The Value-Added Feeder Calf:

Where does the buyer of your calves perceive value?

2007 NCBA Cattleman’s College

Robin Falkner D.V.M.

Pfizer Animal HealthManager: Beef Veterinary Operations

Stocker / Feeder Cattle

How do you determine “value” in the calves you

sell?

You don’t. The only definition of “Premium” or “Value” that matters is that of those who might purchase your cattle. You are dealing primarily with an “investor”, not a “gambler”, philosophy.

What qualities are attractive or important to an “Investor”?

What issues might be he be facing?

What Buyers Want:

Consistency

Predictability

Major drivers of profitability in cow/calf

industry:

Input Costs

Reproductive Efficiency

No improvement in last 30 years.

I ask Feedlot Manager: “Show me the cattle you are feeding yourself.”

Why are these “Preferred Cattle”?

1. Consistency / Predictability

2. Profitable

3. Health

4. Efficiency—most efficient cattle fed (feed conversion).

5. Quality: 80+% Choice+

Are they cheap?

Are they perfect?

Are they still “Preferred” today?

Premium Feeder Calf• A “premium feeder calf” in one market, place,

and time may be a complete “dud” in another one.

• An “admixture” of different “premiums” is only average, or worse.

• To be “premium”, a calf must be prepared and marketed with a group of similar animals to someone whose goals and specifications they meet.

USDA NAHMS COFE 1994

Survey of Feedlots 1000 head or more

Top 5 Concerns When Purchasing

According to Calf Buyers (Feedlot, Stocker, Backgrounders)

1) WEANED2) Vaccinated against specific diseases 3) Weaned for a certain length of time4) Vaccination program properly timed5) Specific vaccines used

– (MLV vs killed, Brand name)

Source:NCA-IRM Calf Information Task Force survey of 600 feedlot, stocker and backgrounding buyers

A small percentage of our total beef cows reside in larger 500+ head herds (14.4%).

This is where I live.

Multifactorial-“Complexes”

Multiple Pathogens

KEY: Management

Profitable management is not about searching for “villains”,

or finding “silver bullets”,

or “perfect programs”

but “removing straws”

DiseasesParasitesNutrition

EnvironmentWeatherHandling

ManagementGenetics

Straws

Progress?

Source: (NAHMS) Changes is U.S. Feedlot Industry 1994-1999. August 2000.

46

48

50

52

54

56

58

60

62

1994 1995 1996 1997 1998 1999

BRD deaths%

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1994 1995 1996 1997 1998 1999

Mortality %

What Can I Expect?• ISU: Commingled “Ranch to Rail-type” 1988-1997

– 2544 head from 20 producer “Feedlot Tests”– Average calves per consignor = 4.2 head

• Morbidity range: 0-59%– Weighted Mean: 20.6%

• Relapse Rate range: 0-81%– Weighted Mean: 39.2%

• Case Fatality Rate (CFR) range: 0-22%– Weighted Mean: 6%

Faber et al: ISU 1999 Research Report 1648

Note the wide variability in health between groups of very similar cattle, handled the same way, in the same places.

Ranch to Rail Data: % of Calves Requiring Treatment After Arrival

23%22%

34%

23%29%

29%

15%13%

27%

14%

0%5%

10%15%20%25%30%35%40%

92-93 93-94 94-95 95-96 96-97 97-98 98-9999-2000

2000-20019 yr average

% of calves requiring treatment

Adapted from: Texas A&M Ranch to Rail Summaries 92-93 to 2000-01 (9 Reports).

Ranch to Rail Data: 1992-2000Impact of Health on

Profitability

$91.23 $88.55

$49.55 $59.62

$87.60

$148.92

$80.12$65.39

$117.42

$0.00$20.00$40.00$60.00$80.00

$100.00$120.00$140.00$160.00

92-93 93-94 94-95 95-96 96-97 97-98 98-9999-2000

8 yr average

Difference in Closeout--Previously sick vs "well" cattle

Adapted from: Texas A&M Ranch to Rail Summaries 92-93 to 99-2000 (8 Reports).

Half of the Measured Cost of Illness is

“Hidden” in Reduced Performance and Carcass Quality.

Feed Efficiency could not be measured in

these studies Adapted from: Texas A&M Ranch to Rail North Summary 1999-2000

Performance• ADG reduced 0.32 lbCarcass Quality• % Choice reduced 33%

Medicine cost

DeathLoss

“Hidden” CostsReduced

Performance

Ranch to Rail Data

BRD: It keeps on giving!

BRD Treatments

CAB Acceptance

Rate

P-value

None 27.1 a <.0051

1 24.2 ab

2 or more 18.7 b

Busby et al. Effect of Postweaning Health on Feedlot PerformanceAnd Quality Grade. 2004 ISU Animal Industry Report. AS Leaflet R1885

My calves are healthy.I am not seeing diseases like BRDC in my herd.I am not part of anyone else’s problem.I wouldn’t be surprised if my neighbors calves got sick.

