Selling cattle well in advance of their delivery date, or forward contracting, is a marketing option available to beef producers. Such a transaction requires the seller to estimate the weight of the cattle prior to delivery. Weights estimated at the time of sale and those recorded upon delivery often differ. Therefore, to ensure fair market value upon delivery, an adjustment of the sale price is often necessary.
The “slide” is a predetermined adjustment in the sale price of cattle and is included in the contract (forward contracting) or in the description of the cattle (video or Internet marketing) being offered for sale. It is based on the difference between the weight estimated prior to consignment or contracting and the actual pay weight. Pay weight is the actual live weight of the cattle upon delivery minus a “pencil” shrink. This pencil shrink is negotiable and normally ranges from 2 to 4 percent.
Three slides are used: up, down or both ways. The seller decides the magnitude and direction. Liveweight and the magnitude of the slide are inversely related; as liveweights increase, the slide will usually decrease. Calves (less than 600 pounds) often are sold with a two-way slide. Sliding cattle both ways is particularly useful when environmental conditions such as rainfall and forage availability can drastically affect weaning weights. The two-way slide protects the buyer if the cattle deliver heavier than expected, and ensures the seller will receive a fair market price if the cattle are lighter than expected. The weight of yearling cattle is more predictable; therefore, yearlings are usually offered with an up slide only.
An up slide is exercised when the weight of the cattle upon delivery is heavier than expected. Selling with an up slide locks in a maximum price (dollars per hundredweight or $/cwt) that will be paid for the cattle.
In a mid-July sale, 600-pound calves con- signed for November delivery sell for $80/cwt. The slide is $5/cwt. Calves will be weighed at the ranch with a 2 percent shrink. Upon delivery in November, the cattle average 630 pounds per head.
The slide will be exercised because the cattle were heavier than expected at delivery.
The extra 17 pounds (expressed as cwt) is multiplied by the slide, yielding $0.85/cwt. The $0.85/cwt is then subtracted from the sale price of $80/cwt to yield the actual price of $79.15 per hundredweight. The actual price paid for the cattle under this agreement is $488.36 per head.
A down slide is exercised when the delivered weight of the cattle is less than expected at the time of sale (contract). Selling with a down slide locks in the minimum price ($/cwt) to be paid for the cattle.
In a mid-June sale, 500-pound calves con- signed for October delivery sell at $90/cwt. The slide is $10/cwt. Calves will be weighed at the ranch with a 3 percent shrink. Upon delivery in October, the cattle average 480 pounds per head.
The down slide will be exercised because the cattle weighed less than expected upon delivery.
This 34-pound (.34 cwt) difference is multiplied by the slide ($10/cwt) to get $3.40/cwt, which is added to the sale price of $90/cwt to obtain the actual price of $93.40 per hundred- weight.
A worksheet for evaluating the use of a down slide (line A is greater than line E) follows.
To evaluate an up slide (line A is less than line E), calculations in lines G and J change as shown.
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