Table of contents

    1. Seven Steps to Better Marketing
    2. Understanding supply factors for agricultural products
    3. How demand and supply determine market price
    4. How exchange rates affect agricultural markets
    5. How interest rates affect agricultural markets
    6. How to use charting to analyse commodity markets
    7. Agriculture marketing clubs
    8. Commodity futures markets
    1. Economics and Marketing – Choosing a Commodity Broker
    2. Margin on futures contracts
    3. Options on futures – an introduction
    4. Using hedging to protect farm product prices
    5. Canola futures contract
    1. Introduction to crop marketing
    2. Basis – How cash grain prices are established
    3. Grain marketing decision grid
    4. Price pooling – How it works
    5. Crop contracts
    6. Grain storage as a marketing strategy
    7. Using producer cars to ship prairie grain
    8. Using frequency charts for marketing decisions
    9. Western Canadian grain catchment
    10. Barley and wheat marketing resources
    11. Wheat basis levels
    12. Wheat quality and protein matters
    13. Wheat pricing considerations
    14. Marketing oats in Canada
    15. US Crops – Where Are They Grown?
    1. Introduction to livestock marketing
    2. Understanding and using basis levels in cattle markets
    3. Forward contracting of cattle
    4. Understanding dressing percentage of slaughter cattle
    5. Understanding the cattle market sliding scale
    6. Predicting feeder cattle prices
    7. Breakeven analysis for feeder cattle
    8. Farm gate values for farm-raised vs purchased calves
    9. Wool marketing in Canada
    10. Marketing feeder lambs
    1. Turf and forage seed trade companies active in the Peace Region
    2. History of creeping red fescue production in the Peace River Region
    3. Alfalfa seed marketing in Canada
    4. Forage seed marketing
    5. Marketing creeping red fescue
    6. Faba bean
    7. Marketing compressed hay
    1. Agricultural Marketing Glossary – A, B
    2. Agricultural Marketing Glossary – C
    3. Agricultural Marketing Glossary – D, E
    4. Agricultural Marketing Glossary – F, G
    5. Agricultural Marketing Glossary – H, I, J, K
    6. Agricultural Marketing Glossary – L, M
    7. Agricultural Marketing Glossary – N, O
    8. Agricultural Marketing Glossary – P, Q, R
    9. Agricultural Marketing Glossary – S
    10. Agricultural Marketing Glossary – T, U
    11. Agricultural Marketing Glossary – V, W
    12. Other Marketing Related Glossaries

Introduction

Farm gate value is what a farm-raised calf is worth going into a feedlot after all selling costs have been estimated and deducted from the market price. In other words, it is the estimated cost of placing a farm-raised calf in an on-farm feedlot. It is important to know the farm gate value when calculating breakeven feeder prices and deciding whether to feed the calves further or sell them.

Home-raised calves should have selling costs deducted from their market price to establish their net value at the farm gate. By contrast, the net value of purchased calves is determined by adding buying costs to the market price. Because of these differences, home-raised calves and purchased calves have different values going into the on-farm feedlot. Even though both would sell for the same market price. That difference in value is important when comparing the breakeven price of purchased calves and home-raised calves in the same feedlot. This module outlines how to calculate farm gate values for home-raised calves and compares this to purchased calves.

Home-raised calves

The calculations that follow estimate the farm gate value for a home-raised calf sold through an auction market. To determine the actual value of a home-raised calf, selling costs are deducted from the market price. In this calculation it is easier to view the farm feedlot as a separate enterprise from the cow-calf operation.

Table 1. Calculating the farm gate value of home-raised calves

Market price: $/head
Shrunk weight x auction market price (475 lb. X $1.67/lb.) $793.25
Less estimated selling costs:
Auction Commission charge 20.00
Alberta Beef Producers Check-Off 3.00
Brand inspection 1.25
Transit insurance 2.00
Trucking from farm to auction (40 km.) 3.00
Farm gate value of home-raised calf $ 764.00

The $764.00 is the net dollars the cow-calf enterprise would have received if the calf was actually sold. This represents the actual market value of a home-raised calf.

Purchased calves

The following calculation estimates the farm gate value of a calf purchased at an auction market. In this instance buying costs (cost of locating, buying and delivery) are added to the market price to determine the total cost of buying the calf at the auction market before placing it in a feedlot.

Table 2. Calculating the farm gate value of purchased calves

Market price: $/head
Shrunk weight X auction market price (475 lb. X $1.67/lb) $793.25
Add buying costs: $5.00
Trucking from market to farm (40 km) $3.00
Farm gate value of purchased calf $801.25

The farm gate value of the home-raised calf is $37.25/head lower than the value of the purchased calf in this example. The lower the cost of an animal placed into a feedlot the greater the profit potential.

Producers should do breakeven calculations before they decide to keep calves or buy calves for their home feedlot. Use the estimated farm gate value as the calf purchase cost or feeder purchase cost in a breakeven analysis. In this model, the farm gate value of a home-raised calf is used for comparing returns from different feedlot alternatives.

Additional information

Other modules in the Livestock Marketing Section will address calculating breakeven values for feeders in detail.

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