We at the Southwind Extension District thank Dr. Jennifer Ifft, KSU Ag Economics Specialist, for allowing the use of this 8-part series to help our district’s beef producers. Questions regarding this series can be directed through Chad Guthrie at [email protected], or by contacting your local extension office.

Farmers and ranchers face risk every day. Individual producers have tools to mitigate risk, such vaccination and irrigation, but never have complete control over production outcomes. Price risk is one example of the many types of risk that can influence farm income. “Uncertainty” characterizes a situation where outcomes are unknown, while “risky” characterizes situations where potential outcomes are known or understood, but different outcomes can occur.

For cow-calf producers that are calving now or within the next few months, production (breeding) decisions were made over 9 months ago. However, it will be another 6 months from today, or longer, that most producers receive any income. Predicting market prices at breeding is highly uncertain: it’s difficult to know what markets will be like a year and a half in advance. By calving, market predictions or expected prices for feeder cattle have been established through futures markets:¹ this is a risky situation rather than an uncertain situation. While futures prices are not a guarantee of a particular market price, they provide information about likely price outcomes.

Price risk is not about whether expected prices are high or low, but whether market prices are different than expected. What does it mean for a price to be different than expected? Let’s say a producer calves in April and plans to sell in October. Today October feeder futures are around $185/cwt. In other words, $185 is the expected market price for October 2022, or $185/cwt is best estimate we have for average national prices in October, based on currently available information. The price risk faced by the producer is that when October arrives, prices may have dropped below $185/cwt. If prices decrease by October, will the producer still be able to make a profit?

In some years, prices decline or stay the same. The largest decline in recent years was in 2015. In April 2015, October feeder cattle futures were around $214/cwt. By October, prices had declined to around $183/cwt. Some producers might have still made money at $183, but this was substantially less than the expected price in April. Prices were similarly high in April 2014: October feeder futures were over $230/cwt. Actual 2014 October prices were a little higher than this. In 2020 expected and actual prices were also similar, around $140/cwt.

Actual prices can be higher than expected. While this is technically a form of price risk, or “upside risk”, most producers are more worried about price declines, or “downside risk”. In April 2013, the October feeder cattle futures price was around $144/cwt, but the actual price ended up around $160/cwt. Likewise, in 2017, the actual October price was almost $10 higher than expected.

Producers may also face unexpected declines in local prices, that may not be reflected in national or futures markets. This type of risk is often referred to as “basis risk”. Basis risk is defined as the different between the current (or nearby) futures price and local cash prices. For example, prices at the local sale barn may experience a larger decline than futures prices.

To summarize, price risk management is not just about getting a high price; it is about protecting yourself from declines in the expected market price. The next article in this series will discuss different price risk management strategies.

This article is the first in an 8-part series on price risk management for cow-calf producers. The first part of the series will focus on price risk and different management alternatives. The later part of the series will focus on Livestock Risk Protection, an insurance product available to Kansas producers, that pays out when market prices for feeder cattle (or fed cattle or swine) are lower than expected. While LRP has been available for 2 decades, recently policy changes make it more affordable to producers. Funding for this work was provided by the North Central Extension Risk Management Education Center, the USDA National Institute of Food and Agriculture Award Number 2018-70024-28586.

We at the Southwind Extension District thank Dr. Jennifer Ifft, KSU Ag Economics Specialist, for allowing the use of this 8-part series to help our district’s beef producers. Questions regarding this series can be directed through Chad Guthrie at [email protected], or by contacting your local extension office.

For more information about this publication and others, visit AgManager.info.

K-State Agricultural Economics | 342 Waters Hall, Manhattan, KS 66506-4011 | 785.532.1504

www.agecononomics.k-state.edu

Copyright 2022: AgManager.info and K-State Department of Agricultural Economics

Are you itching to get out of the house and do something productive in the landscape? If you have fruit trees, now is the time to prune. A little planning ahead with fruit trees, such as pruning, can mean big rewards later in the growing season.

Are you like many who are “afraid” to prune? Don’t be. When done correctly, pruning is an essential component of growing a healthy, productive fruit tree. Fruit trees should be pruned every year and for several reasons. The first is the development of a strong tree structure. Pruning should begin when the tree is planted and continued each year thereafter. Another reason to prune is the increased penetration of sunlight for the development of fruit buds and for the fruit to mature properly.

Trees can be pruned this early (winter) because they are dormant. This can be done in January, February and even early March. Pruning when trees are dormant makes it easier to see undesirable branches because leaves aren’t present. It is important to do any pruning before dormant sprays are applied, to avoid spraying some of the wood that will later be removed. Total spray coverage of limbs, branches and shoots will be increased after pruning. Do not prune if temperatures are below 20°F because this can cause tissue damage.

Have your fruit trees been neglected for quite some time? If so, pruning can seem like an overwhelming task; where to start, how much wood to remove, etc. But a neglected tree can be revitalized.

The first step in revitalizing a neglected tree is to prune wood around the trunk area and near the ground. Remove all sucker growth around the trunk by cutting as close as possible to the point of origin. Then remove all dead and diseased branches. Next, look for two branches that rub and remove one of the two. Branches that are growing toward the interior of the tree should also be removed. No more than thirty percent of the tree should be removed in a year.

You will want to retain scaffolds that are growing away from the tree center at wide angles with the trunk. Scaffolds are one of the main branches making the basic framework of a tree. They should be positioned on different sides of the tree for good distribution of the fruit crop.

The right tools are needed for proper pruning. Tools always need to be sharp so clean cuts can be made. Cuts that result in bark tears, stubs, or jagged surfaces are slow to heal and may even not completely heal. A scissor type of hand shear is used to prune small size wood, usually ¼ inch in diameter. Long handled loppers should be used to cut ¼ to ½ inch wood. These will need to be used generally by the third year of tree growth. For branches larger than ½ inch, use a fine-toothed pruning saw.

The Extension office has a couple of publications on pruning fruit trees that explain in more detail how to prune depending on the species and age of the tree. These publications can be found on our Southwind website: www.southwind.ksu.edu

If you would like me to evaluate your trees, give me a call and a home visit can be scheduled.

Krista Harding is a K-State Research and Extension Agricultural agent assigned to Southwind District.  She may be reached at [email protected] or 620-244-3826.

K-State Research and Extension is an equal opportunity provider and employer.