Price slides are a fact of life in marketing feeder cattle. Here's a look at how it works. |
Over the past month, this column has focused on the feeder cattle market and various value drivers in an effort to help producers better understand market principles while marketing is fresh on their mind. Previous columns have focused on:
Most of that discussion is fairly straightforward and generally easy to illustrate and explain. That's especially true given that all of it's categorical. For example, cattle are either weaned or they aren't - and there's a distinct value difference between the two categories.
But when it comes to dealing with price slides and/or weight stops (never mind shrink for this discussion), my experience has been those principles are generally more difficult to understand. Price slides effectively adjust the price downward as cattle exceed the contract base weight. Meanwhile, weight stops establish a hard break - any weight beyond the weight stop will not be paid for, thereby establishing a total dollar ceiling.
This week's illustration highlights a straightforward example for 640-pound calves priced at $155 per cwt with a $10 per cwt right-side slide (a slide applies only to the cattle as they get heavier), no slide window (zero tolerance beyond the base weight) and a 25-pound weight stop in place.