Exploit What You Have

We don't have the money to make mistakes. We've stayed in business by searching out things that work, things that make us more money, says Daniel Snow of Snow Paradise Farms at Harrison, AR. Indeed. Snow started out 21 years ago with three cows and an acre of land. He grew that into a fulltime commercial and seedstock Brangus cow-calf operation. Along the way he leveraged the value of his genetics

“We don't have the money to make mistakes. We've stayed in business by searching out things that work, things that make us more money,” says Daniel Snow of Snow Paradise Farms at Harrison, AR.

Indeed. Snow started out 21 years ago with three cows and an acre of land. He grew that into a fulltime commercial and seedstock Brangus cow-calf operation. Along the way he leveraged the value of his genetics by owning his own cattle longer, weaning and backgrounding them for upwards of 100 days.

As the number of customers buying his bulls and females increased, Snow began a custom backgrounding business to give them the same opportunity. Collectively, he and his customers built more marketing opportunity along the way.

“We can market like cattle, with same genetics, weaned and vaccinated the same as ours. I stand behind all of the cattle like they're our own,” Snow says.

Plus, by managing and preconditioning the calves the same with Merial SureHealth, buyers and sellers can take advantage of the 21-day Limited Health Warranty provided by Merial and Boehringer Ingelheim Vetmedica.

As Snow's business continues to evolve, he focuses intently on management tweaks that allow him and his customers earn even more for the resources they already have.

For example, Snow says, “In our backgrounding business, utilizing the SureHealth program has probably been the single most valuable thing we've done. Developing our mineral program would come next to that.”

Consider this. The most recent set of calves Snow weaned — 203 head — backgrounded for a 38¢ cost of gain. He only had to doctor one head out of the entire group.

“And that one head wasn't really sick, just looking like he wanted to,” Snow says. “We put 150 lbs. on those calves and sold them for $125.50, so we tripled the price of feed for return.” In other words, he paid $38/cwt. for gain on 150 lb. that returned $125.50/cwt. for a net return of $87.50/cwt. on the money he put into feed.

That selling price represented a $73 value, relative to an average of same-weight calves selling the same week in Arkansas, Oklahoma and Missouri.

“Before, if we weaned 200 head at a time, we would doctor at least 15%,” Snow says. With less of a value on the other end, he adds.

The difference was a simple switch in his preconditioning program four years ago.

“Before, we were giving the same shots but using some of this company's product and some of that company's,” Snow explains. Then he switched to the SureHealth program, using the same animal products and administering them the same way every time.

“It's been black and white, you couldn't help but see the difference in sickness or health status,” Snow says. “You could just draw a line and see it, daylight to dark.”

The first year of the program, he says morbidity was reduced by more than half to about 6%. By refining the program further to match their specific cattle and environment, they've attained the extraordinary results cited earlier.

“I think it's the routine of doing it, giving the same shots at the right time. Dealing with SureHealth came with some education, too,” says Snow. “I think a lot of it is saying, ‘I know I want to market a feeder at about 750 lbs. as SureHealth-certified. That calf is 350 lbs. today on his mama. What do I need to do now?’ You're thinking ahead more, you've got a goal. If you don't have a preconditioning program, there just comes a day when you figure it's time to get the calves weaned.”

Snow says his cost of SureHealth runs about $8/head. The most value he's seen is $73/head, and the least was $62, he says. Since he was already paying other preconditioning costs (such as labor and feed), the value — as well as savings in these other areas — has been gravy.

“It costs us $8/head, but I don't just want to get my money back, I want to see what that $8 can make for me,” Snow says.

By focusing harder on a standardized preconditioning program Snow says they were encouraged to also get a tighter hand on cow health. He attributes part of the reduction in calf morbidity to having the cows in better condition due to an enhanced parasite control program.

“This is something anyone can do,” Snow says. But doing it is intentional. He explains, “I feel like we do a good job, and not by accident. If you've got one animal, you'll influence the beef industry, so do it the best you can.”

Demand Grows for Preconditioning

Even in an up market — or because of it — buyers are willing to reduce risk

“More and more buyers are having experience with these kinds of calves, and they're realizing it's not just about price,” says Mark Herbold, order buyer for Central States Cattle Co., Albia, IA.

Herbold is talking about weaned and preconditioned calves in general — calves that have received vaccinations within a standardized program and sold in large enough groups that buyers and sellers can segregate loads of them.

But he's also talking about the Merial SureHealth program in particular, which has emerged as the standard program in his buying area. It's the health management program chosen by the Iowa-Missouri Beef Improvement Organization (IMBIO), which hosts several sales in the area. These IMBIO sales place genetic requirements on sale cattle — think in terms of minimum EPDs on the sires used to build the calves — along with health.