I

Prevalence of Disease in Cattle Population

• BVD-PI - 0.3% - 4.5%• BVD (titer) - 20-80%• IBR – 67%• Johne’s - 10% -20%• Neospora - 5% -10%• Bovine Leukosis Virus - 10% - 80%• Leptospirosis - 20% - 65%• Campylobacter - 16%What is the “impact” of “endemic”

disease?Multiple references; European and U.S. studies

Exposure (non-clinical) may create “carrier” cow or calf (P.I., Latency, Flora)

Colostral Immunity temporary protection

Calf Exposure (non-clinical) active immunity

No or few obvious problems in origin herd, but calves

source of pathogen in marketing channels,

subsequent segments, and home herd if kept for

replacements.

Diseases (IBR, BVD) that are major causes of respiratory disease post-

weaning are also the major contributors to reproductive losses

in cow herds.

Health, Efficiency, and Profitability

Today’s calf buyer looking for efficiency and predictability.Poor health messes up both.

Falkner Feeder Cattle Profit Model

Input Costs (-)Total $ / animal

“Turnover” “Capacity”

“Operational Efficiency”(+)Feed Efficiency

“Thru-put”# “Profitable Animals”

“Purchasing Flexibility”

Production / Performance (+)Value-added / animal

Profit

R. Falkner 2006

Major Impacts of Health on Profitability

1. Direct Costs: (est. U.S. $1 Billion / Year)

2. Inefficiency (operation and cattle)

3. Indirect Costs (difficult to measure):

Operational Inefficiency“Bottlenecks”

What’s wrong with this picture?

Is there more than one type of “Empty Pen”?

Weekly Cash Corn Prices (CBOT)

Source: Chicago Board of Trade

 

  Last Week Last Year Difference

Kansas Fed Steer Price, live weight $86.91 $96.60 -$130

700-800 lb Feeder Steer Kansas $96.71 $113.73 -$128

500-600 lb Feeder Steer Kansas $111.22 $138.50 -$150

Corn Price $/bu Omaha Nebraska6.5 Feed Conversion

$3.82 $1.80

7wt-finish +$1585wt-finish +$195

5wt-7wt +$40 

Cash Prices: January 22, 2007

220 Feedlots, 1600 Pens, 1987-1996

Impact of recent price changes on profitability

model

• Price Received for Cattle Sold

• Price Paid for Feeder Cattle/Calves

• Feed (Cost and Efficiency)

If Feed is free, what will determine profits?

• Price Received for Cattle Sold ($)

• Price Paid for Feeder Cattle/Calves($)

• Feed ($0.00 cost)

If Feeder Cattle are free, what will determine

profits?• Price of Live Cattle ($)

• Price of Feeder Cattle ($0.00 cost)

• Feed ($)

Be sure to sign up for the free truck drawing!

“Old Market”– high F/E group lost $100 / hd

-the profit from 2 other groups“New Market”

--high F/E group loses $200+ / hd-the profit of 4-10 other groups.

The “New Penalty” for Poor Feeding Performance is

Severe

Impact of Health & Death Loss*

Death Loss ADG FC Profit per head

0% - 0.5% 3.09 6.48 -$10.89

0.5% - 1.5% 3.00 6.65 -$20.41

1.5% and up 2.84 6.86 -$57.62

*800-lb. yearling-fed steers closed out in March 2006

Data: Tom Brink: Senior VP. 5-Rivers Cattle Feeding LLC

Variability in Feed Conversion

Graph from: Dr.Robbie Pritchard, SDSU

The health and performance data you have already seen today strongly suggests that health is one

of the biggest variables influencing efficiency—and the one we can change the

easiest.

Estimating the Effects of Animal Health on the

Performance of Feedlot Cattle

Special Thanks to: Max Irsik DVM, MAB

University of Florida

For his Master’s Thesis and Slides

Morbidity and Performance

Morbidity % Feed Conversion ADG Added Cost Cost of Gain

0.00% 6.34 3.32 $22.86 $50.13

5.00% 6.53 3.22 $23.59 $51.83

10.00% 6.73 3.13 $24.33 $53.3915.00% 6.92 3.04 $25.06 $55.11

20.00% 7.12 2.96 $25.79 $56.86

25.00% 7.31 2.88 $26.52 $58.43

30.00% 7.51 2.80 $27.26 $60.2135.00% 7.70 2.73 $27.99 $61.78

40.00% 7.90 2.66 $28.72 $63.60

50.00% 8.29 2.54 $30.19 $67.03

60.00% 8.68 2.43 $31.65 $70.51

70.00% 9.07 2.32 $33.13 $74.05

80.00% 9.46 2.22 $34.58 $78.09

90.00% 9.85 2.14 $36.05 $81.83

100% 10.24 2.06 $37.51 $85.66

Irsik, M. KSU Master’s Thesis. Cost of Gains calculated with $144/ton ration (DM)

Using these data, a 10-20% reduction in morbidity would be associated with improved Feed

Conversion and reduced Cost of Gain by approx $3-$7/cwt (in a given type/class of cattle)

Can

Work for you and buyer?

