Journal of the NACAA
Volume 10, Issue 1 - June, 2017
Marketing Weaned Calves through the Central Calf Pool: An Economic Analysis
- Friend, D. P., Extension Agent, WVU Extension Service
Loyd, B.M., Extension Agent, WVU Extension Service
From 2001-2015, Central Calf Pool producers collected performance and economic data for annual evaluations. 4,993 calves were pre-vaccinated, weaned for 45 days, and marketed on the WV Quality Assurance Board Sale. Sale prices and weights were compared to similar calves marketed through WV special graded feeder cattle sales (medium and large framed, number 1 muscled black/black baldies). Central Pool price advantages, heavier calves, and marketing savings have returned an average of $36,859.51/year. Feed and vaccination costs have averaged $18,408.35/year. The net return of $55.43/head demonstrates that preconditioning and pooling feeder cattle is profitable and feasible for WV cattlemen.
The average beef cattle herd size in West Virginia is about 20 cows per farm. While the small number of cows doesn’t provide enough income for full-time employment, maximizing profits is important for providing supplemental revenue for farm families. Traditionally, many WV beef producers with winter/spring born feeder calves market through Special Graded Feeder Cattle Sales (GCS) held in the fall. At these sales, feeder cattle are graded according to the USDA Feeder Cattle Grading Standards, are weighed and sorted into similar groups and are then sold. Buyers take advantage of these sales as a way to buy larger groups of feeder cattle with similar traits. Most of these calves are not weaned or prevaccinated. With this strategy, producers don't earn premiums for their extra effort in selecting better genetics or having an effective herd health program because calves are sold based on the average of the group.
Preconditioning of feeder cattle has been recognized by industry experts as a way for cow-calf operators to add value to their annual calf crops. The added value comes from higher average daily gain, greater efficiency of gain and reduced morbidity and mortality for preconditioned cattle in feedlots (Roeber, 2002). Most preconditioning programs include vaccinations, deworming, weaning and starting calves on feed from bunks and drinking from fountains or tanks. Zimmerman, et.al., (2012) reported that buyers preferred weaned calves that had been vaccinated and boostered compared to non-vaccinated and non-weaned calves. The preference for weaned and vaccinated calves translated to price premiums of $1 to $5 per cwt.
For over twenty years, West Virginia calf pools have provided producers with an opportunity to add value to their feeder cattle by marketing feeder cattle with similar genetics in semi-trailer load lots (48,000-50,000 lbs) with tight weight ranges. Combining the added value of preconditioning programs and the marketing advantages of calf pools, the WV Quality Assurance Feeder Cattle Marketing Program (WVQA) is a valuable asset for our small-scale beef producers. To be eligible for the program, producers are Beef Quality Assurance (BQA) certified, have a registered premise identification, and must be able to provide birth dates for source and process verification. Calves must be managed under BQA protocol, be tagged with program visual and EID tags, follow a prescribed health and preconditioning protocol and be castrated, dehorned and healed prior to shipment.
Since the late 1990’s, a group of producers from central West Virginia, the Central Calf Pool, has worked together to enjoy marketing advantages previously enjoyed by only large scale cattlemen. These producers precondition calves on their individual farms (including weaning, vaccinations, and feeding from troughs/bunks). The calves are marketed on the WVQA statewide board sale. Following completion of the 45-day preconditioning period, the calves are delivered to a central location where they are weighed and sorted into lots prior to pick-up by buyers.
Our goal is to continue to broaden participation in the calf pool while improving the overall quality of the calves offered for sale. When recruiting new members, first questions often center on total costs, profit, and added value. As data continues to be collected on an annual basis, best guesses based on results from other sources are replaced with data specific for the Central Pool. Data regarding the economics of a weaning program and the risks involved continue to be very valuable in recruitment of participants and in guiding future decisions of the pool related to marketing.
From 2001-2015, producers marketing calves through the Central Pool have provided the following data for annual analysis:
• Weaning weight
• Vaccination cost
• Deworming/grubicide cost
• Cost of purchased feed
• Value of hay fed
These data, along with sale price, sale costs and sale weights have been summarized annually for producers in the Central Pool.
