In the past two or three years it appeared calf buyers were starting to pay a little more for preconditioned calves; then along came 2014.
Early reports suggest preconditioning values shot up from previous values of about $35 to $50 per calf to more than $100 per head.
With cattle prices at a peak and health issues perhaps tougher than ever, why wouldn’t buyers pay more for cattle which have proven to be healthier, gain better and have lower death loss? This seems pretty clearly to be risk mitigation.
In Oklahoma, buyers last fall paid more than double the 2013 premium for preconditioned calves, with an average price of $19.20 per hundredweight. That compared with $8.65 in 2013 and $9.23 in 2012. That suggests an “average” preconditioning premium of $123 per calf. This was from six sales scattered across the state. This was on 4,327 Oklahoma Quality Beef Network (OQBN)-registered calves, with a comparison of 6,000 non-certified and/or non-preconditioned calves sold immediately around the preconditioned sales and through those same sale barns.
These were total premiums, including the “health difference” and weight gain, plus other possible unnamed factors, said Kellie Curry-Raper, an agricultural economist at Oklahoma State University.
She says her studies of OQBN-calf sales over recent years has tried to quantify only the actual value added by the sales. Her figures do not reflect added value from gain commonly captured during preconditioning, nor do they calculate costs, which are highly individualized.
For comparison, Superior Livestock Auction reported from a large study on its sale platform in 2014 a $12.06-per-hundredweight health price advantage for weaned and vaccinated calves. This was considerably higher than some 2013 data from Superior which showed preconditioned calves earned an average of $4.78 per hundredweight with an average weight of 566 pounds — therefore, an average price of about $24 per head.
Purdue University veterinarian Mark Hilton recently said an 11-year analysis of Indiana beef herds showed weight gain alone on preconditioned calves added $50.84 average premium. In fact, Hilton said, weight gain was the most important profitability factor. Since the first week is usually not a good week for gain, Hilton said longer preconditioning periods appeared to pay better.
Another preconditioning program which has worked in conjunction with the OQBN sales and typically fetches even higher premiums for preconditioned calves is the Integrity Beef preconditioning program. Calves in that sale recorded even larger increases in calf pricing in December 2014 — up to $15 more per hundredweight than the calves from the OQBN sale. Noble Foundation cooperates with and shares one sale with OQBN. These calves have many of the same basic protocols but are usually weaned and fed longer and must be from bulls in the top 20 percent of weaning and yearling-weight EPDs from the Angus and Charolais breeds. This is intended to make them even more attractive to feeders, said Steve Swigert, an economic consultant with Noble.
Reaching back several years, an Iowa study on preconditioned calf sales versus regular auctions suggested in 2008-09 steers in the preconditioned sales earned $2 per hundredweight above their contemporaries and heifers $6 per hundredweight. By 2013-14, that number increased to $6 per hundredweight for steers and $10 per hundredweight for heifers, said Lee Schulz, Iowa State University agricultural economist.
“If you are not adding value to your calves, you are making a huge mistake, leaving money on the table and giving my feedlot owners a lot poorer-quality cattle,” Hilton said.
He said the best way to move toward more preconditioning is for feeders to send a price signal.
“When you’re buying high-risk calves, you’re telling the industry that you’re going to take advantage of somebody. When you buy preconditioned, high-quality calves you’re telling the beef industry that producers of preconditioned, high-quality calves are your partners.”