“There are more and more people looking to buy preconditioned cattle,” Herbold says. “It used to be it was more just farmer-feeders willing to pay for these kind of cattle. But, with medicine costs as high as they are, a lot of people are starting to look at it, a lot of them.”

Even so, Herbold is still amazed by the number of producers surprised that buyers are willing to pay more for preconditioning, even with historically high calf prices. Really, he believes it would be more surprising if buyers weren't willing to spend a few extra dollars in order to save a bunch as equity requirements increase.

“The price being paid for these calves doesn't go very far in paying the medicine cost for a calf that gets sick because it hasn't gone through a preconditioning program like this,” Herbold explains. “Even feedlots that have traditionally been price buyers are figuring out the price can't get low enough to overcome excessive treatment costs. You put $40 into a five-weight calf, that's 8¢ on the cost of gain, which makes it prohibitive to buy those kinds of cattle even if they are cheap. Right now, by far, you're better off to buy the preconditioned ones.”

Rob Fisher, president of Oklahoma National Stock Yards (ONSY) in Oklahoma City, the largest feeder calf market in the nation, sees the same kind of demand, though he says the price premiums aren't as large when cattle prices are high (see “Is Preconditioning For You?”).

“The customers like it and the buyers like it. My customers don't mind paying for something already straightened out,” Fisher says. “There's a great demand for preconditioned cattle. Buyers like the fact everything has been done to the calves.”

Both Fisher and Herbold also say that buyers of SureHealth calves purchase with more confidence because they know the calves come with a 21-day Limited Health Warranty.

What buyers like, too, says Fisher of the SureHealth sales at ONSY, is the veterinarian-certified documentation they receive with the calves. In fact, it was this aspect of the program that sold Fisher on featuring a section of SureHealth calves at ONSY every other Monday.

“As a buyer, I can send SureHealth calves to people and not worry about them having problems. In the order-buying business, that's getting to be a bigger deal. The cattle need to be bulletproof, especially as the price of cattle and the cost of treating them has increased,” Herbold emphasizes. “If you can buy cattle that are healthy and remain healthy, that's money in the bank.”

According to Herbold, reduced health risk is especially predictable in standardized programs like SureHealth. Even if he's putting together cattle that are all preconditioned, but with different programs, Herbold explains each program has its own set of protocols.

Some demand use of products from a single company, or companies, aligned with one another. Such is the case with the unique partnership between Merial and Boehringer Ingelheim Vetmedica, which provides producers with all of the SureHealth products they need under one roof, so to speak.

In fact, Herbold says at certain times of the year, especially when health challenges are the toughest, he has customers who won't buy anything but SureHealth calves.

Bottom line, Herbold says, “I recently bought 227 calves that were SureHealth, source-verified. The reason I bought them is they were verifiable for source as part of the SureHealth program, and were preconditioned with SureHealth. Without both of those things, the cattle would have brought substantially less.”

Focus on the End

Goals Drive Preconditioning Rewards

For all of the economic and herd health benefits producers can receive from preconditioning calves, it's not for everyone (see “Is Preconditioning for You”?).

“When my clients want to consider preconditioning, we start by trying to find out what their weaning plans and marketing plans are. Then we tailor a preconditioning program to meet those plans,” explains Steve Wickham, DVM of Wickham Veterinary Services, Mt. Pleasant, IA.

He begins by determining why clients are interested in preconditioning, and if they have the requisite facilities and expertise to do it on their own or in partnership with someone. How and when different folks already wean plays into both potential and market seasonality.

As well, how a producer intends to precondition calves goes a long ways in determining gain that can be achieved during the preconditioning period, and cost of gain, which is where the most substantial economic rewards lie in preconditioning.

Wickham explains, “In my corner of the world, we have IMBIO sales (see “Demand Grows for Preconditioning”). A couple of years ago, that organization decided to standardize the health protocol for the calves selling through those sales, and they chose Merial SureHealth. At about the same time, the livestock market at Carthage began having SureHealth sales, as well.”

So, in that neck of the woods, SureHealth has become the standard by which other programs are measured. One of the reasons it's become standard is buyers value the calves. (For specific program details, look on the Internet at www.surehealth.com).

Buyers value the calves, not just due to the quality and reliable health of the calves, but because assembling this many cattle together in multiple sales means buyers can assemble load lots. An added draw is the fact that SureHealth calves are veterinarian-certified and come with a 21-day Limited Health Warranty.

Spun differently, you can precondition your calves, verify, certify and document all you want. If buyers don't recognize the program you've used and/or if you can't offer your calves in enough collective volume, it will be next to impossible to realize value on par with producers using recognized programs and offering buyers volume procurement opportunities of cattle that have been managed the same way. And, third-party documentation, such as the veterinarian certification that is part of the SureHealth program seems to carry extra weight with buyers.

