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Retained Ownership Can Maximize Peaks, Avoid Valleys

Risk management was the topic of importance at the Profit Discovery Seminar held during the Leachman Cattle of Colorodo Bull Sale in late March. Warren Weibert of Decatur County Feed Yards explains that retained ownership can help you maximize peaks and avoid valleys.

In raising cattle, as in poker, it’s sometimes difficult to know when to cash in the chips, take the money and run. But smart players know it can sometimes pay bigger dividends to hold onto their cards for the last play.

At a Profit Discovery Seminar held in conjunction with the March 26 Leachman Cattle of Colorado bull sale, Warren Weibert, general manager of Decatur County Feed Yards (DCFY), Oberlin, KS, presented data that suggests it’s been profitable over the last couple of decades for cow-calf producers to hold onto their cattle for bigger paydays. By retaining ownership and selling finished cattle, he says, cow-calf producers have made more money, more often.

In fact, he says sending cattle to the feedlot as yearlings and retaining ownership returned an average of $53 in profits on those cattle in 17 of the last 23 years. Meanwhile, if cow-calf operators had sent calves directly to the feedlot, they would have been profitable in 18 of the 23 years and logged an average of $85/head profit on the animals.

By retaining ownership today, Weibert says, cattlemen can maximize the peaks and avoid the valleys of typical seasonal cattle prices. He says fed-steer prices are highest in April (44% of the time) and in May (19% of the time). The lowest prices are earned in October.

With corn prices skyrocketing, however, can it really be a good time to be in the feeding business? Speakers at the seminar admitted that proper research, good management and smart decision-making will be necessary to overcome increasing challenges in the feeding sector.

“Feed efficiency is going to become more and more important as feed costs remain high,” Weibert says. And, feeders and cattlemen will need to continually strive for improvement, comparing cattle with contemporaries and analyzing the data.

Jason Ahola, Colorado State University associate professor of beef production systems, told the group that feed costs are double their historical values. Partly as a result of that, the industry has migrated from being supply-driven to being cost-driven.

Unlike traditional cattle cycles, profits have dropped at the same time as the cattle supply. “We’re in a situation where cost is driving profitability,” Ahola says; surviving in the industry will require managing those costs.

He and Wiebert agree that feed efficiency will be key to the ability to improve. In fact, Ahola notes research shows a 5% improvement in feed efficiency translates to a 20% improvement in rate of gain.

Dan Dorn, DCFY supply development manager, says that with corn over $6/bu., feed conversion is one of the most important aspects of feedyard success. For a 585-lb. calf, a ½-lb. difference in dry-matter conversion translates to $103 in additional profits, he explains. In addition to feed conversion and efficiency, carcass weights and traits are other factors in feedyard profitability, he adds.

During these challenging times establishing a baseline for cattle is essential, Dorn says, adding “you can’t manage what you can’t measure.”

Genetics a plus

Knowing how genetics are involved in the equation is also critical, says Lee Leachman, manager of Leachman Cattle of Colorado. For his company, getting the benefit of the genetics means “having our eye on the right traits,” he says.

One of the most important traits today is certainly feed efficiency, he says, and the ability to know how well an animal’s offspring will perform on feed. “Feed efficiency EPDs work,” he says. “The differences are huge, and heritable.”

Based on feeding research Leachman conducted in conjunction with DCFY, feed-per-gain EPDs and actual feed-to-gain results were well correlated and showed a huge value difference in cost of feed. In fact, feeding a 600-lb. steer to a 1,250-lb. harvest weight, and assuming a $315/ton dry matter ration cost, created a $164/head difference between the most efficient and least efficient sire groups.

Overall, he says, there’s a huge variation in the amount of feed needed – as much as $350 to $650 worth – to raise an animal from 650 lbs. to 1,200 lbs. “The value difference based on real costs is enormous,” he says.

While feed efficiency is certainly important, Leachman says his company’s breeding focus isn’t solely on this trait; they seek to breed for the highest overall value. Cattlemen should be focused on what works best for them. “The only thing you should be selecting for is dollar profit,” he says.

Leachman says that, in the future, feeders and packers will be able to value calves based on their DNA. Until then, he says cattlemen should strive to know as much as possible about their calves via benchmarking to learn their true value.

“There are huge differences in the value at harvest” based on the grid, he says – as much as $200 between the best and the worst calves. “Don’t hide behind a sea of commodity cattle,” he says.

Breeders join feeders

Sandwiched between breeders they buy from and feeders they sometimes sell to, cow-calf producers can learn from both, thanks to a new alliance formed between Leachman Cattle of Colorado and DCFY. The two have joined in a partnership that will provide information for those looking to maximize performance of the animals they raise.

DCFY, a 40,000-head commercial feeding operation, began its retained ownership program in 1980. It started feeding cattle with Leachman genetics in 1995; today, all Leachman progeny test are fed at DCFY.

Leachman says the DCFY feeding program helps producers benchmark their herd, and is competitive on cost of gain, while able to generate “the best and most comprehensive individual animal data available.”

Meanwhile, DCFY’s Weibert says “we’re very excited about our new partnership… and all the positive benefits we believe our joint customers will receive by our relationship.”

Currently ranchers from more than 30 states, ranging from Hawaii to Virginia, participate in the Decatur Beef Alliance, which Weibert says “is widely recognized as being the most sophisticated, experienced marketing and data retrieval program in the industry today.” Among aspects of the DCFY program are sorting calves to feed each animal to its genetic potential and a pricing system that pays based on what each animal is worth to capture the value of genetic investments. Learn more at www.decaturfeedyard or