Carcass-based cattle feeding profit is maximized by adding carcass weight until the cost of gain (COG) exceeds the value of gain. Marketing strategies for finished cattle marketed using a grid-based carcass pricing system should focus on controlling costs of carcass weight gain and enhancing the value of that gain.
Colorado State University researchers used close-out records from 67,570 lots (pens) of steers and heifers fed in custom feedyards to characterize the relationships of carcass-based measures of growth performance and feeding profitability among pens of cattle sold on an individual carcass basis using a value-based marketing grid.
Close-out lots ranged in size from 26 to 1,871 head. The cattle were fed in 212 feedyards in 21 states and harvested during 2003 to 2008. Performance records included live pen and individual carcass data, while beginning carcass weight was estimated with an equation developed from 19 different serial slaughter research trials. Close-out performance was calculated on a deads-in basis.
Actual lot means for initial weight, carcass weight, feed intake and days on feed were used to calculate carcass-based average daily gain (ADG) and feed conversion. Carcass-based COG was calculated for each lot by using actual feed intake, days on feed, an average cost of $196/dry ton of feed and actual feedlot non-feed costs.
Initial animal value was determined using actual weight, sex and feeder cattle prices for each lot. Final animal value was determined using individual carcass weight, yield grade (YG), quality grade and average USDA beef carcass pricing data from 2003 to 2008 to develop a grid pricing premium and discount scenario.
The economic effects of variation in carcass-based cattle performance were manifested as differences in either cost per unit of carcass gain or value added per unit of carcass gain.
Carcass-based feed conversion was the primary determinant of cost of carcass gain and the most important contributor to differences in net return per animal. Effects of medical expenses and mortality rate on feeding profitability were more pronounced among lighter-weight than heavier-weight steers and heifers. Collectively, carcass-based COG, medical expense and mortality accounted for 63% to 72% of the variation in net return per animal.
Days on feed and carcass-based ADG were the two most important determinants of value of carcass gain, and the second and third most important contributors to net return per animal; 25% to 34% of the variation in net return was associated with value of carcass gain factors.
Placement weight was also important in value of carcass gain. Revenue generated per unit of carcass gain decreased as placement weight increased. Lots of cattle placed on feed at lighter weights had lower initial feeder cost, gained more carcass weight and generated more added value per unit of carcass gain.
Among carcass traits, the percentage of YG 4 and 5 carcasses had the greatest negative effect on net return, while percentage of 1,000-lb. carcasses had relatively little effect.
Variation in carcass weight among cattle within a lot was important to total revenue and profitability and is an easy variable to monitor. Pens of cattle with high carcass weight variation had slower rates of carcass gain resulting in more lightweight, lean carcasses. This did result in a greater percentage of YG 1 and 2 carcasses, but that was offset by lightweight carcass and Standard-grade discounts.
Results favor finishing carcass grid marketed cattle for extended periods of time, adding carcass weight until animals become excessively heavy or fat. This analysis suggests steers could be fed to average carcass weights of 930-945 lbs., and heifers to 830-850 lbs.
Scott B. Laudert, Ph.D., is a beef cattle technical consultant based in Woodland Park, CO. He can be reached at 719-660-4473.