For both buyers and sellers, Wickham believes standardized programs that require the use of single-source animal health products improves predictability.

“It's one less variable to worry about,” he explains. “You can ask 10 different veterinarians about the best way to precondition calves and you'll get at least nine different answers.”

Wickham also believes standardized programs such as SureHealth can help increase a cowherd's overall health and performance.

“For one thing if you're preconditioning and keeping replacements, your replacements end up being vaccinated, too. With VAC-45 type programs like SureHealth, you're apt to wean earlier, too, which allow the cows to put on more condition heading into winter,” he says.

Finally, Wickham points out that while considering the opportunities of a preconditioning program demands estimating costs realistically (see “Is Preconditioning for You?”), it also requires estimating total returns in the same manner.

“The most common misperception about preconditioning I hear is from producers who do it one year and say, ‘My calves brought just as much per pound as they did last year when I didn't precondition them.’ If that's the case, typically what they fail to realize is that they have more weight to sell. Another consideration is that it's a way to get buyers to come back again next year.”

In sum, depending on the goals of a program, the cost relative to returns and available resources, Wickham says, “With the right preconditioning program, a producer can have more product to sell. It also shows pride in what they do, and it's a good marketing tool. That's aside from the excellent animal health benefits.”

There's one downside to the SureHealth program so popular in his region. “I've got clients who feed these cattle, too,” says Wickham. “One disadvantage with the SureHealth program is the calves are often priced beyond what the feeders around here are willing to pay.”

Is Preconditioning For You?

Figure the cost and be sure to consider the added pounds.

There's no question buyers are willing to pay more for calves preconditioned within recognized and proven programs. There's also no question that typically the added pounds from preconditioning generate more economic reward than any price premium.

Of course, tapping this potential comes at a cost, especially when you're talking about a 45-day weaning program where feed, relative to gain, often represents the majority of added cost.

Thus, before embarking on any preconditioning program, you need to estimate accurately both the cost and potential revenue of providing the service.

Kevin Dhuyvetter, a Kansas State University economist, performed an economic analysis of preconditioning calves (http://beefstockerusa.org/conffact.htm) He says the basic information needed to develop a budget includes: purchase price; production, including expected average daily gain, estimated death loss and percent morbidity; costs, including those for feed labor, interest and marketing.

A partial budget comparison of weaning and preconditioning vs. shipping right off the cow might look something like Table 1. The example utilizes an average of steer prices (Medium #1) paid in Nebraska and eastern Wyoming over the past five years.

Figuring even a modest $5/cwt. value for the preconditioned calves, across per-head feed costs ranging from $35 to $65, and the net economic advantage, within the parameter of this budget would have been $69.31-$99.31 per head.

Certainly the bottom line can be affected a variety of ways positively and negatively, depending on what costs you include, how inexpensively you can feed them, and all the rest.

The point is even in a historically high market, with solid management, the same cattle can generate more total dollars on a net basis.

Further, Dhuyvetter points out estimated selling prices should be adjusted for seasonality, also realizing that as weight increases, price per pound typically decreases. Obviously, that's not the same as saying heavier cattle usually generate fewer total dollars, however.

“They won't always get a bigger premium per pound, but if you figure total dollars per head, total returns, money in the pocket, they'll get more and their cows will be in better shape to breed back,” says Mark Herbold, order buyer for Central States Cattle Co. at Albia, IA. Herbold also backgrounds and feeds cattle himself.

Incidentally, Herbold points out another reason buyers are drawn to calves preconditioned through recognized, standardized programs is they usually represent the top end of cattle because producers involved in preconditioning tend to be among the most committed.

“Most of the producers using SureHealth are among the more progressive ones. Compared to average, they typically have better genetics, better quality and more pounds,” Herbold says. “They typically are producing the highest quality animals in the best health anyway.

