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Plan Ahead to Maximize Profit

beef cattle

Kevin Shaffer, Extension Specialist - Livestock

As producers begin to focus on making hay and preparing for winter, they often forget that calf marketing season is just over 100 days away; however, planning to market calves now can pay dividends in the fall.  Producers should consider the following strategies to help improve their bottom line:

  1. Preconditioning. Weaning and bunk breaking calves adds value. Preconditioned calves marketed through the WV Quality Assurance sales returned an average of $105 per head more than calves marketed at regular sales in 2017. Yes, preconditioning costs money and time but with a little planning, inputs can be optimized to maximize potential return. Producers should consider the following to make preconditioning a viable option.
    1. Book Inputs Early. Encourage producers to check prices early and often before demand drives them higher and consider booking feed with neighbors to receive volume discounts. Look at the impact feed prices have on daily cost of gain when feeding 5 pound/head/day for 45 days.
    Price/ton Cost/head/day Total Cost
    $ 300 $ 0.75 $ 33.75
    $ 325 $ 0.81 $ 36.45
    $ 350 $ 0.88 $ 39.60
    $ 375 $ 0.94 $ 42.30
    $ 400 $ 1.00 $ 45.00
    1. Stockpile Forage.

  2. Herd Health Program. Sometimes you have to spend money to make money or save money. One of the best ways to do that is for producers to implement a comprehensive herd health program. Pre-vaccination of calves prior to weaning and shipment reduces treatment costs and adds value. West Virginia calf pool data shows that pre-vaccination increased calf value anywhere from $40 to $200 per head compared to undocumented calves marketed at regular sales in 2017. With the total cost of recommended vaccination programs ranging from $9.03 to $21.80 per head, you’re getting at least a 100% return on investment.
  3. Calculate Breakeven Price. Calculating breakeven price can seem like a daunting task but with a little time and effort producers can get a pretty good idea of where they need to be on sale day. A good way to start is to calculate cost of gain (COG) during the preconditioning period. Producers should begin by identifying all sources of expense (i.e., grazed forage, hay, supplement, minerals and labor) and convert them to similar units ($/head/day). For example, if supplement costs $400/ton and a producer feeds 5 lbs/head/day, it costs $1/head/day to feed supplement. If you add $0.25/day for hay (5 lbs/day @ $100/ton), $0.50/day for grazeable forage and minerals, and $0.50/day for labor, the total would be $2.25/head/day. Then divide the cost/head/day by the projected daily gain to calculate COG. If anticipated ADG is 2 lbs/day, then COG would be $1.13/lb. If they gain 2.5 lbs/day, cost of gain goes down to $0.90/lb. Any price received above COG is profit that would have otherwise left on the table and the time and money spent on preconditioning the calves is already paid for by the weight gain. It’s a win win!

Questions or comments, contact Kevin Shaffer via email or at 304-293-2669.