Pounds mean dollars

If you intend to keep your calf income at 2005 levels, you have two options--cut your cost of production or add more value to your calves.

If you read economist Harlan Hughes' “Market Advisor” columns in BEEF, you're likely aware of his projection that calves will be worth about 11% less this fall than last year. If you intend to keep your income at 2005 levels, you have two options — cut your cost of production or add more value to your calves. The latter option is the focus of this month's column.

We began working with a 100-cow herd in Southern Indiana in 1998. Prior to our involvement, this producer pulled calves off his cows the Wednesday after Labor Day and hauled them to the auction. The crossbred calves generally sold a bit above the average, and the producer was mostly pleased with the results.

In 1999, we started an official preconditioning program in Indiana called Indiana Quality Plus Beef (IQ+BEEF). When we discussed the program with this owner, he seemed interested. His primary goal was to improve income, with secondary goals of producing a better product and tracking calf performance in the feedlot.

In the first year, his preconditioning nutritional program was too conservative. Many “experts” had told him to be sure he didn't get the calves too fat and, at 1.12 lbs./day of gain, they were far from fat (see Table 1). In fact, about 30% were what I call “hairballs” — big hay bellies, long hair and not much else.

The calves sold in a special IQ+BEEF sale and fetched a $3.26/cwt. premium. Even with these lower quality calves in the mix, he still made a net profit to his facilities and labor of $3,360. We had his attention.

The next year, his calves brought almost no premium, but he still profited from preconditioning. After two years, he had an extra $4,202.63 in his cattle account. That's when he realized most of his gain from preconditioning wasn't in the so-called premium but in the weight he had added so very economically to his calves.

Since his calves sold with unique ID tags and paperwork for traceback, the buyers of his calves during the first two years contacted him to see how they could purchase the calves in coming years. He was building demand for healthy, profitable calves.

Over the years he's preconditioned calves, he's earned an extra $33,243.70. That's $30.50/calf/year in additional profit for his facilities and labor. And the majority of that extra profit is due to the additional weight on his calves, not the premium.

When I hear a producer say he doesn't precondition anymore because he didn't get a premium, I share these numbers. When you can get $1 for a pound of gain that only cost you 40¢ to add, that's a great return on investment. The price/cwt. premium for preconditioned calves is just the icing on the cake.

If you're not satisfied with the prospect of less total income over the next 5-10 years, talk to your herd health veterinarian about adding value to your calves through preconditioning.

W. Mark Hilton, DVM, is a clinical associate professor of beef production medicine at Purdue University in West Lafayette, IN.

You can do it

So what are the obstacles to preconditioning on your farm or ranch? Do you think it won't pay? Hopefully the economic data presented will cause you to re-examine this thought.

Maybe you don't have adequate facilities? If so, review the articles on using an anti-weaning device in calves for five days prior to weaning (see “Stress-Relieving Weaning Strategies,” August 2003 BEEF). After that article was published, a rancher from eastern Colorado told me he netted $24,000 profit from preconditioning his 500 calves in 2004.

The feedlots are begging for healthy, preconditioned calves. This is truly a win-win situation for the cow-calf producer and the feedlot.

Table 1. One producer's experience at adding value through preconditioning.
1999 2000 2001 2002 2003 2004 2005
Number of calves 80 92 100 106 95 101 106
Total expenses IQ+BEEF $2,873.83 $3,697.18 $3,284.63 $4,781.31 $3,846.65 $5,849.67 $6,037.24
Cost/calf for IQ+BEEF $35.93 $40.19 $32.85 $45.11 $40.49 $57.92* $56.96
% of total = feed cost 79% 81% 86% 79% 77% 69% 73%
Calf wt. at weaning (lbs.)/date 443 9/3 482 9/8 453 8/31 450 8/16 471 9/5 489 9/4 445 9/2
Calf wt. at sale date with shrink (lbs.)/ADG (lbs.) 501 1.21 554 1.47 541 1.91 567 2.22 603 2.87 636 2.73 589 2.57
Sale price, $/cwt $82.66 $83.54 $90.00 $76.86 $95.13 $108.91 $110.81
Total $/calf sold $414.26 $461.28 $487.04 $444.64 $573.66 $693.25 $657.43
Total cost of gain/cwt. $61.94 $55.82 $37.33 $38.55 $29.59 $39.26 $39.54
Feed cost of gain/cwt. $48.93 $45.21 $32.10 $30.46 $22.79 $27.26 $28.86
Extra profit due to IQ+BEEF/IRM program/calf $42.00 $9.36 $30.76 $45.27 $88.82 $66.19 $57.05
Extra profit due to added wean weight $3,467.78 $1,607.40 $1,225.33 $3,143.19 $5,686.95 $2,006.58
Total profit due to PC calves = $33,243.70
TAGS: Marketing