Stocker calves purchased in late winter, with a longer period of ownership, can generate higher gross returns compared with those purchased later in the spring. Gross margins, though, could be lower. KansasStateUniversity ruminant nutritionist K.C. Olson, PhD, compared the two business models using 10 years of pricing and production data, and concludes that purchasing stocker calves in March or April can improve gross margins per day. “Maintenance cost on an animal has to be paid every day,” he says, “and when the animal is not producing to a high degree, when it’s gaining a small amount of weight, the owner does not have very much production over which to prorate the fixed cost, the maintenance cost of that animal, so it’s very expensive to own it.”

Stocker operators in the Central Plains region often purchase calves as early as December. For the next four months, the calves average only about 1 pound of gain per day. They turn the calves to green grass in April for 60 days of rapid gain, but the value of that gain can’t account for all the maintenance costs accrued earlier.

In the alternative system, producers purchase heavier stocker calves in March or April, paying more per head but owning the cattle for roughly half as long. Gross returns in this system are less than those from the scenario with longer ownership, but the gross margins are almost twice as large. Instead of 44 cents per animal per day, Olson says, the operator now has roughly a dollar per animal per day out of which to pay variable costs. Olson adds that the analysis was based on historical prices for feed, pasture and cattle between 1995 and 2005, before the recent increase in feed and pasture prices. Higher production costs will affect gross margins, he says, but the basic relationships between maintenance cost, rate of gain and daily margins remain the same.