Adding Value To The Calf Crop

DR. ANDREW P. GRIFFITH

KNOXVILLE, TENNESSEE

The term added value in the calf and feeder cattle business is largely associated with weaning and preconditioning calves prior to marketing. Most people like the idea of adding value to the product they are producing if the value added exceeds the cost of doing so, but many people do not like to put forth the effort to add that value. Weaning and preconditioning calves is one way to add value, but some producers have found producing all natural, organic or freezer beef to be a way to add value to the animals they produce. In this article, the focus will be calculating the value of growing a calf from one stage to the next.

Based on the most recent Tennessee weekly auction market report when this article was written, a 525-pound steer was worth $1,942 per head ($370/cwt). That is a tough value to pass up or risk losing, but the question is if more profit could be made by weaning and preconditioning? Using prices from the same auction report, a person who added 100 pounds to the steer during a weaning and preconditioning period would have sold a 625-pound steer for $2,163 per head ($346/cwt). This means the value of gain was $2.20 per pound., and that should be enough to make anyone salivate. Most producers will only have $100 per head cost in this phase of production, which means a profit of $120 per head. 

What if a person grows that animal to a true yearling weight of 825 pounds? The answer is a little more complicated in this situation. A person with just a few heavy weight feeder steers is not likely to experience the full value of the animal. In fact, it would probably not be a good idea to grow these animals to such a weight unless there is a special sale to put them in. However, a person with a 50,000-pound load of 825-pound steers would likely receive about $2,351 per head ($285/cwt). In this case, the value of gain from a 525-pound steer to an 825-pound steer is $1.36 per pound. This would be a fairly common return for a stocker producer, but it may not actually be enough given the financial investment.

Going back to the cow-calf producer and the idea of adding value, what value can be achieved by selling freezer beef. If it is assumed a person finishes their cattle at 1,325 pounds and sells them for $250 per pound on a live basis then the total revenue would $3,312 per head. This would be $1,370 more in revenue than the 525-pound calf sold at weaning and $1,150 more in revenue than the 625-pound weaned and preconditioned calf. Thus, the value of gain from 525 to 1,325 pounds would be $1.71 per pound and $1.64 per pound from 625 to 1,325 pounds. If a $1.15 per pound cost of gain is considered then the profit or added value would be $450 per head when compared to the 525-pound freshly weaned calf and $345 per head when compared to the 625-pound weaned and preconditioned steer.

This seems like a lot of math, and it is. However, this is the process a person must go through if they want to evaluate the profit potential of adding value to a calf crop. It is certainly not the most fun process nor is it as enjoyable as the production side of the business. However, it is an important and integral part of the cattle business. In actuality, it may be more important than many of the tasks a producer performs on their farm.

It should be noted that this is not typically how one would evaluate added value in that only current prices were considered. When attempting to calculate value of gain and profit potential from one stage of production to another, a person would have to use the current value of the animal on hand and then attempt to project the price of a heavier calf at some point in the future. This process is a little easier when thinking about freezer beef in that many producers of freezer beef already have their sell price set for the finished animal.   ∆

DR. ANDREW P. GRIFFITH: University of Tennessee