This year calves are considerably lower in value than the previous years. Calves this year may not bring more than $0.80 per pound, whereas in the last few years many have received over a dollar a pound. The fat-cattle market is not much different than it has been in the past. Most predictions and future markets have fat cattle in the $0.70s per pound. Even though this is not very high, what we have is not much of a difference between young cattle and fat cattle.

When we have high corn prices, weaned calves and background calves go down in price and the fat-cattle market increases in price. The feed cost per pound of gain also increases, however, the difference in the price between young calves and fat cattle lowers the negative margin.

For most people that are used to finishing cattle this may be old news, however, for some that have never finished cattle, it may be worth explaining.

Negative margin is when the purchase price of a given weight is lowered for that same animal as he gains weight. For example, I bought a 700 pound steer for $1 per pound, and I put 500 pounds of gain on the steer, which now weighs 1200 pounds With a $0.70 per pound fat market, this means that the initial 700 pounds that I paid a $1 per pound for is now only worth $0.70 per pound. The negative margin then is $.30 per pound or $21 for this steer. To be able to break even I would have to produce the next 500 pounds at $0.40 per pound difference between the cost of gain and the fat market. In this case the fat market is $0.70 per pound; therefore, the cost of gain would have to be $0.30 per pound of gain to break even. This is almost impossible.

The reverse also happens; we sometimes see positive margin. This occurs when a producer buys an animal for less money per pound than it is worth, then puts gain on it. As an example, let us say we have a 700 pound shell cow or steer that comes through the sale barn. Because of its emaciated look, it only brings $0.20 per pound Let's also say that the normal call market is $0.40 per pound We take that shell cow and put 500 pounds of weight on her then take her back to the sale barn. If it took $0.40 per pound to put that 500 pounds it is a trade off. The initial 700 pounds bought for $0.20 or $140 is now worth 700(x 0.40) or $280. Therefore, the money was made on the positive margin, which amounts to $140 profit.

This year with low calf prices there is little to no negative margins. Even though feed prices are higher, there is money to be made as long as you can put the weight on calves for less money than the market price. For example, if calves are $0.80 and in February or March they are at an extra 200 pounds and $0.80 per pound, we have no negative market.

If we can put weight on for less than $0.80 per pound we can make money. We should be able to put the weight on for $0.50 per pound, thereby we make $0.30 per pound or $60 per head by keeping them until February or March. Furthermore at that time you may re-evaluate and take them all the way to finish. The profit potential to finish works the same and is even better than keeping them only till February.

In the past this has been difficult for two reasons: Prices for light cattle being too high and the labor and investment in equipment and facilities was more than the return. But this year we have Trendsetter SLR.

This feed can be fed free choice for 1 to 1 1/2 percent consumption or mixed half-and-half with corn or any feed and/or commodity mix you desire. The gains will be greater when mixed 50:50. Costs of gain will be low. On background cattle the gains are directly proportional to the forage quality and amount of Trendsetter SLR consumption. On good quality forage, such as corn silage or hay, with net energy value of 6 or greater 2 to 3 pounds of daily gain is expected. With poor quality hay, the gains will be over 2 pounds per day when mixed 50:50 and 1 1/2 pounds a day on straight Trendsetter SLR. MFA research shows that these cattle lose weight with poor quality forage and no grain.

For finishing these cattle we observe and expect a 6:1 conversion and pounds fed per pound of gain. All you have to do is figure 6 times your feed cost per pound and that will be your feed cost per pound of gain. For example if TrendSetter SLR mixed 75:25 cost $130 (or 6.5 per pound x 6 = $0.39 per pound of gain). If fat cattle are $0.70 per pound you do not have a negative margin. It is pretty easy to see profit potential. Remember TrendSetter SLR is mixed with 75 percent corn for the first half of the finishing period and 87 1/2 percent corn with only 12 1/2 percent TrendSetter SLR for the second phase.

There will be many critics out there that will find a lot of fault with this article. They will say we don't have slaughterhouses in Missouri. They will say you haven't covered shrink, labor and interest. My answer is, "I know." However, sale barns are already fat cattle sale days. Yes, I haven't covered shrink, interest and death loss, but there is so much room that there is nothing in agriculture or at the stock market that has as much profit potential as cattle in the year 2002 going into 2003.