Preparing for financial opportunity – Turning calves into yearlings

Consider feed management in your opportunity as well.

October 18, 2022

3 Min Read
Preparing for financial opportunity – Turning calves into yearlings

To reiterate some points I made in my article last week. Cattle producers need to act as business managers and assess inventories of all resources (cows, calves, silage, feed grains and potential for winter grazing) to determine the best course of action to maximize their profit potential. This should include considering how feed resources are best used and various marketing endpoints to maximize returns and capture the greatest possible value.  If you have calves on inventory and no wheat pasture to graze, this week we address the financial opportunity of turning those calves into yearlings without winter grass.

Consider the following:

  • Drought has resulted in low cattle inventories. The laws of supply and demand dictate that the future value of cattle will increase. Feedlot placement data shows more light weight calves going on feed.  At the time of this writing, the futures board looks promising for yearlings in the spring of 2023.  The futures contract for March is at $179/cwt and May is at $185/cwt.  

  • This week the USDA Oklahoma Cattle Auction Summary tells us that 476 pound, Medium and Large frame, Muscle Score 1 steer calves traded at an average of $184.07/cwt. This translates to a total value per head of $876. 

  • A few weeks ago, my colleague, Dr. Dave Lalman put together a ration of roughly 1/3 Dry Distillers Grains, 1/3 rolled Corn and 1/3 chopped Wheat Hay. At August prices, this ration could be limit fed at a rate of 13.5 pounds/day (as is) to 500 pound growing calves resulting in an ADG of just over 2 pounds/day at a cost of gain (COG) of $0.83/pound.  

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  • I will use more conservative figures (2 pound ADG and $0.85 COG) to work through the following calculations:

    • Limit feeding for 180 days until next May resulting in 360 pounds of gain at a cost of $306 per head resulting in an 836 pound yearling.

    • This feed cost added to the current $876 value of the steer equals $1,182.  To account for opportunity cost, financing, and potential death loss, I am raising this value by 10% resulting in a breakeven value of $1,300.

    • Using the current futures board price of $1.85 for May predicts a value of (836 x $1.85) $1,546.  

I encourage producers to check on current prices of feedstuffs in your area. Take inventory of your hay, silage, feed grains and potential for winter grazing. Manage your business, do the math, consult with a nutritionist and arrive at your own estimation of the cost of gain. For example, if we raise the COG to $1.30 in the example above, the breakeven goes to $1479.

Also consider feeding management, as limit feeding requires skills and facilities such as:

  • Adequate bunk space to permit all calves to eat at the same time.

  • Pens small enough so that all calves come to the bunk to eat at feeding time.

  • A scale or method of weighing out the daily feed.

  • Roughage feeds available for calves while working up to a high concentrate, limit fed diet.

  • Time constraints and feeding skills of the manager.  This limit feeding program works best when calves are fed at the same time each day.

  • Business management skill to assess the economic limitations and opportunities.

  • A plan for the use of or marketing of cattle following the limit growing program.

Source: Oklahoma State University

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