Feed costs are always a concern for cattle producers, but 2022-2023 numbers have shown some of the highest feed costs in over a decade. In fact, according to the USDA feed price index, overall feed prices for feed, livestock and poultry are up 26.6% from September 2020 through September 2022.
“Feed costs are only part of the equation when it comes to backgrounding, however,” said Bryon Parman, North Dakota State University (NDSU) Extension agriculture finance specialist. “The (prices) of weaned calves and backgrounded calves are extremely important.”
A recent USDA Agricultural Marketing Service North Dakota Weekly Cattle Auction Summary report showed a wide range in North Dakota’s calf prices. For example, 550-600 pound, medium and large No. 1 steer prices ranged from $188/cwt to $225/cwt, with a $198.64 average.
“So, from a backgrounding standpoint, it may be advantageous to consider the average and below-average priced steers to add value in a backgrounding program,” said Tim Petry, NDSU Extension livestock marketing specialist.
Heifer calf prices are discounted relative to their steer counterparts. The North Dakota Agricultural Marketing Service report showed 550-600 lb. heifers averaging $175.74/cwt, almost $23/cwt less than steers. Heifers gain in price relative to steers, with 850-900 lb. heifers at close to the same value. Many heifers are backgrounded each year in North Dakota, and the budgets show that has potential again this year.
The feeder cattle futures market can be a guide for price expectations for backgrounded steers marketed in January through March. January feeder cattle futures currently are trading at $179/cwt, with March futures contracts at $182/cwt.
Because the cattle market is volatile with all the fundamental factors affecting the market, Extension specialists encourage ranchers to consider price risk management strategies in calf backgrounding marketing plans.
“Not only are feed prices high, but with the rise in energy costs, interest, labor, hauling and repair fees, overhead costs have risen and can erode profits for cattle set to gain at slower rates,” Parman said. “For instance, with a yardage cost of $0.45 per day on top of interest accumulation, an animal in the yard for 100 days would incur an interest and yardage cost total of $67.73, while an animal in the yard for 167 days would incur a cost of $112.40. This explains much of the difference between the 1.8 lb. average daily gain for steers and the 2.8 lb. average daily gain scenario.”
According to NDSU Extension livestock systems specialist Karl Hoppe, lighter calves gaining 1.8 lbs. per day would need a 0.34 megacalorie (Mcal) per pound net energy ration. Steers gaining 2.8 lbs. per day need a 0.45 Mcal/lb. net energy ration. To reach a 3.6 lb. average daily gain, the final ration would require an average of 0.55 Mcal or better. If the calves are fed to finish, the final ration needs to be 0.62 Mcal or higher during the final months on feed.
Ration cost per day increases as the energy density of the ration increases. Using diets consisting of grass hay, corn silage, corn grain and distillers grains, the cost per day is $1.41 for 0.34 Mcal ration, $1.76 for 0.45 Mcal ration and $2.50 for 0.55 Mcal ration.
“Feed cost of gain provides more insight to efficiency than feed cost per day,” Hoppe said. “Feed cost per pound of gain is $0.78 for 1.8 lbs. daily gain, $0.63 for 2.8 lbs. daily gain and $0.69 for 3.6 lbs. daily gain.”
While feed costs for energy are usually based on the corn grain price, local prices and costs vary.
“Keeping feed costs low, calf gain and feed conversion performance high, and purchase cost affordable can make backgrounding an opportunity for the winter season of 2022-2023,” Hoppe said. — NDSU Extension
