Will It Pay?

By Emmit L. Rawls, Professor Agricultural Economics and published by University of Tennessee in Beef Cattle Time, Volume 25, Number 2, Spring 2007
calendar icon 1 April 2007
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When it is suggested that calves be vaccinated, weaned, taught to eat from a trough and drink from a tank/trough, age and source verified, etc., one common question is, will it pay? I am sure McDonald’s and others in the food business ask themselves that question and do extensive research and analysis before introducing a new product.

We believe the management practices we recommend will pay for themselves and more. I recently heard a producer say that he would not wean and precondition calves unless there was a $10 per hundred price premium over what non-preconditioned calves were bringing in the market. While there may have been instances of that high a premium, don’t count on it. Much of the money made preconditioning by calves has been made on the gain in weight of 100 pounds or more during a 45 to 60 day post-weaning period.

When feed costs were lower, that return was more assured; but a cost-conscious producer can still reap a positive return. Once calves are preconditioned, the ability to market them in uniform truckloads is the key to making them bring something above cattle that were not preconditioned.

One very common mistake is to compare a special sale of preconditioned cattle to some other sale held several days or weeks before or after the special sale. With the current volatility in the corn and cattle markets, the only valid comparison is for sales held the same day or at least the same week as the special sale. We have excellent market news available that reports weekly auctions, graded sales and video sales. Volume is the key. A partial load of most any cattle will usually not bring the price of a full load of fairly comparable cattle. Buyers need to know what they are bidding on, and it most always takes at least two equally informed buyers to make the cattle bring top price.

I have not reached the point of saying “there are no premiums, there are only discounts for cattle that have not been preconditioned.” I recall that Paul Jolly made feeder pigs with their tails docked bring several dollars more than pigs with tails. It did not take long before tail-docked pigs were the norm and pigs with tails were discounted. In my opinion we may be headed there, but we are not there yet in the cattle business. Beef producers think in terms of “how much more will I get” when considering preconditioning, graded sales or other such marketing efforts. Part of the reason is that the majority of feeder cattle are not preconditioned.

The Tennessee Beef Evaluation is a program in which beef producers can send a minimum of five head of steers or heifers to a custom feedlot in Southwest Iowa and obtain feedlot performance data as well as detailed carcass information on their cattle. The program, in one form or another, has been operating since 1991. One requirement is that all calves be preconditioned at least 30 days, preferably 45 days, before shipment. Preconditioning is no guarantee that calves will not get sick.

Death loss and morbidity (sickness) have been minimal. However, the data indicates calves which had to be treated for a health problem at the feedlot returned about $100 less per head. They also gained slower by at least two tenths of a pound, had fewer in the Choice grade, and more in the Select and Standard grades. This data confirms what the Texas Ranch-to-Rail program has reported for years.

Calves which have had a preconditioning program perform better in the feedlot or in a stocker program. They gain faster, have lower death loss, reducedsickness and treatment costs, require less feed (which lowers feed costs), and have fewer days on feed (which lowers feed , yardage and interest costs). All of these factors contribute to a lower cost of gain. Buyers who are confident of a preconditioning program will step up and pay more for preconditioned calves. However, they must have confidence in the program. Simply saying the calves are preconditioned may mean little more than saying they’ve had all their shots. Programs without some documentation of what was done can work, but buyers will only pay up based on their experience with those programs.

The Tennessee Department of Agriculture’s Ag Enhancement program for the first time is making a significant contribution to add value to Tennessee feeder cattle. If the cattle are age and source verified with the producer properly enrolled in the Process VerificationProgram (PVP) and are sold through a TDA approved preconditioned sale, the producer will be paid $10 per head up to $500. That should about cover the cost of the animal health products. We don’t know how long the program will be around, but it is time for Tennessee beef producers to step up if they want to be a part of delivering the product the market is asking for and become a player in the future. Otherwise, we may see only discounts rather than get premiums for providing what the market wants.

April 2007

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