Vet's Opinion

What is a premium?

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As a veterinarian, clients frequently ask me: “Can I get a premium for my preconditioned calves?” I always respond with: “What is a premium?”

Premiums can come from several sources; because of this, we may often fail to recognize a premium when one is received. The premium may not come from “topping the sale,” but preconditioned calves can bring the producer more income because such calves frequently weigh more than those “weaned on the trailer.”

In order to get the best premium for preconditioned calves, producers should ask a third party, such as their veterinarian, to certify that the calves were preconditioned. In an Iowa State University study, third-party certification (TPC) offered a distinct advantage over preconditioned calves that were not third-party certified (Table 1).

But a premium can mean different things to different people. I'm convinced some producers refuse to believe they've received a premium unless they see that particular word on their check.

Meanwhile, if a producer believes that a premium comes only from topping the sale that week, there will be only one person who gets a premium. It's similar to winning Grand Champion at the county fair. There is only one winner every year, but that doesn't mean all the cattle that didn't win first place were bad stock.

Many sources

We must consider the fact that premiums come from many sources. When seeking a premium, producers are simply looking for opportunities for more profitability.

For instance, in some areas of the country, groups of producers with smaller herd sizes have given themselves a distinct marketing advantage by preconditioning their calves, and then combining their calf crops in order to offer a larger parcel of similar type for sale. I was privileged to meet such a group of producers in Kentucky a couple of years ago.

These producers plan their herd management together, select their genetics together and wean and sell their calves together. Their goal is improved profitability, and they're achieving that goal — plus, I'm sure, occasionally topping the sale, to boot.

Cow leases offer another opportunity; they can provide an advantage similar to what those Kentucky producers are experiencing. A few years ago, I saw a statistic that the average age of the U.S. rancher gets one year older with each passing year. I don't know that this still holds true, but it certainly indicates that very few young people are getting into ranching. It also indicates that older ranchers aren't getting out.

Why would this be? In many instances, I suspect it's probably due to the enormous startup costs of ranching for the young producer, coupled with the tax liability of selling out a sizable cowherd for the established rancher.

But this generational dilemma provides a unique opportunity. On one hand, we have experienced cattlemen who are probably ready to slow down, but not really interested in quitting completely. And we have younger people who may be interested in raising cattle, but probably need a little help getting started.

A win-win

A cow-lease agreement could provide the experienced cattleman the break he desires, while providing the younger rancher with the stock, established genetics and a mentor. It may even provide a vehicle for the established rancher to expand his cowherd, while decreasing his workload at the same time. Plus, the rancher and his collection of lessees can market their calves as a larger group.

The University of Nebraska has some excellent information on setting up a cow-lease agreement, which can be found online at http://beef.unl.edu/.

In short, a preconditioning program is important, but it's only one element to better profitability. Premiums can come from many sources, so producers need to keep their eyes on the big picture.

If a producer feels his cattle are being discounted, he needs to ask himself, and objectively answer the question of, “why?” Because such objectivity can be very difficult, it may be best to ask an outside party for help and advice, such as your herd-health veterinarian.

Providing good genetics and good health are the keys to receiving the best price at sale time. Once these programs are established, we can look at specific marketing programs such as combining cattle from different sources to provide larger, more attractive lots of cattle. It can be a win-win for everyone.

Dave Sjeklocha is a feedlot consulting veterinarian at the Haskell County Animal Hospital in Sublette, KS. Contact him at 620-675-8180.

Table 1. Third-party certification (TPC) premiums
Preconditioning with TPC $6.15/cwt.
Preconditioning without TPC $3.40/cwt.
Source: Iowa State University
What's Vet's Opinion?

Three top U.S. veterinarians provide tightly focused discussion of specific beef cattle disease and welfare topics.

Contributors

Dave Sjeklocha

Dave Sjeklocha, DVM, is operations manager of animal health and welfare for Cattle Empire, LLC, Satanta, KS.

Mike Apley

Mike Apley, DVM, PhD, is a professor in clinical sciences at Kansas State University in Manhattan.

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