnth cattle. For example, in 47 percent of the iths, during all of the Aprils, Mays and Junes r consideration, a negative margin was reported. his would seem to indicate that not only is this a i, margin period for short-fed cattle, but also a e ly risky one. if The slaughter calves fed 3 months showed quite l fferent pattern of margins. Price differences ughout the year diminished, with the last quarter i ing the lowest average. In general, even though I margin for slaughter calves did not reach the A i? levels of the steer feeding, the margins indicated h less risk. It was only in the last quarter of the A that the proportion of months with negative ins became significant. This factor, plus several ‘ers mentioned earliéfn-could mean the profit poten- L in slaughter calfifeeding are superior to those éheavier cattle. _ In each case the seasonal averages of margins Qtained were expected to be influenced by the gen- 1 cattle price level, and consequently the cyclical it for the longer fed cattle occurred in the April- p changes which occurred during the period under con- sideration. In view of the uncertainty as to whether the margin will be positive or negative, probably the safest estimate for a cattle feeder would be to assume a zero price spread in the long run. The use of this “no margin” concept allows the construction of a hypothetical market price situation which explains some of the expansion in feeding in the face of smaller profits per head (Table ll). 27. - Z6. - jlaughier Sieers (U.S.Good) I . ,\ L-Feeder calves " V (MEdlUm) Dollars/Mr. E5 I .51 I 51' I ,1 193i I967. I963 l964 I965 Year Price spread / m m i l96| i962. I963 I964- I965 Year NSNJ>SI1FD>I I l Dol la YS/cwf. I kf Figure 18. Comparison of slaughter steers vs. medium feeder prices with a 3-month lag. Fort Worth Stockyard quotation: January slaughter steers vs. October feeder calves. (See Appendix Table l0.) 21 2'7 26 - Z5 ' —-S|augh’rer calves 23 I- F I I I‘ l," t I V \] -' I I I I I I 2' ' t‘ A l/Feeder calves v V. \ I 2Q - ' (Medium) Dol la FS/cwt. i.e... I96I I961 I963 I964 I965 Year Figure l9. Comparison of slaughter calves vs. medium feeder This cost-price relationship indicates that as the general market price level for cattle moves lower, the profit per head in feeding such animals also would move down. Profits are reduced until the break-even point is reached, and this in turn is determined by the level of the 'cost of gain. In other words, at a $22 cattle-calf market price and a cost of gain of 22 cents per pound, the profit per head on each animal is zero. This profit direction indicator compliments the rela- tionship found betwen price levels and feeding margins. In both cases the profit potential increases TABLE l0. AVERAGE SEASONAL CHANGES IN PRICE MARGINS AND PROPORTION OF NEGATIVE MONTHS‘ Average difference, dollars Percent of negative Months per hundredweight margin months Slaughter steers-feeder calves (6-month lag) January-March +1.68 33 April-June ' +2.71 _ 33 July-September +1.78 29 October-December +2.37 21 Slaughter steers-feeder calves (3-month lag) January-March +2.56 8 April-June +1.43 47 July-September +2.43 7 October-December +2.52 21 Slaughter calves-feder calves (3-month lag) January-March +2.46 0 April-June +2.08 7 July-September +1.90 0 October-December +1.27 20 ‘For period mid-1961 to December 1965 (see Appendix Tables 9, 1O and 11) . 22 f I Price Spread Z NSH+P1W I DOI Ia Y's/awf- Feeder IN I / Q Jr V - | n L n -- ‘j I961 I962 196a I964 uses Year a prices with a 3-month lag. (See Appendix Table ll.) when general cattle prices are rising and decrea when they are falling. i’ I The two most probable alternatives then for large commercial feedlot that may be experienci, some losses because of lower cattle prices are: (l) ce operations altogether until prices improve and, con quently, absorb all fixed costs of the feedlot dur'_ this period; or (2) expand the size of the feedlot wig the hopes that the additional capacity will lower ,v average cost of gain slightly and enable contin - feeding at a profit even with the lower price lev For example, a feedlot making $12 per head wh general cattle prices are $25 per hundredweight co make the same total gross income at $23.50 1.»; hundredweight price levels by doubling capacity, e 1 with no improvement in cost of gain. This expan " provides more head to make a profit on and, thro I economies of scale, probably will reduce the cost pound of gainion each animal. Particularly effec are some of the economies of marketing available} the large feedlots, as well as the increased bargain ~ ability of larger size operations in purchases of w: calves and feed. This type of adjustment may explain the nix‘ sion of some of the larger commercial feedlots in face of lower profits per head. Development of cu " feedlots in the Southwest probably has also stimulated by such profit maximizing or rather 1 minimizing adjustments. i: @711. CATTLE FEEDING PROFITS VERSUS MARKET LEVEL‘ \ feeder Cost of