Depending on who's running the abacus, purchase price drives profit opportunity in the stocker business. But, the price paid is still relative to the health risk and gain potential.
That's one reason last year's BEEF National Stocker Survey revealed that only 24% of stocker operators base their procurement strategy on buying cattle below market average in order to straighten out someone else's mistakes. Instead, 65% of those surveyed indicate they buy on average; 11% pay prices that tend to be above average.
For instance, demand continues to increase for preconditioned calves, even as the volume of qualifying calves increases.
A recent study sponsored by Pfizer Animal Health (PAH) indicates that in 2008 producers received the highest premiums since 1995 for VAC-45 and VAC-PreCon calves and the second highest premium on VAC-34 (see sidebar for explanations of programs).
VAC-45 calves earned a $8.20/cwt. premium; VAC-PreCon calves earned a $9.36/cwt. premium; and VAC-34 calves earned a $3.57/cwt. premium over similar unweaned, nonviral vaccinated calves. The research was conducted by Michael E. King and considered 3,741 lots of cattle (465,754 head) that sold through seven Superior Livestock Auction video sales in 2008.
Likewise, Montana State University (MSU) researchers found that weaning was worth $17.64/head in sales price compared to unweaned calves. Vaccinations added $14.81/head, compared to unvaccinated calves. That was the average on 68,665 Montana steers and heifers weighing an average of 588 lbs. that sold through Superior Livestock video sales in June and July 2007.
Keep in mind that 88% of those calves sold as either VAC-34 (76%) or VAC-45 weaned calves (12%). The average lot size was 116 head. Cattle in the July sale brought $16.51/head more on average than those selling in the June sale.
The reason buyers continue to see more value in these calves is undeniable.
In another third-party study conducted on behalf of PAH, unweaned, unvaccinated calves (control) were compared with calves receiving the PAH WeanVAC® program (WeanVAC), and with calves that were the product of other industry preconditioning programs (OHP). Bottom line, OHP calves returned an average of $11.36/head more profit than the control group; WeanVAC calves returned $33.71/head more on average than the control group. The additional profit came with fewer days on feed, more feed intake and gain, higher USDA Quality grades and a higher percentage qualifying for Certified Angus Beef®.
Though still among the minority of buyers, some stockers now buy preconditioned calves exclusively. For some, the decision is based on health cost through the stocker phase. For others, it means being able to run more cattle without adding manpower.
Arguably, the identification and certification that often accompany preconditioned programs have helped establish and maintain a market premium. It becomes easier to qualify the same cattle for other value-added options, be they domestic all-natural programs, the international Non-Hormone Treated Cattle market, or other beef export programs.
According to an Iowa State University study, calves with certified vaccination claims and weaned at least 30 days received $2.75/cwt. more than calves with uncertified claims (the seller's word) of vaccinations and at least 30 days of weaning. Premium for the certified calves was $6.15/cwt.; it was $3.40/cwt. for the uncertified calves.
Explaining the VAC Program
VAC-45 — typically infers that calves are vaccinated, weaned, booster-vaccinated and further preconditioned at least 45 days after weaning.
Vac-PreCon — typically infers the same as VAC-45, except for put-together cattle from several sources.
VAC-34 — typically infers that calves are vaccinated at least 3-4 weeks before weaning.