Early this year, two pens of 10 steers were purchased from auction markets located in Central Texas.

  • One pen (Pen A) was of unknown origins with no pre-auction market information for use in our purchase decision.

  • The second group of 10 steers (Pen B) was purchased from an auction market during a Premium Value-Added Calf Sale (VAC-45). These cattle were preconditioned a minimum of 45 days after weaning and were wormed, vaccinated and boosted to prevent calfhood diseases.

In addition, the steers at this premium sale had been sorted into pens according to frame size, USDA feeder grades and weight.

Pens A and B were placed on feed at the Texas A&M University Research Center at McGregor feedyard. This research center can obtain individual feed intake on each steer.

2001 Beef Quality Challenge entrants were asked in the October issue of BEEF to identify the top five net return steers. Net return was determined by subtracting the expenses (feed costs, animal health costs, initial feeder calf cost, checkoff and interest) from the income derived from selling the carcass to the packer.

The steers were sold on the carcass grid presented in Table 1. Notice that on this grid, the Choice/Select spread is $10, the widest spread we''''ve had this year. That means that USDA Quality Grade will have more monetary emphasis than USDA Yield Grade (YG).

This grid also significantly penalizes “out” cattle. These are cattle whose carcasses are too light or too heavy, those that grade USDA Standard (No Roll), are dark cutting or YG4 and 5.

The Good, Bad And Ugly

  • First, let''''s discuss the ugly. The net returns shown in Tables 2 and 3 indicate that we lost an average of $142/steer. The feeder calves were purchased at a high price, and we sold on the down side of the finished steer market. This scenario follows closely what feedyards have been experiencing the last few months.

    Table 1.
    Live Pricing
    Live cash price ($/cwt.) $69.00
    Carcass Pricing
    Base carcass price ($/cwt.)
    Choice Yield Grade 3 and 600-950 lbs. carcass
    $115.00
    Carcass Premiums (+/- $/cwt.) Carcass Value/cwt.
    Discounts
    Quality
    Prime $6 $121
    Top Choice $3 $118
    Low Choice $0 $115
    Select ($10) $105
    Standard/No Roll ($17) $98
    Dark cutter ($30) $85
    Cutability
    Yield Grade 1 $3 $118
    Yield Grade 2 $2 $117
    Yield Grade 3 $0 $115
    Yield Grade 4 ($15) $100
    Yield Grade 5 ($22) $93
    Carcass Weight
    <550 lbs. ($20) $135
    550-600 lbs. ($3) $112
    550-950 lbs. $0 $115
    950-1,000 lbs. ($5) $110
    Over 1,000 lbs. ($25) $90

    We sold these calves when the live cash price for a finished steer was $69/cwt. Even worse, the live cash price has continued to sink further the last few months.

  • The top five steers are our good news. The photos of the top five net return steers indicate a wide variety of colors, sizes and shapes. The top two steers came from Pen A. These are steers from an auction market sale that provided no pre-auction history on the cattle. Therefore, it''''s not surprising that a couple of steers from that group would rise to the top. Unfortunately, we will discover the bad in Pen A will far outweigh any good.

Each steer arrived at its place of prominence different ways. Steer 7, for instance, had a superior carcass (Top Choice, YG2 and high dressing percent), while Steer 6 had a superior feedyard performance (low feed/gain ratio and cost of gain and a YG1).

Meanwhile, steers 12 and 20 combined carcass quality and feedyard performance to make it into the top five. Both produced USDA Choice, YG1 or 2 carcasses and had better than average feed/gain ratios and daily gains.

Table 2. How Pen A stacked up
Pen Steer
ID
Processing
& medicine
costs
Cost of
gain
Daily
gain
Feed
gain
Pay
weight
Carcass
weight
Dressing
percent
Quality
Grade
Yield
Grade
Carcass
income/cwt.
Carcass
income
Live
cash
value
Difference
carcass -
live value
Net return