gain, Selling price for Profit, per cents fat animal,“ dollars dollars weight per pound” per hundredweight per head 22 35 +52 22 30 +32 22 25 +12 22 22 0 22 20 _- 8 22 l5 ~28 '2 und feeder calf fed and sold as a 1,000-pound slaughter (400 pounds gain in lot) icost of gain of 400 pounds at $0.22 per pound z $88.00; es all costs of feed, labor and facilities on a per pound iifference between the feeder price and the fat animal 0; price spread z 0. Therefore selling price is same d" paid for feeder. -even Cost Charts g addition to the normal tools used by a cattle such as balancing and least cost rations and ilrugs for disease protection, there are certain ic tools which can be used to evaluate future F“ and guard against losses. One is the break- ‘cost chart. hese charts were developed to emphasize the I at feeder animals are never really “cheapened,” 't is possible to put on “cheap” gains. Two ate charts are provided— one for feeding heavy ‘rand the other for typical Texas slaughter calves. i; assumes certain weight limits and is applicable to animals that gain this certain amount in the (Figure 20). 1The slaughter calf break-even cost chart, for gple, is based on the purchase of a 350-pound if calf to be fed and sold at 550 pounds, In this i200 pounds are added to the weight of the animal while in the feedlot. The cost of gain line is calcu- lated by adding all costs of feed, labor, facilities and miscellaneous expenses for all animals in the lot, dividing that figure first by the number of head in the lot and then by the average weight gain of each head. The result is the average cost per pound of gain in that particular feedlot. By selecting a cost per pound of gain line most representative of the particular situation, a compari- son can be made between the various purchasing costs for feeders and the selling prices of slaughter animals. A 350-pound feeder calf bought for $25 per hundred- weight and fed with a cost of gain of, 17 cents per pound would have to bring $22.09 per hundredweight as a slaughter calf, just to break even. Any price per hundredweight less would mean a loss, any price higher would mean a profit. The effects of higher costs of gain also are evident from this chart. A finished slaughter calf produced from a $25 per hundredweight feeder would have to bring $22.82 per hundredweight to break even if the cost of gain was 19 cents per pound. The price spreads (the margin between feeder and fat animal) must become larger and more positive as the cost of gain increases. For slaughter calf, the cost of gain normally is considerably below the general selling price level. In heavy cattle feeding, however, the cattle price and the cost of gain are fairly close. The heavy beef chart yields similar results for feeders purchased at 600 pounds and fed to 1,000- pound fat slaughter steers gaining 400 pounds. Using these charts in reverse, a forecast of future cattle prices can be utilized to estimate the maximum price that can be paid for a feeder calf to break even. These charts may be used for any animals that gain an equivalent amount in the feedlot. Buying price For Feeders, $/CW'C s/cwr» Slauqlller calf s/cwr- l-leavy Beef‘ g 15- Break even cos’: charl Break even cosl cha rl i 24* $ 26¢ f zs- _g_> 2s IL’ 21 I 24 ‘i 3 l‘ _ 20. Break-even cost can” “:23 Left, 350-pound feeder g Z0 “Q 21 5| 550-pound slaughter calf; ,_ [q m Z‘ t, 600-pound feeder fed to <2 ___ gX-pound fat steer. 8 l3 K20 ‘l '1 l1 qglg “- c g, |5 l: lB 5 I5 T’ l1- <3 14- I6 -- l I l I I l l I i“; l L l l 1 l l l l l l6 n l8l9102lZZZ324-Z5Z6 I6 n I819 20242125242526 Buyinq price {Or féederg $/CWT. 23 Feeder Versus Slaughter Grades Although the length of the feeding period creates a difficult problem for analysis of price spreads for cattle feeding, the lack of correlation between feeder and slaughter cattle grades presents an even more perplexing problem. Feeder grades under the USDA standards were supposed to indicate the final attainable grade of the calf after feeding and slaughter. Yet, traditionally, the feedlot operator has managed to squeeze extra profits from his feeding operation by “upgrading” the feeder animals. In other words, he took a so- called “1ower grade” calf and fed him to become a higher quality slaughter animal. Southwestern feedlots have been accomplishing this “upgrading” for several years. As a consequence, they have demanded the cross-bred type calves pro- duced in Texas and the southeastern states, while the “higher” quality calves continued to move to the Corn Belt for feeding. Recently, however, research accomplished at uni- versities in Iowa and Colorado have confirmed that this upgrading also is possible and profitable in the northern feeding areas. Figure 21 shows the results of the Iowa study. Particularly surprising to beef cattle producers is the spectacular feedlot performance of Common Holstein and Brown Swiss dairy calves. Feeder grade glgghier gLLJg 0 U-l- h m-n ... C _ 3. S" .........<.>.!..¢.§...ff-ie4.<,=