Deciding when to sell calves? Calculate the value of additional gain.
Cattle feeding has many variables to manage. How many days on feed or to what weight do we feed the calves are questions that every backgrounder deals with. The value of additional gain can be reviewed to access profitability and when to market calves.
Traditionally, the calf market price per pound decreases as cattle get heavier. February 2017 is no exception.
Using the value of additional gain can help decide when to sell calves. When the value of the additional gain is positive, feeding to a heavier weight is a good option. When the value of additional gain is negative, it’s time to minimize loss and consider selling.
To calculate the value of additional gain, weights and prices for various sizes of cattle are needed. Table 1 uses North Dakota sale barn prices and corresponding weights reported February 9, 2017. https://www.ams.usda.gov/mnreports/sf_ls764.txt
Also required is the additional cost of gain for the cattle being backgrounded. Feed cost of gain for calves gaining 3 pounds per day was calculated at $.32 per pound. Total cost of gain was calculated at $.48 cents per pound of gain. Since each feedlot has its own cost structure, the total cost of gain should be used for that feedlot and the type of cattle and ration being fed.
Table 1. Value of additional gain for backgrounded steers.
Since the value of the additional gain is greater than the cost of gain, feeding to a heavier weight is profitable at these prices.
However, if the market drops $5 across all weights during the next 2- 3 week feeding period, the value of additional gain is positive in only two of the weight ranges as compared to when the calves could have been sold.
If the calves were purchased, using the actual purchase price for the calves would be preferred. Please consider season trends where heavier weight and/or fleshy cattle can be additionally discounted.
These calculations can be useful in evaluating premiums or discounts for certain weight ranges and determining target weights for selling calves.
Area Extension Livestock Specialist