For the economic analyses, marketing costs and sale prices were compared to compiled results of all WV GCS held in each respective fall marketing season from 2001-2014. In 2015, marketing costs and sale prices were compared to compiled results of GCS at the Buckhannon Stockyard and Weston Livestock Marketing. Sales for the comparison were held September 29 and October 13 (Buckhannon) and October 1 and October 8 (Weston). These dates were selected because Central Pool cattle were sold on the statewide Board Sale on October 2. These special sales were the most comparable in date, and Central Pool producers would have sold their calves at one of these markets had they not marketed their calves with the Central Pool. For all years, sale prices were calculated by determining a weighted average for calves. For primary comparative purposes, only Angus-influenced (black or black-white face) medium and large framed, number 1 muscled (ML1) steers and heifers from the GCS were used in all comparisons. The GCS calves were unweaned and unvaccinated and were born during the winter/spring calving season.
Over the fifteen years of the study, 4,993 calves were marketed through the Central Pool. Weight data was collected for 2,601 calves and cost data was collected for 2,184 calves marketed in the Central Pool (52.1% and 43.7%, respectively). The average age at weaning of Central Pool calves was 191 days. An average of 15.8 farms have marketed 12.7 steers and 8.5 heifers per year.
To fairly compare calf pool price data to that of GCS, similar cattle were considered. Central pool calves are winter/spring born, are highly influenced by Angus genetics (i.e. predominantly black-hided) and are medium (M) or large (L) frame exhibiting a muscle score of #1 (or very top of #2 under current USDA standards). There is significant variation in GCS prices because of breed/color, frame size and muscling. Thus, only prices for black and black/white faced, ML1 feeder steers and heifers were included in the analyses. Yearling cattle were excluded from the analyses. The selected calves were classified in 100 pound increments (300-400, 400-500, etc.). Weighted average prices were calculated for each 100 pound weight class.
Average daily gain (ADG) is an important factor when evaluating the benefit of a preconditioning program. It should be noted that these data are based on on-farm weaning weights and final weights collected at weigh-up which would include shrinkage due to trucking. This shrink could account for 0.1 to 0.3 lbs/day decrease in actual ADG based on 1-3% shrink. Table 1 is a summary of the average daily gain reported for each year. "Producer mean ADG low" indicates the average for the farm with the lowest ADG; "Producer mean ADG high" is the mean ADG for the farm with the highest ADG in the given year.
Table 1. Average daily gain for Central Pool calves by year.
|Year||Producer Mean ADG (lb/d) Low||Producer Mean ADG (lb/d) High||Pool Mean ADG (lb/d)|
As would be expected, weaning cash costs varied by year with most of the variation due to purchased feed costs. During the weaning period, calves were dry-lotted and fed free choice hay and started on feed. Once calves were weaned, producers continued feeding the calves in bunks and also allowed calves to graze pasture or aftermath hayfields or continued feeding hay. Producers reported the value of the hay fed during the preconditioning program. The weaning costs (feed, hay, vaccines, dewormers) per year are listed in Table 2.
Table 2. Annual weaning cost for the Central Pool (health and feed costs).
|Year||Range in Cost per Head||Average Cost per Head|
|2002||$31.35 - $37.04||$32.68|
|2003||$21.11 - $37.60||$32.52|
|2004||$24.94 - $34.87||$29.84|
|2005||$25.47 - $35.29||$28.16|
|2006||$21.04 - $47.13||$28.62|
|2007||$25.99 - $71.69||$41.96|
|2008||$46.89 - $100.30||$62.41|
|2009||$51.12 - $94.75||$72.36|
|2010||$48.89 - $94.22||$66.67|
|2011||$37.51 - $129.88||$77.36|
|2012||$32.98 - $116.61||$94.99|
|2013||$85.75 - $108.65||$96.88|
|2014||$38.39 - $124.31||$88.16|
|2015||$49.58 - $99.45||$70.59|
* Little variation in cost range; the highest cost was reported.
Table 3 illustrates the bid price advantage for calves marketed through the Central Pool compared to special graded feeder cattle sales. The prices reported are weighted averages.