Table 1
Comparison of Selling at Weaning vs. Preconditioning and Selling Later
Fresh Weaned
Weaning Weight 550 lb.
Pay Weight (4% Shrink) 528 lb.
Number of head sold 100
Total Pounds Sold 52,800
Sale Price (weaning)1 $108.65/cwt.
Gross Revenue $57,367
Weaned and Preconditioned
Per Head Feed Cost (60-days)
$35 $45 $55 $65
Weaning Weight 550 lb. 550 lb. 550 lb. 550 lb.
Expected Average Daily Gain 2.0 lb. 2.0 lb. 2.0 lb. 2.0 lb.
Number of Calves to Wean 100 100 100 100
Total Feed Cost $3,500 $4,500 $5,500 $6,500
Total cost of feed labor $300 $300 $300 $300
Animal Health Products/head2 $8 $8 $8 $8
Total Animal Health Cost $800 $800 $800 $800
Total Cost $4,600 $5,600 $6,600 $7,600
Pay Weight, lb. (3.5% Shrink) 646.5 646.5 646.5 646.5
Total Weight (lb.) 64,650 64,650 64,650 64,650
Number to be Sold 100 100 100 100
Estimate price at time of sale3/cwt. $106 $106 $106 $106
Total Revenue $71,898 $71,898$ 71,898 $71,898
-Total Cost $4,600 $5,600 $6,600 $7,600
Net Revenue $67,298 $66,298 $65,298 $64,298
Revenue sold as Fresh Weaned $57,367 $57,367 $57,367 $57,367
Net Advantage Total $9,931 $8,931 $7,931 $6,931
Net Advantage per Head $99.31 $89.31 $79.31 $69.31
1Basis $108.65 is the average of prices paid for medium #1 steers weighing 500-600 lb., selling in Nebraska and eastern Wyoming from 2000-2004.
2Includes dewormer, original and booster doses of respiratory and clostridial vaccines and pasteurella.
3Basis $100.01 is the average of prices paid for medium #1 steers weighing 600-700 lb., selling in Nebraska and eastern Wyoming from 2000-2004, plus $5/cwt. preconditioning premium=$106.01.

Guarantee Is Its Own Reward

Buyers like getting added insurance in the price of the cattle.

Up front, Larry O'Hern believes preconditioning should be mandatory for every cow-calf producer in the nation, from an animal stewardship standpoint. But he also remains puzzled by those who ignore the economic potential associated with the practice.

“If people are serious about the cattle business, they'll look at it from a financial standpoint,” says O'Hern, who owns and manages O'Hern Stock Farm with his family at Vermont, IL. He explains the net value and reduced health risk often associated with preconditioned calves continues to drive added interest in the cattle.

The O'Hern operation here in western Illinois consists of a commercial cow-calf operation. For the past 25 years, it's also included an extensive backgrounding enterprise for home-raised and purchased cattle.

“I'm sold on SUREHEALTH preconditioning, whether you do it or you buy it. When I buy cattle I look for it. I won't buy high-risk calves and send them straight to the feed yard,” he says.

But, like other buyers and sellers, O'Hern knows the most value comes with calves preconditioned within a standardized program that are marketed accordingly.

“The real value for us has been as a marketing tool,” O'Hern says. “It really allows us to market a branded product. It's a third-party certified, nationally recognized program.” He's talking specifically of his decision to precondition calves through the Merial SureHealthprogram several years ago.

“I know there's merit to the national recognition of the program. I background and sell cattle to buyers in Oklahoma for wheat pasture and to buyers in Kansas to turn out on ryegrass,” O'Hern says. “The buyers don't know me from a box of rocks but they'll buy the cattle because they're SureHealth calves.”

One reason buyers are willing to take the leap with SureHealth cattle, even if they don't have previous experience with the seller, is the warranty that comes with the calves, he adds. In basic terms, any cattle managed and certified within the SureHealth program, and sold without commingling with non-preconditioned calves, comes with a 21-day post-sale warranty. If calves get sick within that time, Merial and Boehringer Ingelheim Vetmedica stand the cost of treatment and diagnostics.

O'Hern knows the warranty is good, too, because he's used it.

“When I first heard about the warranty, it's not that I didn't believe they'd do it, but I wondered how they could,” he remembers. “We had a set of our own calves break after we'd weaned them and sent them to grass in Nebraska. Merial stood behind its product and did exactly what it said it would do. Plus, I'd already sold a piece of them. It sure was a nice marketing tool for me, too.”

Brent Lowderman sees the same kind of buyer acceptance at his Carthage, IL, sale barn, which features the most SureHealth sales of any marketing facility in the state. He says, “SureHealth has stepped up to the plate because they do have a guarantee on the cattle, and that warranty helps.”

In round numbers, Lowderman says the SureHealth calves currently bring $3-$5/cwt. premium at his facility. But, he predicts that's nothing compared to what it will be: “The spread is there but when this market turns around and goes south, if you aren't on a program like SureHealth, you're going to get burned and burned hard.”

Lowderman and his father also background cattle, along with running a purebred Polled Hereford operation. “I SureHealth certified 300 head of calves last winter. I only had to treat one calf, and they were running in mud up to their bellies,” he says. Before, he would have spent the first month just trying to get them straightened out.

“Using a standardized program with single-source animal health products is nice, too, in that it gives us a standard operating procedure everyone understands,” O'Hern says. “So, the standardization is important just from the fact that no matter who's processing the cattle, they know the procedure and it's less likely that something won't get done.”

Bottom line, O'Hern says, “There are a lot of programs out there. But, the SureHealth program is the only one I know offering a guarantee. They'll back your play. It makes good economic sense and good animal husbandry sense.”