“With high feed prices, producers might be tempted to skip preconditioning calves this fall to save on costs, but if producers get a premium of $6/cwt., preconditioning will still be profitable,” says Kevin Dhuyvetter, Kansas State University agricultural economist. That's his conclusion after updating an in-depth analysis with current feed prices (August 8).
Specifically, Dhuyvetter points out if calves only gain 1 lb./day, preconditioning is barely breakeven in his scenarios (Table 1) with corn prices at $7.35/bu., soybean meal at $399/ton and hay at $80/ton. As usual, increased mortality rates also submarine net potential, but increased performance can overcome a reduced premium.
| Table 1. Preconditioning breakeven scenarios |
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Table 1 offers a baseline:
A. Average feed prices in 2003-07, compared to similar performance at current feed prices;
B. What happens when average daily gain (ADG) declines; or
C. ADG increases; and
D. How increased death loss impacts the equation.
Though producers contemplating preconditioning this fall must run a sharp pencil on costs and realistic expectations, premiums are the primary question mark. On the one hand, cattle are worth so much more in historic terms that the value of reduced health risk increases. On the other hand, calf prices remain strong, historically speaking, while input costs have skyrocketed the past 12 months.
If last year is any indication, premiums will still be there. According to Superior Livestock Video Auctions, VAC 45 calves marketed through their sales in 2007 achieved an average premium of $7.83/cwt. compared to similar calves that weren't weaned, didn't receive a respiratory tract viral vaccination and weren't part of that organization's Value-Added Health Program.
What Superior terms “VAC Pre Con calves” (vaccinated at branding and working with a modified-live viral and Pasteurella 2-4 weeks prior to shipment) received an average premium of $7.22/cwt.
Similarly, in 2006, Iowa State University reported calves with certified vaccination claims and weaned at least 30 days received a $6.15/cwt. premium compared to calves sold through auction without vaccination or weaning claims. Calves with uncertified claims of vaccinations and at least 30 days weaning received a $3.40/cwt. premium, $2.75/cwt. less than those with verification.
Keep in mind the Superior programs mentioned also include verification. It goes back to that notion of marketing added value rather than simply selling cattle that happen to have added value.