Monday, July 30, 2012
Value of Gain
Most of you that read this blog know about my focus on VALUE of gain. This is from Glen Selk's latest newsletter: "Notwithstanding current production difficulties, the market is providing strong signals to add weight to feeder cattle before feedlot placement. For example, 525 pounds steers have averaged about $140/cwt. the past two weeks in Oklahoma. Adding 225 pounds at 1.5-2.0 pounds per day would produce a 750 pound steer by November. Using a November Feeder Futures price of $144.90/cwt and zero basis results in a gross margin of roughly $350/head or a value of gain of $1.56/lb. The extent to which this is a good market opportunity will depend on the cost of production but even with relatively expensive feed costs, a cost of production well under this value of gain is likely. While many producers are unable to take advantage of this situation, there are undoubtedly some producers with the ability to implement a stocker or backgrounding program to take advantage of this very high value of gain." Value of gain at $1.56!!! Now if we can get a rain or two we can take advantage of a tremendous opportunity!