The computer or smartphone-based app builds on a data set that Iowa State University had been generating for several years. The program provides information for producers who buy feed and yearling cattle or weaned pigs.
The university had been calculating the pig wean to finish and cattle yearling to finish “crush margin” data for several years, said Lee Schulz, livestock economist with Iowa State University’s Extension and Outreach and one of the apps developers. That information is calculated once a week.
“We intend to keep releasing those margins,” he told FeedNavigator. “Producers and stakeholders in the industry really use them as a barometer and risk management opportunity as they serve to track them over time.”
The crush margin is a term borrowed from the soybean industry where it is used to identify the margin that can be hedged by evaluating futures contract prices for soybeans, meal or oil, according to information from the Iowa State Extension office. In this instance, it is being determined for cattle and hogs as a way to manage risk.
For cattle on feed, the margin is established by looking at live cattle value minus the cost of the feeder cattle and estimated corn fed value. A margin for market hogs was determined by comparing lean hog value against weaned pig value and the estimated cost of corn and soybean meal fed.
The newly released app is intended to capitalize on that work and provide producers more individualized data, said Schulz. “This is a complement – it allows a little more flexibility as it allows producers to input their own information,” he added.
“The app allows them [producers] to fine tune their look at risk management and identify opportunities in regards to price risk management,” he said. “The historical margins are very important, and producers will continue to track them as it gives you the change over time. The app allows you to fine tune that to your operation – to identify opportunities to sell futures contracts to hedge that risk.”
The increased use of smartphone technology and app development helped maintain interest in creating an app for producers, he said. “It’s always been something that was on the mind, from the extension standpoint of bringing producers tools that they can readily use and that are valuable to their operations,” he added.
Elements of managing risk
The app evaluates several sets of information including animal prices and costs for feed ingredients like corn and soybean meal, said Schulz.
“The costs that we’re looking at are the major inputs for cattle and hog production – for example in identifying opportunities to mitigate price risk in the form of paying higher prices for feed cattle or corn or receiving lower prices for cattle or hogs,” he said.
“That’s important to the producer’s overall profitability – lean hogs, corn, soybean meal or feeder [calves] – those constitute the majority of the profitability drivers. If we can protect them from paying for higher prices of input through futures or lower prices for output that’s important for the bottom line.”
Animal price and feed costs are the majority of total input costs and can introduce volatility for producers, the extension and outreach office reported.
Work on the crush margin app started several months ago and took a team to bring together, said Schulz. The app was designed so it can be updated, and it draws pricing information regularly.
“We’ve seen the proliferation of apps and making those tools for producers to use,” he said. “We see this as an opportunity to address a lot of questions from producers.”
The information being published was based on a standardized calculation but that may not fit the specifics of individual producers’ experiences, he said. “This allows a little more flexibility to put it into what the producer is facing,” he added.
Using the new app, a producer can vary details like the weight of the feeder cattle or feed ingredient price, he said.
The app is web-based and available for a free download from the ISU Livestock Crush Margin App website.