In cattle feeding, as elsewhere, the term "closeout" implies a conclusion, finality, the end. Cattle ship from the feedyard and managers run final calculations of their profitability based on sale prices and production costs.

But in the new world of value-based management and marketing, closeout can imply a beginning, or at least a step in an on-going process, rather than an ending.

Information and communication change the role of the closeout in a value-based system. Data from the feedyard and the packing plant serve as guidelines for continuous quality improvements through the chain of production, leading to future growth in profits at every stage.

This series has followed a group of steer calves through the production process to illustrate how value-based management and marketing strategies can improve their value as fed cattle. Another objective is to demonstrate how individual identification and extensive data collection at the feedyard and packing plant can offer benefits throughout the production chain.

Closeout data on these cattle confirm what visual assessment and performance data collected at re-implant time suggested-this was a relatively uniform set of steers with better-than-average performance. There are, however, enough differences among the group that traditional management and marketing would have resulted in some missed opportunities in terms of performance and carcass value. But perhaps the greatest missed opportunity would have been the chance to share and apply objective information toward future improvements.

The strategy

The crew at Schramm, Yuma, Colo., with the assistance of veterinarian Lynn Locatelli, sorted Pen 112 into three marketing groups on March 3, at the time the steers received their terminal implants. Profitability lies at the heart of the sorting strategy, which is designed to balance feedyard performance with carcass value in a grid-pricing system. Dr. Locatelli utilizes the Cattle Performance Enhancement Co. (CPEC) software for market sorting and the CPEC system in combination with the AgInfoLink software for individual animal management.

When the cattle are re-implanted, each animal moves through the processing chute and several pieces of information are captured-the animal's individual identification number from the electronic ear tag, its weight from the electronic scales, its backfat thickness and marbling scores from an ultrasound image.

Prior to scanning, the set-up program for the CPEC software is addressed. Economic variables, such as the projected cost of gain and market price are entered into the computer program as well as grid discount and premium regions and finally biologic parameters and performance projections are entered.

The chute-side CPEC software interfaces the measured individual data (carcass characteristics and body weight) with the parameters entered in the set-up program (economic, marketing and performance factors) to generate a profitability curve. The peak of the curve represents the ideal marketing date for each individual. Cattle with similar marketing dates are grouped into sorts, their ear tags are marked accordingly and they all return to their home pen.

The marketing strategy for these cattle, and most of the cattle Schramm feeds, was to fit a commodity grid, specifically, the Gelbvieh Alliance grids offered through the ConAgra Beef plant in Greeley, Colo. "The Gelbvieh Alliance offers an excellent commodity grid and marbling grid and data is returned quickly in an understandable, useful format," Dr. Locatelli says. "And ConAgra is very user-friendly and customer-service oriented."

Grid pricing offers price premiums for high-yielding, well-marbled carcasses, but feeders sometimes lose sight of production-cost issues when they target those premiums. Excessive cost of gain toward the end of the feeding period can counteract the benefits of feeding a pen to a higher grading percentage. So can discounts imposed on heavyweight or overly fat carcasses.

Adding to the complexity of timely marketing, carcass gains can continue at a cost-effective level after live-weight gains drop off toward the end of the feeding period. "End-stage gain is primarily carcass gain," Dr. Locatelli says. "So additional days on feed can be profitable in a grid system where the feeder is paid on carcass value." Feeders marketing cattle on a grid can benefit by producing better dressing percentages, higher quality grades and more pounds of beef.

Most feeders, however, take a risk in feeding cattle longer by increasing the potential for producing heavyweight or yield grade 4 carcasses that the packer discounts severely.

The sorting program at Schramm addresses these issues with marketing dates for each group intended to find an economic balance between cost of gain and potential improvements in carcass value, while eliminating discounts for "out" cattle. Individual identification also gives Schramm an advantage. "We're not so concerned with live-weight gains toward the end of the feeding period as we are with carcass gains," says feedyard manager Tom Holtorf. With the Choice/Select spread as high as it's been, he says the feedyard is pushing for Choice premiums, and they are willing to keep cattle a little longer to improve their grading percentage.

"If you're selling on a live-weight basis at a price around $70 per hundredweight, and a pound of gain is costing $0.70, it's time for those cattle to ship," Mr. Holtorf explains. "But if you're selling on a carcass basis at $112, and you know that something like 80 percent of that gain is going to the carcass, you look at cost-of-gain differently."

When Schramm scans and weighs cattle at re-implanting, they learn how fast they have gained to that point. That performance history, combined with ultrasound information, allows accurate projections that take advantage of carcass gains late in the feeding period without producing carcasses that are too heavy or too fat. Schramm can feed grid cattle longer, after live-weight gains drop off, with confidence that they will not earn discounts at the packing plant.

Mr. Holtorf says that he has learned to trust the system to provide dates that balance performance and carcass value while preventing discounts for "out" cattle. Once the computer decides the groupings and marketing dates, he sticks as close to those dates as possible.

Ultrasound sorting on this pen occurred after 134 days on feed, 119 days from the initial implant. "We don't get overly concerned when the initial implant runs out for a week or two," Dr. Locatelli notes, "but we certainly don't want to run out of our terminal implant. There is an optimal window for scanning-which allows the cattle to sufficiently grow apart to make accurate projections while at the same time maximizes the use of the implant strategy (which avoids running out of the terminal implant on the cattle that are sold in the last sort.) To determine the optimal time to scan a pen of cattle-the feedyard computer flags pens that have a pre-determined number of days on hot feed, then we visually assess each pen and prioritize the scanning order."

The results

The first sort from Pen 112 shipped to ConAgra on April 19, followed by the next groups on May 3 and May 31, a 42-day interval from the first to the last. "If we had marketed them all together," Mr. Holtorf says, "around the date of the middle sort, we would have left money on the table." Some would have stopped gaining a week or more prior to marketing. Some would have had potential for continued profitable gains for several weeks after marketing. The group almost definitely would have included some outliers, especially yield grade 4 carcasses from animals fed too long, underfed cattle with poor dressing percentages and the percentage of Choice carcasses would have been lower.

The CPEC system can answer many "what if" questions-for example, if these cattle were to be sold as one group, the CPEC system suggests marketing them in late April. This appears to be the optimum date for the group as a whole because feeding them much longer would result in a significant number of heavyweight carcasses. The result would be several green cattle going to market (with poor dressing percentages and lost quality grade potential) and an overall Choice percentage around 64 percent. By sorting the cattle the potential of each animal can be realized, carcass quality is optimized economically and profitability is maximized.

With sorting, however, the entire pen finished with an average daily gain of 3.19 pounds, average feed conversion of 6.62 pounds of feed per pound of gain, feed cost of gain of $0.3916 per pound and total cost of gain $0.5041 per pound. Live-weight gains dropped off noticeably between the March 3 sort date and marketing, but as noted earlier, Mr. Holtorf was more concerned with carcass gains and carcass value. The third sort group for example, gained weight more slowly, but produced higher yielding, higher grading carcasses.

The next article in this series will explore carcass data and the profitability of Pen 112 in detail.