(expenses-
carcass income)
Net
return
ranking
A 1 $23.20 $0.56 2.0 8.0 994 608 61.2 Select- 2.6 $107.00 $650.56 $685.58 $(35.02) $(152.80) 16
A 2 $23.20 $0.63 2.2 9.4 1037 659 63.6 Standard+ 1.6 $101.00 $665.59 $715.39 $(49.80) $(192.14) 18
A 3 $23.20 $0.49 2.6 7.1 1048 658 62.8 Select- 3.3 $105.00 $690.90 $723.34 $(32.44) $(103.63) 9
A 4 $23.20 $0.53 2.1 7.6 902 576 63.8 Select + 2.0 $104.00 $599.04 $622.66 $(23.62) $(107.81) 11
A 5 $23.20 $0.52 2.5 7.7 1070 679 63.4 Select- 1.5 $108.00 $733.32 $738.58 $(5.26) $(101.70) 8
A 6 $23.20 $0.43 3.3 6.4 1160 760 65.5 Select- 1.8 $108.00 $820.80 $800.18 $20.62 $1.77 2
A 7 $23.20 $0.51 2.9 7.7 1273 838 65.8 Choice Avg 2.0 $120.00 $1,005.60 $878.34 $127.26 $18.47 1
A 8 $23.20 $0.51 3.1 7.7 1075 661 61.5 Select- 2.5 $107.00 $707.27 $741.89 $(34.62) $(80.23) 6
A 9 $23.20 $0.63 1.6 8.8 854 506 59.2 Select- 1.5 $93.00 $470.58 $589.54 $(118.96) $(244.84) 19
A 10 $118.72 - - - na na na na na $- $- $- $- $(860.17) 20
Average $32.75 $2.90 / 1.76 / 9.9 /
$0.54 2.48 7.82
1046 661 63.0 10% Choice 2.1 $95.30 $634.37 $649.55 $(15.18) $(182.31) -
The two numbers in this box show averages for the trait including Street #10 and excluding Street #10

Steer 12 registered the best feed efficiency of all 20 steers, while Steer 11 had a high dressing percent and, more importantly, produced a YG1 carcass.

  • The bad of this contest is represented by the bottom five steers. Comparing the pictures and data from the top five and bottom five steers demonstrates two main challenges facing the beef cattle industry.

First, it is difficult, if not impossible, to determine a steer''''s feedyard performance and carcass quality using only visual appraisal. Second, there are vast differences in the cattle population with regard to beef quality traits.

The contest''''s worst animal was Steer 10, which died the first month of the feeding period and resulted in a loss of $860.17. This includes $105.12 in extra medicine costs and a loss of the initial calf cost of $711.45.

Steer 9 also was ill and never recovered from his slow start. His average daily gain (ADG) in the feedyard was just 1.6 lbs. Another slow gainer was Steer 2, which also produced an out carcass (USDA Standard), which resulted in a $17/cwt. carcass discount.

Table 3. How Pen B stacked up
Pen Steer
ID
Processing
& medicine
costs
Cost of
gain
Daily
gain
Feed
gain
Pay
weight
Carcass
weight
Dressing
percent
Quality
Grade
Yield
Grade
Carcass
income/cwt.
Carcass
income
Live
cash
value
Difference
carcass -
live value
Net return

(expenses-
carcass income)
Net
return
ranking
B 11 $7.10 $0.46 3.4 7.3 1224 819 66.9 Select + 1.9 $108.00 $884.36 $844.56 $39.80 $(78.65) 5
B 12 $7.10 $0.41 3.4 6.5 1085 686 63.2 Choice- 2.5 $117.00 $802.14 $748.51 $53.63 $(2.30) 3
B 13 $7.10 $0.64 2.7 10.4 1061 687 64.8 Select+ 2.7 $107.00 $735.52 $731.95 $3.56 $(190.48) 17
B 14 $7.10 $0.44 3.6 7.0 1234 792 64.2 Select+ 3.1 $105.00 $831.57 $851.18 $(19.61) $(124.71) 14
B 15 $7.10 $0.46 3.3 7.3 1147 755 65.8 Select- 2.4 $107.00 $807.70 $791.57 $16.13 $(88.18) 7
B 16 $7.10 $0.49 3.6 7.9 1162 734 63.2 Select- 2.7 $107.00 $785.52 $801.50 $(15.98) $(119.73) 13
B 17 $7.10 $0.48 3.2 7.8 1114 680 61.1 Choice- 3.7 $115.00 $782.47 $768.38 $14.09 $(104.77) 10
B 18 $7.10 $0.42 3.4 6.8 1157 713 61.6 Select- 2.2 $107.00 $762.47 $798.19 $(35.72) $(119.53) 12
B 19 $13.10 $0.45 3.4 7.0 1157 707 61.1 Select- 2.0 $107.00 $756.28 $798.19 $(41.91) $(141.34) 15
B 20 $7.10 $0.49 3.2 7.9 1162 748 64.4 Choice- 1.5 $118.00 $882.72 $801.50 $81.22 $(49.22) 4
Average $7.70 $0.47 $3.33 7.59 1150 732 63.6 30% Choice 2.5 $109.80 $803.08 $793.56 $9.52 $(101.89) -

Steer 13 posted the poorest feed/gain ratio of all steers except Steer 10, which was the only steer from Pen B to fall to the bottom. For some unknown reason, this steer ate the most feed throughout the feeding period but virtually stopped gaining weight toward the end of the feeding period. This demonstrates that not all VAC-45 preconditioned calves are created equal.

