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OSU Extension BEEF Team

BEEF Cattle questions may be directed to the OSU Extension BEEF Team through Stephen Boyles or Stan Smith, Editor

Previous issues of the BEEF Cattle letter

Issue # 396

July 28, 2004



Keep Calves Growing Through the Summer - John B. Hall, Extension Animal Scientist, Beef, VA Tech

In late summer, calf growth can slow due to hot weather and declining forage quality. Current high dollar per cwt prices are tempting some producers to sell light calves rather than waiting until fall to sell. However, putting pounds on calves now and delaying sale until the fall will pay in the long run.

Calf value by the pound or by the head - Producers need to look at calf value by the head rather than by the cwt or lb. The bottom line is how many total dollars you get per calf not that you "sold 'em high". Using sale averages from week of July 16, 2004, the value of a heavier calf can easily be seen. That week 4-cwt steers averaged 459 lbs and sold for $134.06/cwt while 6-wt calves averaged 648 and sold for $121.75/cwt. The value of those calves are shown below:

459 lbs @ $134.06 = $615.33
648 lbs @ $121.75 = $788.94

So, the heavier calves would be worth $173.61 more per head than the light calves. Even if calf prices decline towards fall, 6-cwt calves would have to drop to $94.90 to bring in the same money as selling a 4-cwt calf now. All price indicators appear strong, and it should put more profit in your pocket to keep calves until fall.

Calf growth during late summer and early fall - Calves will gain 1.5 to 2+ lbs per day from 4 months of age until weaning. Average daily gain will depend on forage availability and forage type. For example, unweaned calves in the mountains of Virginia grazing Orchardgrass/Bluegrass pastures will easily gain 2 or more lbs per day. However, unweaned calves in Southside Virginia grazing predominately fescue pastures may only gain 1 lb per day. Increasing the amount of legumes in fescue pastures or grazing calves on Bermudagrass or crabgrass pastures will increase average daily gains in the warmer parts of the state. Creep grazing of calves, which allows them access to higher quality forage, will also increase calf weight gain.

Another alternative is creep feeding. Creep feeding is most advantageous when calf prices are high and feed costs are low. Because of exceptionally high calf prices this year, it may be worth creep feeding calves that are grazing fescue pastures, even though feed costs are high. Studies with cow calf pairs grazing fescue pastures in Southern Illinois (a climate much like the Northern Piedmont of VA) demonstrated an advantage to creep feeding unweaned calves (Table 1). In addition, creep feeding for 56 days was much more cost effective than creep feeding all summer long.

Table 1. Effect of creep feeding nursing calves grazing fescue pastures during mid-July through mid-October.

Days on Creep

Item

0

28

56

84

Summer Average Daily Gain, lbs. 1.26 1.58 1.98 2.35
Daily creep feed consumed per calf, lbs 0 6.62 6.28 7.94
Gain to feed ratio, lbs ------ 0.24 0.32 0.30
From Tarr et al., 1994

In the data summarized in Table 1, creep feeding for 84 days gave the highest average daily gains, but calves consumed a total of 667 lbs of creep feed per calf during the summer. Calves creep fed for only 56 days gained almost 2 lbs per day, but only consumed 352 lbs of creep feed during the summer. So there appears to be an advantage in creep feeding nursing calves on fescue from mid-August to weaning compared to creep feeding all summer long.

The value of creep feeding will depend on the cost of the creep feed and the value of the pounds gained. Let's assume that this year each additional pound of calf gain is worth $0.80 and creep feed costs $200 ton. Using the data from Table 1, calves creep fed for 56 days will gain 60 more lbs than non-creep-fed calves. The value of the gain is $48.00/calf, and the creep feed would cost $35.20/calf. So, creep feeding would add $12.80 profit to each calf.

Creep feeds that are based on highly digestible fiber feeds such as corn gluten or soy hulls may produce better gains than corn based creep feeds. Feeds like corn gluten and soy hulls do not cause a depression in ability of the animal to digest forage. Creep feeds should be high energy and contain at least 12% crude protein.

Think about creep feeding or creep grazing calves during late summer this year. Especially consider creep feeding if you are east of the Blue Ridge and grazing fescue. Make sure you put a pencil to creep feeding. For sure, do not sell those calves too early and too light or you will be giving up profit.





What are your calves worth? - Steve Suther, Director, Industry Information, Certified Angus Beef (reprinted with permission from the May, 2004, CAB "Black Ink" publication)

Farmers and ranchers take pride in their calves' ability to "top the market." If that happens, they may save the market report and circle the weight and price received. They can use those values in financial reports and point to them if anyone wants to buy their calves.

Everyone wants to sell for a premium, but let's look at factors that set the market - both its base and the bonuses. Graziers may buy the light calves, but feedlot buyers go for those 600 lb. and above. Either way, the "break-even" equation sets the base, determining the price to pay for a given weight of calf while covering all costs.

Think of it as (final sale value - enterprise costs) times calf weight at delivery. For a feedlot example, if the final value is that of a 750 pound carcass times $1.20/lb., or $900, and feedlot costs are $300, divide $600 by calf weight. You can see that $1/lb. is the most a feedlot will pay for an average 600 pound calf.

Feedlots don't want to buy calves that will just break even, however. They may bid themselves into such corners to keep pens full, but when little is known about calf history, the risks are great. Given the break-even example, a feedlot may instruct all buyers to back off a dime for margin, allowing bids up to $.90/lb. on the 6-weights.

What if the buyer knows what a set of calves can do? A decade of increasingly common value grid marketing has feedlots thinking about grids for calf values. Some have even purchased calves based on what they ultimately do in the yard and on the packinghouse rail.

Data on 12,000 calves fed at a Kansas yard from 1998 through 2001 and marketed on a value-based grid revealed these relative values for the incoming feeder calves, given that $.90/lb. average:

Grade/Brand

Value/head at harvest

Value/lb.as 600-lb. calf

Prime

$992.39

$1.05

CAB

$948.59

$0.99

Choice

$914.25

$0.94

Select

$850.65

$0.86

Standard

$731.40

$0.70

The extreme range shows a calf may be worth anywhere from $630 to $420 based on quality grade potential alone. What about ability to perform in the feedlot? Average daily gain among the 12,000 calves was 3.55 lb., but the top 25% gained 4.11 lb./day. Calves that would gain a half-pound per day above average were worth about $50/head more as 6-weights; of course, those that would fall behind by a similar rate were worth $50/head less.

North Dakota data suggests proper pre-feedlot management is worth $50/head, and "the right genetics" can add another $85/head. Mismanaged, mongrelized cattle should be discounted accordingly.

Many buyers believe they cannot find in the same package calves that will achieve high quality grade as well as gain rapidly and efficiently. Maybe that's because some of the most efficient feedlot cattle come in with quality grade potential compromised by inadequate nutrition before they get near the feedlot. It will take data on previous calf crops to convince buyers your calves can do it all.

Calf health governs grade and gain ability, so buyers keep a kind of health discount grid in mind. Based on experience and data from Texas and Kansas studies, they know sick cattle must be discounted at least $.20/lb. If they show nasal discharge or runny eyes, look for a $.05/lb. dock. Lameness or suspicious lumps cost $.15/lb. or more, and mud subtracts another penny or two.

Breed type can add or subtract a nickel, and grids can be adjusted for season, location, frame size, sex, muscling, condition, lot size and uniformity. You can probably think of more variables, but the key is to line up as many positive features as possible.

Imagine the value of a sick heifer calf of unrecognized genetics expected to gain a pound less per day than average, without the ability to grade at least Select. Contrast that to the value of a healthy steer with documented preconditioning and genetics and data from last year''s brothers showing above average gain and a high percentage Choice or better grading.





The Fire Drill: A False Positive Test - Kris Ringwall, Beef Specialist, NDSU Extension Service

People have gradually shifted their thinking toward the concept of absolutes rather than variations within the world. This may not be a major discussion point, but certainly the recent events involving the inconclusive tests for BSE (mad cow disease) remind us that modern technology works. The process may or may not be as simple as everyone would like, but the process works.

A test where the results indicate a positive reading, but in reality the sample is really negative, is not a new phenomenon. False positive test results have been around for a long time.

As testing processes have been developed through the years, two potential errors have always existed, the false positive and the false negative. For a test to have the highest level of accuracy, any occurrence of false negatives, i.e. a sample that is really positive but is not picked up by the test, is totally unacceptable.

False positive results have not been as detrimental as false negatives, and have been allowed to exist, along with subsequent development of additional tests, to help further reduce the incidence of a false positive. The false positive is the process of calling or labeling a sample as positive when in reality the sample is negative.

Can the industry live with false positives? The answer is yes, but the consumer or affected party needs to better understand what test results really mean. In the case of the false positive test for BSE, there was no danger to the food supply and the general public remained safe.

A fire drill is a good analogy to explain a false positive test. Most people should be well versed in the functioning of a fire drill. From the first day of grade school, people are taught what a fire alarm is and what to do when one sounds.

Upon hearing the sound of the alarm, everyone must leave the building or premises. The logic is that the sooner all people leave the premises, the less likely anyone will be hurt in the event of a fire. The principle works and has saved many lives.

The general public has grown used to fire drills, i.e. false positive tests. In this case, the sounding of the alarm when, in reality, no fire exists.

There are some people that don't like fire drills. In fact, I had to smile the other day while reading memos attached to the bulletin board at the North Dakota Sate Capital. One memo was signed by the Governor indicating the consequences of employees failing to exit the Capitol when the fire alarm is activated.

A problem appeared to exist because some employees were ignoring the alarm. Such action not only jeopardizes the safety of the individual, but also places in danger those individuals called upon to save them in the event of an actual fire.

The same is true for BSE test results. No one really wants to be bogged down with additional testing requirements, and yet the general consensus is a resounding affirmation of the need for the tests. Beef producers and consumers stand in support. But just like fire drills, both groups need to understand the concept of preparation, false positive test results and the diligence required to assure absolute accuracy in the final report.

No one wants to re-enter a building following a fire drill, only to find out the building was actually on fire. So for now, the world does not stop for fire drills, and should not stop for false positive BSE test results. The two tests simply bring attention to the details needed to provide a safe haven in the world today, and life will go on.

May you find all your USAIP ear tags.







Weekly Purcell Agricultural Commodity Market Report for July 27, 2004
Wayne D. Purcell, Agricultural and Applied Economics, Virginia Tech
http://www.ext.vt.edu/news/periodicals/purcell/

Bull markets in cattle do not die easily. The continued strong demand pushed the cattle futures higher in early week trade as we saw a nice improvement in boxed beef values on Monday and all live cattle futures except August made new highs. Cash trade is likely to be around $86 or possibly $87 this week, with limited early sales near the low end of that range. Selective hedgers will see the higher Tuesday closes and think about buying back short hedges as we get two consecutive closes above the old highs, but there is another side to that "buy back" rule this week. The October and December contracts have moved above $90 and that strong performance may be based on expectations that all beef trading channels, including to Japan, will be open before the end of the year. That is not guaranteed, and this might be a time to answer margin calls on short hedge positions and hold the positions. It will be hard to hold a $90 market in cattle in the fourth quarter as seasonal hog supplies increase. And in passing , we need to note that the July 1 inventory reports finally shows some limited signs of herd building tendencies as the category "heifers for beef cow replacement" came in over 4% above year ago levels. Once this building starts, it will reduce beef supplies and continually push beef, cattle, and calf prices to new highs and that pattern could last for several years.

It is harder to see how feeder cattle can hold current levels. A $115 price tag on feeder cattle in the 800 pound category needs fed cattle prices well above $90 to break even. Late in 2004, look for cattle coming out of feedlots to be losing significant money on a per head basis and that is always a negative in this complex. At these extraordinary levels, I think holding short hedges in feeder cattle makes sense. If you have no hedges, then watch the current price advances and add to protection when the markets reach levels that allow you to lock in exceptional profits, especially on cattle placed in grass programs early in 2004 when prices were not this strong. If we get any significant seasonal price dip in this market, I will want to start watching for chances to place long hedges against a spring 2005 market that will show us record high prices again.





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BEEF Cattle is a weekly publication of Ohio State University Extension in Fairfield County and the OSU Beef Team. Contributors include members of the Beef Team and other beef cattle specialists and economists from across the U.S.

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