And other cattle marketing thoughts
I was just looking at the Missouri Department of Agriculture’s Weekly Market Summary as a reference point for this article and noticed a couple of very important things. Cull cows are bringing up to $70 per hundredweight and slaughter bulls are bringing as much as $85 per hundredweight. I also just saw that the percentage of heifers placed in feed yards in April was the second highest for any month since they have been keeping track.
Here’s what I get out of that: The U.S. cow herd is not going to grow in the foreseeable future, and the shortages of lean trim and feeder cattle are going to continue. Add that to a hungry, growing world population, and it surely adds up to a positive future for U.S. production agriculture. MFA is committed to be a part of that future. One of the ways we do that is through programs like the MFA Health Track program.
Occasionally, someone tells me that participating in Health Track doesn’t pay. Right up front I am willing to concede that possibility. But, in my defense, sometimes that can be very hard to see. After all, the things MFA doesn’t own, like your cattle, auction markets, feedlots or packing plants, assures that we can’t control any market on any given day or location. But if you are a cow/calf producer in MFA’s market area, chances are you can’t either.
There are so many variables that affect price (genetics, fill, flesh, weather, futures, etc.) that most of the time the per-hundredweight price spread on any class, weight, and sex of cattle is 3 or 4 times greater than any potential program premiums. Seems to me the best you can do when it comes to marketing your calf crop is to minimize risk and maximize value within the constraints of your operation. That is precisely why the Health Track program was created. I have enrolled all of my own calves into Health Track since I started at MFA 10 years ago, and it has always paid for me. Here’s why...
I have measured for myself, as well as seen research data that shows the result of shrink on calves during the mar-keting process. My conclusion is that bawling (unweaned) calves will shrink at least twice what a pre-conditioned calf will in the same environment. The stress of being pulled from their dam’s side and the lack of experience with waterers and feed bunks should make that easy to understand. If a 500 pound steer is worth $1.20 per pound, the difference between 3 percent and 6 percent shrink is $18 per head.
Marketing stress increases the risk of those calves getting sick at their next stop as well. Most backgrounders will tell you that at certain times of the year 30 percent of the unweaned calves they re¬ceive will get sick and 3 to 5 percent will die. You can wean your calves at home without using the Health Track program to mitigate this problem, but I can’t tell you whether or not your method will work. After collecting data on over 350,000 Health Track calves I can tell you that if you follow our protocol your average disease risk is about 2 percent and your death loss risk is about 0.01 percent during the first 45 days of the post weaning pre-conditioning period. Meanwhile, sick animals don’t gain much—if any—weight. In most cases, that early gain is critical to the profitability of pre-conditioning. Keeping calves healthy greatly reduces risk to your profitability. Health Track’s nutrition requirements not only are balanced to compliment the vaccination strategy but also utilize Cattle Charge and Full Throttle, which assure the highly efficient low-cost gain missing from lesser feeding strategies.
Keeping as many potential buyers hitched to your wagon as possible limits your price risk. There are days when some buyers are only bidding on age-and-source verified (ASV) and/or pre-conditioned calves. You all know what happens when there are fewer bidders. Remember, buyers don’t pay more than they have to. In addition, the futures and supply/demand market timing issues can be managed post weaning as the level of nutrition and days fed can be adjusted to target a moving market.
One of my favorite quotes goes something like this: “The definition of insanity is to always do what you have always done and expect a different result.” In the beef industry, we tend to call that “being traditional.” Here’s an example: Almost every year the lowest gross value received for unweaned calves is in the fall. It happens because that’s when most of calves hit the market. Supply and demand signals at their clearest! Since the majority of the calves in our part of the world are born in the spring and sold in the fall, oversupply occurs. Disease probabilities of the pending winter-weather stress provide additional challenges to demand. The third piece of the market-timing dilemma is the weight-to-head price spread. In October and November 2009, the average difference in price (dollars-per-hundredweight spread) between 550 and 850 pound steers was less than $8 per hundredweight. The obvious price incentive on spring born calves is to get as much weight on them as possible before the spread starts opening up after the first of the year. Health Track is a great tool designed to help you accomplish just that. As for you fall calvers, don’t think I’m going to let you off the hook. Spring-weaned calves almost always have extra value due to the opposite of the above supply/demand dynamic. At the same time, feed ingredient cost usually starts to go down due to a softening of demand as grass greens up. The higher value of cattle and moderating costs mean that the incremental value (additional pounds x calf price – cost of gain) of each pound of gain is even more significant. Our sales data supports this as the average net return/head from sales of Health Track calves versus selling calves right off the cow 45 to 60 days earlier is almost always highest at summer sales.
Vac 45 processing
The advantages of weaning a minimum of 45 days, vaccinating, and growing calves is old news to most cattle feeders. Recent market studies of significant numbers of video sales have shown at least an $8 per hundredweight premium paid for Vac 45 calves. There are other coordinated marketing programs that pay similar premiums. This added value cannot be created by any downstream players as the advantage is enhanced lifelong performance due to the absence of disease from birth. This premium is not arbitrarily added onto the sale price at an auction, which is part of why it is hard to see sometimes. The only thing I know for certain is that if a few buyers are only looking for properly weaned and vaccinated cattle at an auction and your cattle are not Vac 45 you will limit the potential bidders.
Age and source verified
Again, there’s nothing really very new or unex¬plored here. Packers have been paying premiums for ASV cattle since the Japanese market reopened. USPB has consistently paid at least $35 per head and other packers have been on both sides of that figure. I have witnessed the demand for ASV cattle in many venues, and I would say that most feeders seem willing to pay half of the premium to the calf seller. I can do that math: $17.50 for a $3.50 investment in tags and a little paperwork. I can also state without hesitation that we provide the ASV certification to buyers of the vast majority of Health Track cattle sold. This has increased dramatically every year since it started—it’s obvious they are taking advantage of the value.
Health Track reputation
The MFA Health Track program has been in existence since the summer of 2000. Since we started to computerize the records in spring of 2001, there have been nearly 370,000 calves enrolled. If you add up the cumulative advantages outlined above you should conclude that the Health Track program is about creating the opportunity to increase the net return per cow in your herd. It’s as simple as that. Managing shrink, experiencing healthy and efficient gain and placing a sign that screams “HEY, BUY ME, I’M WORTH MORE” in their ear can help break “tradition” and add real value to your operation.
Mike John is director the MFA Health Track program.