Lawton Stewart, Extension Beef Cattle Specialist
Francis Fluharty, Animal and Dairy Science Department Head
Jason Duggin, Extension Beef Cattle Specialist
Current situation, producers are looking at ways to maintain economic livelihood. One of the ways they can achieve this is through retaining ownership of the calves past weaning. This can take on different meanings, depending on the length ownership, and the goal. Whatever this may be, two important concepts to consider will be: 1) the management required, and 2) the risk assumed and risk management strategies to available. Here we will discuss different options.
Preconditioning or Backgrounding:
This it typically retaining ownership for 40-60 days post weaning. This time period allows time for producers to administer the proper vaccinations, deworm, ensure castrations are healed, and start some level of supplementation. Just as important, this period allows calves to get over the stress of weaning before the additional stress of shipping and comingling is incurred. This creates a “value-added” calf that is potentially eligible for graded feeder calf sales or grouped and sold through a third-party. In addition to adding value, this process also allows producers time to observe market trends since they are not committing to selling directly at weaning.
If a producer wants to consider this option, they need to keep in mind the additional cost. This includes the cost of vaccines, dewormer, feed cost, and additional labor. Also, the risk is somewhat minimal, but could include potential death loss and price decrease due to market volatility. Producers are recommended to determine the type of ration and total amount need so that it can be purchased or booked ahead of time. Additionally, producers should communicate with marketers to fully understand any management requirements.
Any practice that requires the calf crop to stay onsite longer, this will take resources away from the main cow herd. Pasture, conserved forage resources, and space are the biggest issues. If these are reallocated away from the cow herd, it could cause brood cows to lose body condition, cycle later, and affect future productivity. Producers should consider all aspects of retaining ownership onsite as additional cost.
This phase has more flexibility in the description and could be considered an extension of the backgrounding phase. Typically, this is a period between weaning and finishing where cattle are “stocked” on a forage-based system for 60-150 days. The concept is to keep cattle growing, but not overcondition. This is typically on a high quality cool or warm season forage such as ryegrass or millet, silage/baleage, or grazing plus some level of supplementation.
This system requires more management and expertise on both the forage and cattle component. The forage must be managed to maximize quality, either from a grazing or harvesting standpoint. Also, any time cattle are retained for longer periods of time, additional manage resources are required. Similar to backgrounding, this allows producers a longer period of time to observe market trends and work with a marketer to determine the best time and avenue to sell.
Producers should consider the risk. Similar to backgrounding, there is risk for death loss and market volatility. However, since the ownership period is extended, it increases the potential for these to happen. Producers should plan for a specified death loss; this could be 1-5%, depending on the background and health status of the cattle. Also, producers should communicate early in the process with a marketer to know avenues of selling cattle and the possibility of forward contracting the cattle.
The decision to retain ownership of calves throughout the feedlot period needs to be considered based on the cost of gain, yardage, marketing, and risk management. Corn futures for 2020 and 2021 look to be less than $3.50 per bushel at this time. This may change, depending on the growing conditions for corn in the Midwest. However, current feedlot placements have a projected feed cost of gain under $0.80/lb (https://www.asi.k-state.edu/about/newsletters/focus-on-feedlots/docs/fofmarch2020.pdf). With a yardage charge of approximately $0.45 per day, that’s around $0.10 to $0.15 per pound, depending on the animal’s average daily gain. This leaves trucking, veterinary costs, death loss, and risk management as the only other major costs. Thus, a reasonable break-even should be somewhere in the $1.05 to $1.10 range. It is important to look at the live fed cattle futures market before deciding whether to place cattle into a feedlot. In a year where feeder cattle futures are lower than costs of production, retaining ownership may be a good option to consider. This is especially true if the breeding plan placed an emphasis on cattle with greater than average marbling ability. So far this year, the Choice-Select spread (the difference between a USDA Choice carcass and a USDA Select carcass) has been very similar to the 2019 values (https://www.agmanager.info/livestock-meat/livestock-marketing-charts/choice-select-boxed-beef-spread). For most of 2019, the Choice-Select spread was over $10/cwt, with only January, February, and March below this. Thus, timing of marketing fed cattle is important as the Choice-Select normally peaks in the April through June time period in preparation for the summer grilling period, and again in the fall in the October through December in preparation for holiday dinners and parties. However, last year, it maintained strength throughout the summer. We can’t forget that last year exports added nearly $310 to the value of every fed animal. Thus, beef exports have the potential to have a huge impact on the price of Choice carcasses as we export highly-marbled products. Regardless of the market, this year demonstrated the need to use risk management, such as forward contracting or puts, as an insurance policy that puts a floor on the price received.
Moving forward, cattle producers in Georgia need to pay close attention to all management/marketing options for their calf crops. This will hopefully help them maintain profitability in their operations during these interesting times. If you have any question, or would like help, developing strategies for retaining cattle past the weaning, please contact your County Agent.