June 14, 2016
Preconditioning has grown a lot in value and therefore in the premiums it pays over the past 10-20 years, but that's likely to shrink back this year with lower cattle prices.
In 2014, Wes Ishmael reported for BEEF on a Kansas State University/Merck study from the year before that showed weaned calves were worth $4.78 per cwt more than non-weaned calves, and VAC 45 preconditioned cattle earned a premium of $6 per cwt more than non-weaned, non-preconditioned calves. Those VAC 45 calves were worth about $1.25 per cwt more than weaned calves that had at least one viral vaccination.
Things got even better in 2014, when the Oklahoma Quality Beef Network (OQBN), which is a VAC 45 program, reported premiums averaging $19.20 per cwt, or about $80 per calf.
Since long-weaned calves seem to be one solution to the modern conundrum of high morbidity and death loss in stockers and feeders, this makes sense. I've even asked before if such premiums are actually high enough, considering the financial risk of a sick and/or dying $1,500 calf.
Now calves are back at 2011-2012 prices and budgeting a preconditioning program seems a bit more daunting.
Since Oklahoma State University just released some percentage estimates of the value of management practices and preconditioning, I decided to project those onto current feeder-cattle prices from Oklahoma City, using medium- and large-frame No. 1 cattle.
OSU says four years of data from 2010-2013 produced these percentage rewards and punishments:
Non-castration: 5.2% loss
Horns: 3.33% loss
Weaned: 1.25% gain
Vaccinated: 1.85% gain
Certified preconditioned: 1.27% gain
In Oklahoma the past several years, calves in the OQBN sales earned a total premium of 5-9%, so we'll also calculate a total for those VAC 45 calves at 5%. You can do the math if you want to bank on the 9%, which was achieved in the nosebleed pricing section in 2014.
If sale time this fall brings prices similar to Oklahoma City average prices last week for 500-600-pound stocker steers, here's what management and preconditioning might pay you this fall. Those steer calves averaged $142-152 per cwt, so I'm projecting these possible values:
Certified preconditioned: $1.80-1.93 per cwt
Vaccinated: $2.63-2.81 per cwt
Weaned: $1.78-$1.93 per cwt
VAC 45 (OQBN): $7.10-$7.60 per cwt
These figures are actually a bit lower than the percentages Wes Ishmael reported in that BEEF article in 2014, however. Those numbers calculated by K-State suggest the following percentage increases:
VAC 45: 3.6%
Probably good to keep in mind these are different studies conducted with different rules and somewhat different locales.
Personally, I have a bad feeling about the economy and I'm not betting we'll see today's prices this fall, when we normally see seasonal downtrend anyway. But I've been wrong many times before.
If you want to do some budgeting before deciding about preconditioning this fall, OSU has a downloadable tool to help you do that.
So, preconditioning will still pay premiums. Run the numbers for your own operation to decide what works best for you.
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