Value to the Market“Everyone knows the value of preconditioning. … we’re seeing the widest price ranges in history… Calves preconditioned and weaned for 45 days consistently brought $5 – $8 per cwt more this past year.

But when verified for age and source, they can generate an additional $10 – $20 per head.”

Randy Blach, Cattle-Fax, 2006

Impact of “VAC”Health Programs, 1995-2006 King ME, et al. JAVMA, November 1, 2006.

0

2

4

6

8

VAC 45 VAC 34 Viral

VAC 45 2.47 3.35 3.89 3.35 3.33 3.66 4.06 5.01 6.69 7.91 6.64 7.61

VAC 34 1.35 0.99 1.61 1.38 1.17 1.76 2.21 1.8 3.39 3.47 2.45 3.41

Viral 0.7 0.43 0.72 0.74 0.96 1.27 1.23 1.1 1.85 1.71 1.43 1.92

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

$/CWT

Effect of Two Value Added Calf Programs on Morbidity, Mortality and

ProfitabilityMorbidity

%

Mortality

%

CPH 34.7 1.1

KCA (Gold Tag)

36.7 1.1

Unknown History

77.3 11.4

Roeber, et al., 2000

+ 10% death loss = approx. $50 / head

Effect of Two Value Added Calf Programs on Morbidity, Mortality and

Profitability

Morbidity

%

Mortality

%

Adjusted Margin Over

Purchase Cost

CPH 34.7 1.1 $242.29

KCA (Gold Tag)

36.7 1.1 $239.31

Unknown History

77.3 11.4 $117.78

Roeber, et al., 2000

+ 10% death loss = approx. $50 / head

$242 - $118 = $124 / hd additional profits

$124 - $50 = $74 / hd “other” health effects

Does SelectVAC work?

2003 Health Study2

– Calves of unknown background compared to WeanVAC calves

The cattle originated were purchased at the Joplin Regional Stockyard in Carthage, MO during December 2003.

The cattle were immediately trucked to Decatur County Feed Yard, Oberlin, KS were they were finished.

2 Data on file, Study 3933R-60-03-342, Pfizer Inc

Health PerformanceMorbidity – First 28 days in yard2

2 Data on file, Study 3933R-60-03-342, Pfizer Inc

0

5

10

15

20

25

30

35

% Morbidity

Unknown

WeanVAC

32.27%

6.9%

Added Value to the Seller and Buyer2

2 Data on file, Study 3933R-60-03-342, Pfizer Inc

Calves of Unknown History

WeanVAC calves

Calf Cost $624.47 $653.27 $28.80 Increase

Cost of Production

$245.69 $248.78

Total Costs $870.16 $902.05

Carcass Value $900.19 $951.56

Profit $30.03 $49.51 $19.48 Increase

Joplin Regional Stockyards

Analysis of Calf Sale Information

Price Advantage vs. Non-Vaccinated (per cwt)

WeanVAC$5.33

PreVAC$4.84

*Other VAC$4.59

$4.00

$4.50

$5.00

$5.50

Dollars per hundredweight

Sales Information Analyzed Nov ‘03 – March ‘04

124,568 calves

16,369 lots

• WeanVAC calves sold for $3.98 more per head than calves enrolled in other VAC programs

a

ab

b

a, b Values without a common superscript differ (P < .05).

*Other VAC - other Animal Health manufacturer programs

SelectVAC Value to the Industry

“About 10 years ago, with Pfizer’s support, we started hosting local producer meetings on the

value of preconditioning and SelectVAC.”

“A key benefit of the SelectVAC program is that buyers recognize the SelectVAC cards during a sale. SelectVAC program calves are widely recognized throughout the entire industry because of the strong protocol Pfizer has developed.

“This brings a lot of consistency, and consistency is everything in the feedyard.”

-Mark Harmon, Joplin Regional Stockyards,

Missouri

Conclusions• Keep focus on real profit drivers. • Prepare your calves for the “World they will face.”• Join an established value-chain, or• Create a value-chain for your cattle.• Open communication with the buyer of your calves.• Produce a “group” of calves that will finish together

and efficiently.• Consider willingness to accept or share some of the

risks in order to share in the profits.

“Once the grapes hit the dock, it’s too late for us to correct the fruit. You can make good or bad wine from good grapes, but you can’t make good wine from bad grapes.”

Bob Reed, Llano Estacado Winery.

“Cattle ain’t Grapes. There are not too many bad cattle. Mostly bad people and plenty of cattle in the wrong place or at the wrong price.”

Robin Falkner