Premiums are a 2 edged sword

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Son of Butch
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Premiums are a 2 edged sword

Postby Son of Butch » Thu Jan 10, 2019 12:59 pm

2017 - 5.95% of beef carcasses graded prime earning $17 cwt in premiums a 850 lb carcass = $145 each
2018 - 8.0% graded prime, this 34% increase in supply dropped premiums 41% to $10 cwt or $85 a difference $60
Premium beef supply increases 34% so premiums drop 41% = packers always give producers the short end of the stick.
It does not take a genius to see if we continue to increase quality then premiums will continue to disappear.

It takes more days on feed to grade prime, which increases carcass weights, which in turn increases the supply of beef
and drops the base pay for beef to which premiums are then added.... for a net of no difference.
IF corn goes higher feedlots will find it more profitable to shorten days on feed and send cattle to market lighter
rather than chasing premiums. Which reduces the total beef market supply, leading to raising the base pay for beef.

Ideally everyone except you and me quits producing prime carcasses and sends finished cattle to market lighter
and we'll all be better off. Especially you and me.

Now just one simple step..... getting everyone to agree. :)
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Son of Butch
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Re: Premiums are a 2 edged sword

Postby Son of Butch » Thu Jan 10, 2019 6:07 pm

Plan B.
I think getting cow/calf producers to switch to using registered Black Hereford bulls would help my program a lot. :)
Anyone on board?
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Midtenn
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Re: Premiums are a 2 edged sword

Postby Midtenn » Thu Jan 10, 2019 7:29 pm

It's tough. You never know which way to head. Do you sale on the grid? I see guys making good money on whites/ reds crossbred calves by retaining ownership through the feedlot. But they are not grading high I'm sure.
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mwj
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Re: Premiums are a 2 edged sword

Postby mwj » Thu Jan 10, 2019 7:53 pm

There is a limited market for prime beef and it doesn't take much supply to drop the price. A niche market can pay a hefty premium till all of your neighbors jump in! :nod:
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Dave
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Re: Premiums are a 2 edged sword

Postby Dave » Thu Jan 10, 2019 8:53 pm

I was on a tour of a large feedlot in the early 2000's. I can't remember which year it was but the market had not been good. They said that the year before the average steer lost the owner $60. I asked why not ship them earlier and thus lose less. The choice / select spread wasn't that high at that time. I got no answer just stupid looks. The answer was that probably 35,000 head of the 40,000 in that feedlot were being custom fed. The longer they stayed there and got pushed towards making choice the more money the feedlot made.
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Silver
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Re: Premiums are a 2 edged sword

Postby Silver » Sun Jan 13, 2019 1:00 pm

Midtenn wrote:It's tough. You never know which way to head. Do you sale on the grid? I see guys making good money on whites/ reds crossbred calves by retaining ownership through the feedlot. But they are not grading high I'm sure.


Why would that be?
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Midtenn
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Re: Premiums are a 2 edged sword

Postby Midtenn » Mon Jan 14, 2019 8:53 pm

Silver wrote:
Midtenn wrote:It's tough. You never know which way to head. Do you sale on the grid? I see guys making good money on whites/ reds crossbred calves by retaining ownership through the feedlot. But they are not grading high I'm sure.


Why would that be?


Based on SOB's post I was assuming he raises angus high marbling type cattle. The guys I was referring to that are retaining ownership thru the feedlots generally have framier type cattle and more eared or Charolais or other continental influence which generally gain more, but don't marble as well.
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Stocker Steve
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Re: Premiums are a 2 edged sword

Postby Stocker Steve » Tue Jan 15, 2019 12:26 am

Son of Butch wrote:Plan B.
I think getting cow/calf producers to switch to using registered Black Hereford bulls would help my program a lot. :)


So you will have the entire prime market for your dairy steers? :cowboy:
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