A Premium Product

You won't find a dictionary definition for the term preconditioning. Every cattle producer, though, seems to have an impression of what it is — and after nearly 30 years, the concept of preconditioning is coming of age.

Take Iowa, for example. An estimated 350,000 of the state's 1 million feeder calves are marketed each year through the Iowa Preconditioning Calf Program. The Iowa Veterinary Medical Association in cooperation with the Iowa Cattlemen's Association (ICA) initiated and has continually updated the program that has withstood the test of time.

From Maine to California, preconditioning programs have unique characteristics matching the region's demographics and physical environment.

Most lexicons define preconditioning as weaning practices intended to boost a calf's immune system and nutritional status — in short, whatever it takes to keep the calf from getting stressed and sick after it's weaned.

Organized efforts to encourage standardized management of beef calves prior to weaning and shipment began in the mid 1960s. In September 1967, about 200 animal and veterinary scientists met at Oklahoma State University (OSU) to discuss the problems and scientific basis for developing and encouraging these revolutionary management practices.

Industry-wide adoption of the preconditioning concept has been painfully slow. Controversy surrounding the topic is still prevalent today.

However, recent beef industry developments promise to propel the concept forward at a faster rate. Numerous value-based marketing programs are now available to beef cattle producers, an approach that serves to increase information flow and management coordination up and down the production chain.

Added value, added outcomes

The first question ranchers ask about preconditioning, however, isn't necessarily about the features of a certain program. It is, “How much will I get paid for doing it?”

Conservatively, says David Lalman, Stillwater, OK, preconditioning may capture $50-$75/head of additional value from weaning through the packing phase. That's compared to a production system where weaning, vaccination and other management practices associated with preconditioning occur after shipment from the ranch of origin.

“The outcome of this process is added value to the entire beef production system,” says Lalman, an Oklahoma State University Extension beef specialist. Added value is realized through reduced incidence and associated costs of sickness, improved performance in terms of weight gain and feed efficiency, a reduction in drug use and the labor required to treat and manage sick cattle. There's also improved beef product quality, he says.

But, how much of that added value comes back to the rancher?

“A nickel a pound comes pretty quickly if you have a well-documented preconditioning program,” says Evan Vermeer, ICA vice president for membership services. “Beyond the premium, though, you also need to look at the increased weight an animal can put on through a preconditioning program. That's the biggest payback to a cow-calf producer.”

Vermeer says preconditioning costs range from $12-$15/head for health, feed and labor expenses. “But, when you start adding 30-50 lbs. to a calf at well over a buck a pound, the economics of preconditioning start getting your attention,” he adds.

Extra health measures

The ICA Green Tag Sales Program has been expanded to allow calves to also carry gold tags that indicate extra health measures have been provided.

“The extra provisions are a result of requests by feedlots for additional health and management practices for calves sold through the marketplace,” Craig White says. He's an Estherville, IA, cow-calf producer and member of the committee that developed Iowa's preconditioning program.

Green-tagged calves are vaccinated for IBR, BVD, BRSV, PI3, 7-way Clostridia, and Haemophilus somnus. They're treated for internal and external parasites and must be castrated and dehorned. Optional treatments include vaccination for Mannheimia (formerly Pasteurella) and other diseases, and implants with a growth promotant. All vaccinations and health procedures must be performed by a vet.

The gold tag indicates the calves have received a second set of vaccinations and been weaned for 45 days.

Last year, the ICA coordinated more than a dozen special preconditioned calf sales in northwest Iowa alone. There will be more again this year, running from December 2004 through March 2005.

“Calves will be identified according to their preconditioning program,” White says. “Listings prior to the sale will include the numbers and descriptions of calves in each program.”

Profitability factors vary

As demonstrated in Iowa, cow-calf producers benefit through the development of a reputation for high-quality cattle, and utilizing management skills and feed resources to add further value to home-raised calves.

Experience shows preconditioning programs are most profitable during periods of high calf prices. That's because the profitability of a preconditioning program is so closely tied to the cost of feed relative to the price of calves. This is true whether the calves are sold to a buyer or the producer retains ownership.

There is an incentive for feedlots to pay higher premiums for preconditioned cattle to reduce death losses when calves are more valuable, says DeeVon Bailey, Utah State University (USU) ag economist.

“Buyers are willing to pay more for preconditioned calves in order to shift the risk associated with death losses to producers who conduct preconditioning programs,” Bailey says.

Even though there may be a premium paid for preconditioned calves, buyers generally slide prices as calves get heavier. USU research found calf prices declined about 5¢/cwt. for every additional pound of weight.

More buyers, more premiums

Calves from the Louisiana Calf to Carcass Project will end up at the Henry C. Hitch Feedlot in Guymon, OK, later this month. Jim Paul Dupont of Cameron Parish, LA, again entered a consignment of calves from his 300-head cow herd.

In addition to gaining valuable information about herd health and genetics, Dupont has seen at least a 10% increase in profits on his F-1 Braford steers due to the program.

“There's just nothing negative to say about this program,” says Dupont, who's in his eighth year of participation.

The cost for preconditioning the Louisiana cattle is estimated at $60.31/head for the 45-day period. This includes initial vaccinations, boosters, internal and external parasite control, feed, antibiotics and eartags. The nomination fee of $30/head includes trucking costs to the feedyard.

The cost of this program is very similar to costs associated with other programs in the Southeast and Southwest.

Beyond preconditioning, the goal is to help producers feed their calves to finish and retain a larger percentage of the overall profit of the animal.

North Carolina Cooperative Extension agents and specialists helped beef cattle producers launch the Western North Carolina Preconditioned Cattle Marketing Association. Now, 12 years old, it is a way to improve the health of feeder calves produced and sold in the area.

Ed Rogers, Waynesville, NC, was one of the first producers introduced to the new concept. Since then, he's seen premiums at western North Carolina preconditioned cattle sales range 3-9¢/lb. above state-graded sales, and as much as 15¢/lb. above regular sales.

The 79-year-old farmer says he's looking forward to the association's second “teleauction” of the year on Oct. 13, when 60 or more buyers will participate.

“I don't think we've ever lost money — maybe a year or two we didn't make a lot,” he says of the program. “But, even and extra 3-4¢/lb. helps.”

About this table: The information in the preconditioning table was compiled by Annette Bryant, a Kansas State University graduate student from Fairview, TN, specializing in ruminant nutrition with an emphasis in electronic livestock ID. The table was built using information contained in returned questionnaires from each program. The table will be updated as new information becomes available. To add programs or information to the table, send to beef@primediabusiness.com. The most current table will be available at www.beefstockerusa.org and www.beefcowcalf.com.

Preconditioning programs and producers' critical questions (See key to abbreviations below.)