New Crossbred May Offer More Profit Potential In New JBS/Nexus Contract

By Jeff Rose
Something had to give. Dairy farms have been breeding increasing numbers of cows using beef semen for more than two years now. Semen companies have been selling this as a way to get more money for bull calves, and it seems to be working. 

The major Holstein steer markets and the veal business don’t want the resulting crossbred cattle, but what the customer wants, in this case, doesn’t matter. That’s because the traditional colored cattle feeders are willing to buy these cattle, which look kind of like colored cattle, for less than colored feeder cattle prices. The problem is, the price is more than a Holstein feeder price, by a lot. Many of these crossbreds are getting sold as finished colored cattle and that makes the price worth the gamble.

So now we have a bit of a shortage of straight Holstein cattle, and the traditional Holstein processors must compete for a product that they really don’t desire. The result is, JBS made a pretty major change in its Holstein contract offered for harvest in Green Bay, Wisconsin, Plainwell, Michigan and Souderton, Pennsylvania. They narrowed the basis by $4.00 and are paying a premium for Prime quality carcasses. 

At National Farmers, we looked at recent loads of cattle paid using the previous method and the loads paid the new way. The new contract, so far, pays more total dollars on most loads. Results, of course, vary with the cattle weight, implant strategy and feeding programs, but it looks promising. 

The biggest problem is still the price difference between the Holstein cross and the straight Holstein feeder. We estimate the most profitable is still the straight Holstein steer for producers who want to contract to manage risk. 

For producers willing to play the market, the crossbred may offer more profit potential. The question is, how much risk and how long will the other packers be willing to pay beef prices for them?

I don’t want to talk about COVID-19, but it’s a must-do. This risk wild card will be with us at least until summer, and I wouldn’t be surprised if it is still affecting market psychology this fall. Changes in weather, vaccine availability and new strains all remain factors. I don’t want to talk about any of the pandemic issues, but they’re reality. Some good pricing opportunities are available, so maybe this isn’t the year to swing for the fence. 

Yes, we said the same thing in the March/April Livestock Signals in National Farmers Magazine. The comment still stands. Call 866.455.6553 for assistance and insights today.

Call 814.720.0549 for marketing advice.

 

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