Source: Beef Cattle Research Council
Decision making tool for cow-calf producers regarding retained ownership of preconditioned calves
Preconditioning is a management method that prepares calves to enter the feedlot and can really pay off in a retained ownership or direct marketing system. Preconditioning was developed to reduce large economic losses associated with high morbidity and mortality due to acute respiratory disease in highly stressed weaned and transported beef calves (Radostits, 2000). Calves are typically vaccinated at least 3 weeks prior to sale or shipment and are at least 4 months of age prior to being vaccinated. They are also castrated, treated for warbles and dehorned at least 3 weeks prior to sale (Radostits, 2000). A preconditioning program also requires that calves be weaned for a minimum of 45 days and have some experience eating from a feed bunk prior to leaving their place of origin.
Many studies have shown that preconditioned calves have a lower cost of gain at the feedlot with improved rates of gain and feed efficiency, as well as lower treatment rates and death loss. These attributes contribute to higher profits in later phases of beef production and allows cattle buyers to pay a price premium for preconditioned calves. Additional weight gain during the preconditioning phase as well as reduced shrinkage associated with stress during transportation and the marketing process also contributes to higher returns from preconditioned calves.
While there are clear benefits to the feedlot for purchasing preconditioned calves, is it worthwhile to the cow-calf producer to retain ownership?
A study by Carlberg, J.G., et al. (2013)1 showed that from October 2011 through October 2012 two Alberta auction marts had an average premium of $7.97/cwt on cattle that went through a preconditioning program. A summary by F.A. Thrift et al. (2011)2 indicates that buyers paid more for preconditioned relative to non-preconditioned calves with premium values ranging from US$1.43 to US$6.15/cwt; the magnitude of the premiums is affected by cattle appearance, seller reputation as well as marketing channel.
Price premiums on preconditioned calves do not necessarily result in positive net return for cow-calf producers as the extra costs of preconditioning and price variations due to weight increase and market seasonality can negatively impact revenue. To accurately assess the potential economic returns from preconditioning, a producer should have a good idea of their cost structure and realistic projections on cattle prices and precondition premiums based on current market situations and experience from previous precondition sales.
The Value of Preconditioning tool is designed to help Canadian producers evaluate the economic opportunity from preconditioning. The tool is comprised of five steps. The first four steps require: general calf information, anticipated price under traditional management, preconditioning costs, and projected prices for non-preconditioned and preconditioned calves based on weight and seasonal adjustments. With a robust database on historical Canadian cattle prices, the tool allows producers to compare their projections to the 10 year provincial average. The fifth step then provides a summary of estimated net returns from preconditioning and projected breakeven price premiums of three different precondition programs (typically 30, 45, 60 days).
The following example uses 10 year average calf prices to reflect a seasonal price year (note the 10 year and 5 year seasonality are consistent, with 2003/04 having minimal impact on feeder price seasonality).
Step 1: General Information
A calf was born in mid-March at 85 lbs. It is expected to be weaned at around 220 days (mid-October). With an average daily weight gain of 1.8 lbs, the projected weaning weight is 480 lbs.