Should They Stay or Should They Go? Marketing Weaned Calves vs Yearlings

Introduction

Cow-calf producers need to consider marketing options for their calves. Along with the choices of direct to buyer vs. auction mart, or regular sales vs. special sales, they have the option of retaining calves after fall weaning. These calves can be backgrounded over winter on a forage based ration and sold come spring, hopefully into the traditionally "hot" market for grass cattle. But will backgrounding calves put more dollars into the producer's pocket? This article compares the financial outcome of selling calves at weaning with marketing them as stockers in the spring. The resulting Net Margin (the difference between selling as stockers vs calves) is projected over a wide range of both calf and stocker prices.

Method

A cattle feeding budget spreadsheet (OMAFRA Beef Shortkeep, Excel*) was used to run multiple scenarios using a range of prices for 500 lb weaned calves and 750 lb stockers. Calves were assumed to be either sold at 500 lbs on Nov.1, or retained over winter and sold as 725 lb stockers on April 1. The backgrounding ration was formulated to give 1.5 lbs/day of gain. The values included in the budget are shown in Table 1. The principle ration component, good quality hay, is valued at cost of production ($50 /tonne).

Table 1. Backgrounding Budget

Item Cost
Weaned calf price range $1.20 - $2.00 /lb
Stocker price range $1.00 - $2.20 /lb
Health and Vet $20 /hd
Marketing / Trucking $40 /hd
Yardage $0.42 /day
Interest rate 4.0 %
Good quality hay $50 /tonne
Corn grain $274 /tonne
Beef supplement $440 /tonne
Salt /mineral $500 /tonne
Corn grain $274 /tonne

In general, it is expected that calves will be more valuable in spring than fall, since gain on pasture is usually less expensive than feedlot gain, so grass farmers can afford to pay more. However, cow-calf producers need to be able to evaluate a wide range of prices for both calves and stockers. For this evaluation, fall calf prices ranged from $1.20 /lb to $2.00 /lb. The corresponding spring stocker prices were set as the range from a negative price margin of -$.20 /lb to a positive price margin of +$.30 /lb. For a particular series of calculations, fall 500 lb calf price was fixed, and spring 725 lb stocker price was varied from $.20 /lb less than calf price to $.30 /lb more than calf price.

The outcome of interest in this study was the Net Margin resulting from the various combinations of fall calf and spring stocker prices. This value represents the money gained (or lost) from the backgrounding option, compared with selling the calves in the fall.

Using the Net Margin Graph

To use the Net Margin graph (Fig. 1), you need to first determine what price you expect to get for your weaned calves in fall. For example, you decide that 500 lb calves will sell for $1.50 /lb. Look for the corresponding line on the graph. Now you have to estimate what price you would receive for those animals if you kept them through the winter and sold them as 725 lb stockers the next spring. In this case, we estimate that those stockers will be worth $1.60 /lb. Locate that price on the horizontal axis on the graph, and draw a vertical line up until it touches the $1.50 calf line. From that point, draw a horizontal line across to the Net Margin scale. In this case, it crosses that scale at the $170 point. This means that overwintering your calves and selling them as stockers would create an additional $170 of added value per head. In these calculations, the cost of extra feed and other operating expenses have been taken into account, but not additional labour or risk.

Graph showing the net margin for backgrounding calves.

Figure 1. Net Margin for Backgrounding Calves

Text Equivalent of Diagram

Over the price ranges used in this study, backgrounding was worthwhile in most instances. However, the net margin was negative when fall calf price was in the lower ranges and stocker price /lb was lower than calf price /lb. Backgrounding was profitable in each case where stocker price was greater than calf price, showing that feed and associated costs were more than covered by increased revenue. These results show that retaining calves past weaning and backgrounding them can increase total net revenue for cow calf producers.

Resources

*Budgeting tool: http://www.omafra.gov.on.ca/english/busdev/bear2000/Budgets/budgettools.htm

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