Cattle producers need to act as business managers and assess the inventories of all their resources (cows, calves, silage, feed grains and potential for winter grazing) to determine the best course of action to maximize their profit potential.
This should include considering how feed resources are best used and considering various marketing endpoints to maximize returns and capture the greatest possible value. If you have calves in inventory and no wheat pasture to graze, this week, we address the financial opportunity of turning those calves into yearlings without winter grass.
Consider the following.
Drought has resulted in low cattle inventories. The laws of supply and demand dictate that the future value of cattle will increase. Feedlot placement data shows more lightweight calves going on feed. At the time of writing this, the futures board looks promising for yearlings in the spring of 2023. The futures contract for March is at $179/cwt, and May is at $185/cwt.
The most recent USDA Oklahoma Weekly Cattle Auction Summary tells us that 476 pound, medium- and large-frame, muscle score 1 steer calves traded at an average of $184.07/cwt. This translates to a total value per head of $876.
A few weeks ago, David Lalman, Oklahoma State University (OSU) professor and Extension beef cattle specialist, put together a ration of roughly one-third dry distillers grains, one-third rolled corn and one-third chopped wheat hay. At August prices, this ration could be limit fed at a rate of 13.5 lbs./day (as is) to 500 lb. growing calves, resulting in an average daily gain (ADG) of just over 2 lbs./day at a cost of gain (COG) of $0.83/lb.
The following calculations use conservative figures: 2 lbs. ADG and $0.85 COG.
• Limit feeding for 180 days until next May, resulting in 360 lbs. of gain at a cost of $306 per head, resulting in an 836 lb. yearling.
• This feed cost added to the current $876 value of the steer equals $1,182. To account for opportunity cost, financing and potential death loss, raise this value by 10%, resulting in a break-even value of $1,300.
• Using the current futures board price of $1.85 for May predicts a value of $1,546 (836 x $1.85).
Producers should be encouraged to check on the current prices of feedstuffs in their area. Take inventory of your hay, silage, feed grains and potential for winter grazing. Manage your business, do the math, consult with a nutritionist and arrive at your own estimation of the COG. For example, if we raise the COG to $1.30 in the example above, the break-even value goes to $1,479.
Also consider feeding management, as limit feeding requires skills and facilities such as:
• Adequate bunk space to permit all calves to eat at the same time.
• Pens small enough so that all calves come to the bunk to eat at feeding time.
• A scale or method of weighing out the daily feed.
• Roughage feeds available for calves while working up to a high concentrate, limit fed diet.
• Time constraints and feeding skills. This limit feeding program works best when calves are fed at the same time each day.
• Business management skills to assess the economic limitations and opportunities.
• A plan for the use of or marketing of cattle following the limit growing program. — Mark Z. Johnson, OSU Extension beef cattle breeding specialist