Table 3. Price Advantage for calves marketed through the Central Pool.
|Year||Graded Special Sale Bid Price ($/CWT)||Graded Special Sale ($/Head)||Central Pool Bid Price ($/CWT)||Central Pool ($/Head)||Price Advantage*($/Head)|
* This is only for difference in bid price received for Central Pool cattle compared to graded special sales.
**Data limited to prices reported at 4 special graded feeder cattle sales in Weston and Buckhannon.
Historically, calves marketed in the Central Pool have been heavier than calves marketed through the graded special sales. Average value added due to increased weight was calculated by multiplying the additional pounds sold by the price received for the Central Pool calves. Table 4 includes the average weights for steers and heifers and the added value for Central Pool calves because of the increased weight.
Table 4. Comparison of average weights for Central Pool vs. special sale calves and the added value for greater pay weights.
|Year||Graded Special Sale Steer Average Weight (lb)||Central Pool Steer Average Weight (lb)||Graded Special Sale Heifer Average Weight (lb)||Central Pool Heifer Average Weight (lb)||Average Value Added Due to Increased Weight ($/Head)|
Marketing costs, such as sales commission and insurance, have been lower for calves marketed through the Central Pool compared to calves marketed through GCS. This savings is primarily because the Central Pool is self-insured and charges a commission based only on cost recovery and not profit for the marketing agent. In fact, the savings in marketing cost has generally been enough to pay for the vaccination program required. The savings in marketing cost has ranged from $6.50 to $15.50 with a mean savings of $9.64 per head.
Preconditioned feeder cattle have well documented reductions in morbidity and mortality and increased net returns for feedlots. Additionally, preconditioning programs that are 45 days or longer show improvements in average daily gain and feed efficiency (Maday, 2011). Producers in the Central Pool began weaning calves for 45 days in 2001, and have continued the preconditioning program with few changes for the past 15 years. The preconditioning program includes initial and booster vaccinations for respiratory and clostridial diseases, deworming, weaning at least 45 days prior to delivery, and feeding calves in bunks/troughs.
Initially, questions about total costs, profit, and added value of this type of preconditioning program were answered with best guesses based on results from other calf marketing pools and other areas of the country. However, no data specific for West Virginia or the Central Pool was available regarding the economics of a weaning program. These data would be very valuable in guiding future decisions of the pool related to marketing and recruitment of additional participants. With fifteen years of data, participants in the Central Pool have a good idea of expectations for cost, gain and other factors associated with weaning and pooling feeder calves. However, much of the outcome in terms of costs and return is dependent on market conditions.
Based on data collected for the economic analyses conducted from 2001-2015, Central Pool producers have seen an average bid price advantage of $18,438.93 per year compared to the special sales. Because the calves marketed through the Central Pool have been heavier at sale time than feeder cattle marketed through special sales, producers have earned an average of $15,189.06 per year. Marketing charges are lower for producers marketing through the Central Pool when compared to GCS. These lower marketing charges have saved producers in the Central Pool an average of $3,231.52 per year.
Participation in this value added program comes with a cost, however. Central Pool producers have spent an average of $18,408.35 on the preconditioning program annually, or $55.30 per head. The total value added to feeder cattle because of price advantage, sale weight and marketing savings was $36,859.51. After deducting the preconditioning costs, the average annual net return was $18,451.16, or $55.43 per head.
Beyond the financial advantages of higher bid prices, more pounds sold and savings on marketing costs, preconditioning continues to provide other incentives and benefits to producers who marketed calves through the Central Pool. Weaning provided producers with greater options for cow management. Cull cows could be sold earlier and ahead of the seasonal lull in cull cow prices. Several producers noted that thin cows were given more time to regain body condition before winter feeding begins. Finally, weaning of calves takes some pressure off of late summer pastures and water supplies particularly in droughty years.
The Central Calf Pool provides an opportunity for producers in central West Virginia to add value to their calf crop by cooperatively marketing preconditioned feeder cattle. For producers willing to step up their management practices to include a preconditioning program, participation in the Central Pool has resulted in a positive economic benefit.
Maday, J. (2011). Calf Preconditioning: The best for both worlds. Retrieved July 25, 2011 from