Steer 1 combined poor feedyard performance and a below average carcass to make it to the bottom five. Four of the five steers at the bottom were from Pen A.

Did VAC-45 Steers Pay?

Because of market conditions, neither pen of cattle made money. But, did a VAC-45 program warrant the additional $7/head paid for these steers?

Information from the past several years of Texas A&M University Ranch to Rail Program data demonstrates that calves backgrounded at least 45 days, vaccinated and revaccinated with an effective animal health program have a reduced death loss and morbidity, gain faster and are less apt to produce out carcasses.

An analysis of four years of Ranch to Rail data shows sick calves on average lost $31.97, while calves that never got sick had a net return of $61.23. On a 571-lb. feeder calf, that equates to a sick calf being worth $16.32/cwt. less than a healthy calf.

Table 4.
Trait Pen A Pen B Difference

Pen B - Pen A
Initial weight 6,602.00 6,880.00 278.00
Initial total value price $6,139.86 $6,880.00 $740.14
Processing costs $136.00 $71.00 $(65.00)
Medicine costs $191.52 $6.00 $(185.52)
Days on feed 160 139 (21.00)
Total expenses $8,166.74 $9,049.67 $882.94
Carcass income $6,343.66 $8,030.76 $1,687.10
Net return (expenses-carcass income) $(1,823.08) $(1,018.91) $804.16
Net return/cwt. initial weight $(27.61) $(14.81) $12.80

Some feeders have carried that out to estimate that VAC-45 type calves may be worth about $8/cwt. more. That''''s with the assumption that 50% of the non VAC-45 calves might get sick.

Pen B Netted $804.16 More Than Pen A

The feedyard and carcass traits for the two pens are strikingly different. Pen B steers were superior in all areas, even though the steers were fed in the feedyard 21 fewer days than Pen A and initially cost $740.14 more at purchase than the Pen A steers. Lower processing and medicine costs and cost of gain, along with higher ADG and carcass incomes resulted in a greater net return.

The facts indicate that the VAC-45 auction market feeder calves in Pen B were worth $19.80/cwt. more (at the auction barn) than the steers in Pen A which were of unknown history ($7/cwt. paid initially plus $12.80/cwt.) (See Table 4.)

This comparison is only on two small groups of cattle and may not apply in all cases. However, related information reported in research studies and information feedback programs like Ranch to Rail demonstrate why many ranchers and feeders are taking a hard look at value added calf programs.

Why The Big Difference?

Simply, Pen B calves were prepared to enter the feedyard. Already vaccinated, their initial processing costs were less. The only additional medicine cost was for one steer that had pinkeye.

Not only were their immune systems prepared, they were also ready to eat. In the first month, Pen B steers ate 62% more feed (as fed basis), a trend that continued throughout the feeding period. This added intake was obviously utilized for growth (Figure 1).

Even though Pen B ate substantially more, this pen had a lower feed/gain ratio. Pen A had a poor start and was never able to catch up (Figure 2). While there was an average difference of 28 lbs. in the beginning feedyard weight, Pen B averaged 104 lbs. more at the end of the feeding period, again with fewer days on feed.

The Value Of Consistency

A second big difference between the two pens was that Pen B was a more consistent group, thus easier to manage to an appropriate endpoint. Before the sale these calves were divided into groups according to frame size, USDA Feeder Grade and weight.

Initially, Pen B had a 135-lb. range in weight. After feeding, that range was just 173 lbs. on a live basis and 139 lbs. on a carcass basis.

Contrarily, Pen A initially had a 240-lb. range in weight. After feeding, the range was 419 lbs. on a live basis and 332 lbs. on a carcass basis.

The result was that Pen B overall had more acceptable carcasses and no out carcasses. Pen B brought more money when sold on the packer grid basis, compared to a live cash basis. Pen A, meanwhile, brought considerably less on a packer grid basis compared to the live cash basis (Table 2).

In the feedyard, pens of cattle enter the feedyard together, are fed together and are harvested together. This management style potentially produces a wide variety of carcass types and weights. As observed in this contest, sorting cattle into groups of similar weight and genetics potentially reduces carcass variation.

Dan Hale is a professor in the Department of Animal Science at Texas A&M University. Contact him at dhale@tamu.edu. Special thanks to David Lunt, Ted McCollum, John McNeill, Mike De La Zerda, Doug Perkins, Davey Griffin, Gordon Carstens and the staff at the Texas A&M University Research Center in McGregor.

Official Results

The Top 5 Net Return Steers

6, 7, 12, 11 and 20

  1. My Pen of 5 steers will produce carcasses that are 60% USDA Choice.

  2. Which pen will have the highest total net return? Pen B

  3. What is the difference in pen value (net return for all 10 steers in each pen) between Pen A and Pen B? $804.16 in favor of Pen B