# Making dollars and sense out of buying and

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2 Using A Price Slide A price slide is usually specified in dollars per hundredweight. The price slide should be consistent with the price difference due to factors such as weight observed in feeder cattle markets. The price slide is used to adjust the bid price based on the pay weight of the feeder cattle. Price slides may be used in a number of different ways. For instance, price slides may be applied up and down using the same price slide value, or one price slide value may be used to slide up and another used to slide down. Also, in some sales, price slides are specified to slide one way (eight down or up). In addition, some price slides are used in conjunction with an acceptable weight range for which no bid price adjustment is made within the weight allowance (window). Price Slide The price slide is simple to use. However, it does require four pieces of information: The estimated pay weight (EPW). The actual pay weight (APW). The bid price (BP). The magnitude of the price slide (PS), as shown in Equation 1. These factors will allow us to calculate the actual pay price (APP). Equation 1: Actual pay price = Bid price + [(Estimated pay weight - Actual pay weight) x Slide] or APP = BP + [ (EPW - APW) x PS] For example, assume the seller over-estimated the feeder cattle weight at 735 pounds (estimated pay weight), when the actual pay weight was 686 pounds. Also, assume a \$5 per hundredweight price slide and a \$75 per hundredweight bid price. Through the use of the slide, the bid price would be adjusted upward by \$2.45 (( ) x 5 100), resulting in an actual pay price of \$77.45 per hundredweight, as shown in Table 1. Note that the actual pay price is increased when the estimated pay weight is greater than the actual pay weight. Likewise, the actual pay price is decreased when the estimated pay weight is less than the actual pay weight. Figures 1a and 1b graphically show the effect of a price slide on the actual pay price for feeder cattle with an estimated pay weight of 700 pounds, a \$75-perhundredweight bid price, and a \$5 per hundredweight price slide. The actual pay price increases for feeder cattle whose weights have been over-estimated (lighter actual pay weights) and decreases for feeder cattle whose weights have been under-estimated (heavier actual pay weights), as shown in Figure 1a. Figure 1b illustrates that the larger the price slide, the more significant the impact on actual pay price becomes. Furthermore, in this example, if you assume an actual pay weight of 660 pounds, the actual pay prices become \$76.20, \$77.00, and \$77.80 for \$3, \$5, and Table 1. Feeder Cattle Weight And Price Calculations Using The Price Slide. a Weight Alternatives Item Units Under-Estimated Correctly Estimated Over-Estimated Weight Calculations Estimated Live weight cwt Estimated pay weight cwt Actual live weight cwt Actual pay weight cwt Weight error cwt. (0.49) Weigt allowance cwt Adjusted weight error cwt. (0.49) Price Calculations Bid price \$/cwt Price slide \$/cwt Price Slide Adjustment \$/cwt. (2.45) Actual pay price \$/cwt Value of animal \$/hd a The calculations assume a 2-percent shrink and no weight allowance. Estimated and actual pay weights are after shrink. 2 Alabama Cooperative Extension System

3 ACTUALPAY P RICE(\$/cwt.) ACTUALPAY P RICE(\$/cwt.) \$78 \$77 \$76 \$75 \$74 \$73 \$5/cwt. Price Slide \$72 Figure 1a. The effect of a price slide without a weight allowance on actual pay. \$78 \$77 \$76 \$75 \$74 \$73 \$7/cwt. Price Slide \$5/cwt. Price Slide \$3/cwt. Price Slide \$72 Figure 1b. The effects of different price slides without a weight allowance on actual pay price. \$7 per hundredweight price slides, respectively. The total value per head for the respective price slides are \$502.92, \$508.20, and \$ per head. The value per head increases as the price slide values increase. However, the value per head will decrease for feeder cattle with heavier-than-expected pay weights. The actual pay price is sensitive to weight error (Estimated - Actual pay weight) and the price slide. Therefore, it is important that the estimated pay weight should be close to the actual pay weight and that the magnitude of the price slide should accurately reflect the price adjustment for heavier or lighter feeder cattle in order to obtain the current competitive market price. Price Slide With A Weight Allowance Building a weight allowance (WA) into the price slide provides an extra incentive for the seller to accurately estimate the pay weight of feeder cattle. The weight allowance usually applies both up and down from the estimated pay weight, as shown in Table 2. Equation 2 may be used to calculate the actual pay price using a price slide with a weight allowance. Equation 2: APP = or BP + {[(EPW - APW) ± WA] PS}, if EPW - APW > WA BP, if EPW - APW WA The bid price will be adjusted when the difference between the estimated and the actual pay weights is Table 2. Feeder Cattle Weight And Price Calculations Using The Price Slide With A Weight Allowance. a Weight Alternatives Item Units Under-Estimated Correctly Estimated Over-Estimated Weight Calculations Estimated Live weight cwt Estimated pay weight cwt Actual live weight cwt Actual pay weight cwt Weight error cwt. (0.49) Weigt allowance cwt (0.10) Adjusted weight error cwt. (0.39) Price Calculations Bid price \$/cwt Price slide \$/cwt Price Slide Adjustment \$/cwt. (1.95) Actual pay price \$/cwt Value of animal \$/hd a The calculations assume a 2-percent shrink and a weight allowance of 10 pounds. Estimated and actual pay weights are after shrink. Marketing Feeder Cattle With A Price Slide 3

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