We will evaluate four market channels for the cow calf enterprise: 1) selling directly off the cow; 2) adding value to feeder calves by weaning, vaccinating and backgrounding prior to sale; 3) finishing the calves on grain and selling direct to consumer as a whole carcass (not cuts); and 4) finishing the calves on grass and selling direct to consumer as a whole carcass (not cuts). I have elected not to evaluate farmers markets or restaurants as I don’t have a good method of quantifying for these two market channels the amount of labor required, which can be excessive. Matt LeRoux, marketing specialist for Cornell Cooperative Extension, Tompkins County, estimated that it can take up to 36 hours to market one beef through a farmers market, based on the assumption of selling about 70 pounds of beef over a six-hour period at the market.
Assumptions for the cow/calf enterprise selling as feeders:
- April/May born calves; primarily of English breeding (e.g. Angus, Hereford)
- Annual cost to keep a cow: $650
- Calves weaned Nov. 1 at 550 pounds
- Sold either Nov. 1 or backgrounded and sold Dec. 15
- 45-day weaning period, $1.20 per head per day, 1.5 pounds average daily gain
- Sale weight of steer calves either 550 pounds or 650 pounds
1) Selling feeder calves directly off the cow. The system with the least amount of labor and expense is the “I-90” system, where the calves are weaned on the truck as they go to the sale barn. This system has no place in modern beef production. It puts all of the risk on the next owner. These calves are more likely to get sick and will have a higher death rate. This affects not only profitability but also meat quality. These calves also require more antibiotics, which is not desired by the feeder or the consumer.
2) Pre-vaccinated, weaned and backgrounded. I just finished an on-farm weaning project evaluating the performance of calves exposed to three levels of stress. The least stressful treatment involved vaccinating and weaning calves on the farm of birth. At weaning the calves were fed a commercially available pellet from Purina Mills (Purina Stress Care 5 AS140 Medicated pellets) for 19 days and then transferred to a grower pellet (Purina 4-Square Stocker/Grower 14 pellet) for 29 days. Over the 48-day period the average daily gain was 2.1 pounds and the total cost, including pellets, hay and yardage, was $90 per head. The vaccine and dewormer cost an additional $15 per head for a total of $115.
Read more: The power of efficiency in beef herds
Value is added to these calves from additional sale weight and reducing the risk to the buyer through pre-vaccination and backgrounding. Holding the calves for 45 days and properly feeding them increased weight by 100 pounds compared to weight at weaning. Prices for calves sold at Finger Lakes Livestock Exchange in Canandaigua on Dec. 5 are shown in Table 1.
If sold at weaning the calves weighed 550 pounds and would have produced gross receipts of $891 per head (550 pounds x $1.62). Holding and feeding them for 45 days would have increased weight by 100 pounds and produced gross receipts of $1,034 per head (650 pounds x $1.59). The difference in gross receipts is $143.
There was not enough non-vaccinated calves to make a fair comparison at the Dec. 5 sale, however, the highest price paid for calves in the 550-pound range was $1.40 per pound. Let’s be conservative and use half of the price differential between vaccinated and non-vaccinated calves (1.59 – 1.40 = 0.19/2 = 0.095). The difference in gross receipts would be $69 per head (vaccinated, 550 pounds x $1.62 = $891 versus non-vaccinated, 550 pounds x 1.495 = $822).
The combined added value from selling additional weight, pre-conditioning and vaccination is $212 per head. Subtracting the cost to get that additional value yields a net profit of $97 per head.
3 & 4) Freezer trade. It is common among many producers to finish all or a portion of their calves and sell them through “freezer trade.” These cattle can be finished on grain or grass. I’ve made some additional assumptions.
- Calves finished on grain will weigh 1,120 pounds and yield a 650-pound carcass.
- Calves finished on grain will weigh 1,050 pounds and yield a 578-pound carcass.
- Cost to background calves from weaning through the following spring is $1.20 per head per day for 180 days.
- For calves finished on grass, they need to have a greater winter ADG if they are to finish before their second summer, therefore I increased the winter feeding expense to reflect greater cost of higher quality forage.
- Feed cost of gain is 20 percent above the rate published by Kansas State University AgManager.info, plus a daily yardage fee of $0.40 per head per day.
- Projected ADG is 2.8 pounds and 1.5 pounds for grain and grass finished cattle, respectively.
- Cost to finish on grass is $2 per head per day for 181 days, plus a $0.10 per head per day yardage cost.
- Trucking to slaughter is based on a 45-mile haul at a cost of $2 per loaded mile for two heads.
- Cost of slaughter and cut and wrap: $65 per head and $0.85 per pound carcass weight, respectively.
- Average price (including processing) of grain finished beef $3.76 per pound and grass finished beef $4.64 carcass weight (representative prices from MeatSuite.com).
Table 2 shows the results of economic evaluation of each market channel. As already stated, the program that includes vaccination, weaning and background has the potential to increase value by $97 per head. If the calves are finished on grain and sold direct to the consumer, an additional $290 per head can be realized ($447-$157). Finally, finishing the cattle on grass can increase the value to $529 per head.
One item that may be a surprise to some is that the cost of production between grain and grass finishing is the same. This is due primarily to cost of feed. On an energy basis, high-quality forage – whether stored or as pasture – is not cheap compared to corn. Getting these calves finished before their second winter is critical to optimize profitability, requiring high-quality forage.
Read more: What weight should I harvest my steer?
There are several items not captured in this analysis, which may reduce the added value:
- Illness and/or death loss from keeping calves beyond weaning.
- Volatility in feeder calf market.
- Increased labor required for direct marketing (freezer trade).
- Dealing with people (slaughter house and customers).
- Performance on grass is less predictable than grain.
- Drought, which requires supplemental feeding while on pasture.
I’ll be the first to admit that there are a lot of assumptions in this analysis, and I’m sure many readers will argue with me on my assumptions. The important message is to evaluate your own situation. Do you have the extra hours required to be in the direct marketing channel? If management of the herd is slipping such that your cost of production is rising, overall profitability will suffer. You can’t market your way out of a high cost herd. This is one advantage of the beef operation. Unlike other livestock enterprises, where “one size fits all,” you have more flexibility in employing different production techniques that meet your goals while having access to a very diverse market.
Read more: Increasing market cow value part 1