Since the value of gain continues to increase with calf prices, preconditioning can still pay for the same reasons it always has. By weaning and then feeding calves at least 45 days, there should be more weight to sell; and usually at a time of seasonally higher prices.
Plus, there’s the opportunity for a price premium or the chance to eliminate price discounts. That’s especially true with prices so high. Fewer stocker operators and feedlots are willing to gamble the increased equity requirement on the proverbial mismanaged, misfit cattle.
“The challenge is managing feed costs and having the genetics capable of gaining 2 lbs./day,” says Steve Swigert, an agricultural economics consultant with The Samuel Roberts Noble Foundation in Ardmore, OK.
In Oklahoma, where spring calving predominates, Swigert explains that a flood of calves hit the market in October. “There have only been a couple of years when there wasn’t a significant price run-up to the first part of December when these preconditioned calves are marketed,” he says.
Call it a premium or discount avoidance, but Swigert explains that weaned calves receive as much as a $7 discount at the stockyards in Oklahoma City, compared to preconditioned calves.
Swigert also says preconditioned calves at Oklahoma City carrying other value attributes such as age verification, PI testing or eligibility for breed-based marketing programs, command a $5-10 premium compared to preconditioned calves without those attributes. All told, for the herds he works with, Swigert says the net return of preconditioning was $120.96/head last year; it was $58.11/head in 2009.
Likewise, Kevin Laurent, University of Kentucky Extension, says the average net estimated returns for Certified Preconditioned Health (CPH-45) sales held in two different Kentucky locations has been $59.36/head. These are calves weaned in October, preconditioned an average of 50 days with an average daily gain of 2.6 lbs., and then marketed through CPH-45 sales in December at Hopkinsville or Guthrie. The average includes Hopkinsville data going back to 1993; Guthrie data goes back to 2005. The net estimated returns represent the sale price minus estimated health and feed costs.
Besides the pounds, it’s the animal care aspect of preconditioning that leads Swigert to encourage preconditioning most of the time.
“The thing I don’t think a lot of people consider when evaluating preconditioning is the shrink,” Swigert says. Without it, he points out calves can shrink 4-12%, depending on the distance hauled, the sale facility and other factors. Conversely, some preconditioned calves actually gain weight through the marketing process because they’re already straightened out and know how to eat.
Of course, preconditioning can also be a fast ride to a massive economic train wreck. For instance: