Focus on preconditioning to add value, profit

Focus on preconditioning to add value, profit

The financial benefits are real, if you skip preconditioning you're leaving money on the table.

It’s been talked about for 60 years. It’s better for animals, preferred by most cattle feeders and could provide a 169% return on investment.

“2014 was the biggest ‘no brainer’ year in history to precondition your calves,” says Purdue University veterinarian W. Mark Hilton. “2015 could be even better.”

Crunching the numbers, Hilton first turns to an 11-year analysis of Indiana beef herds that showed weight alone added $50.84 average profit on preconditioned calves.

In 2014, Superior Livestock Auction reported a $12.06 per hundredweight “health price advantage” for weaned and vaccinated calves.

PRECONDITIONED APPROACH. The potential for added returns piles up under the right marketing situation if ranchers add preconditioning to their management system.

“Even if that calf only gained 1 lb. a day, you earned $62.20 per head with that health price advantage,” Hilton says. “In life, I worry about stuff I can control...the health advantage, I don’t have any control over. It’s nice and I’ll take it when I can get it.”

But without that auction market bonus, a producer loses money if calves only gain 1 lb. per day during that post-weaning phase. Adding the weight and the preconditioning bonus together gives the full picture.

Increase that gain to 3lb./day and that’s a $211 profit, or a 169% net return on investment.

“How would you like to go to your banker and hand him a $100 bill and tell him I’m going to come back in 45 days and I want you to give me $269?” Hilton asks. “He’d say you’re nuts.”

Moving forward

Yet, it seems that many cattlemen aren’t easily motivated.

“The movement has been slower than we anticipated,” says Lee Schulz, Iowa State University agricultural economist. The 2014 Iowa Beef Center Cow-Calf Producer survey notes barely 60% of producers in his state precondition cattle at least 45 days, but the percentage is growing.

Schulz says it’s “compatible” with the popularity of value-based marketing, certification programs and other points of differentiation in the feeder calf market.

“The beef industry has gained a better understanding of all things that affect the final performance,” he says. “Cattle feeders are more aware of that and willing to pay higher prices. It increases value for the entire supply chain.”

In the 2014 Iowa Beef Center Feedlot Operator survey, more than 82% indicated vaccination history was “very important” or “important,” and more than 76% said the same about “reputation of seller.”

“Having a market for value-added cattle is important, too,” Schulz says, noting preliminary results of an Iowa study on special “preconditioned sales” versus regular auctions. In 2008-09, steers in the preconditioned sales earned $2/cwt. above their contemporaries and heifers $6/cwt. By 2013-14, that number increased to $6/cwt. for steers and $10/cwt. for heifers, and shows a general upward trend over time.

Four keys to success >>


The dollar values are pretty convincing, but Schulz says cattlemen need to evaluate how it might work on their own farms and ranches.

Hilton shares “four keys to success:”

Team Building. Get a team of experts who are willing to continue learning with you, he says. That might include a veterinarian, nutritionist, Extension personnel, etc.

Weight gain. “In preconditioning, if you’re not having those calves gain a significant amount of weight… you’re not going to have as much profit in them,” he says, sharing examples of 3-lb. average daily gains prior to feedlot arrival. “The genetics we’ve got today—they can do it. They can put it right on and not get fleshy.”

Calves may just maintain weight during the first week of preconditioning, so every additional week you keep them helps the bottom line. “We want to dilute out that first week and make it not a big deal,” Hilton says.

“In our 11-year study in Indiana, weight gain was the most important factor in profitability,” he emphasizes.

Herd health and nutrition. Finding the right vaccination program and timing is essential to preconditioning success. “I’m not going to tell you what diseases to vaccinate for, because I don’t know. I’ve only practiced in two states,” he says, encouraging one-on-one consultations with their herd health veterinarians.

In the Indiana study, 79% of the cost of preconditioning was in the form of hay and feed, Hilton says, underscoring the importance of nutrition. “We found having a balanced diet was key to getting 3 lb. per day gain in our calves.”

Marketing. “Your calves are special,” he says. “You need to build a resume for them.” That includes finding out more about how the calves do after weaning by retaining some ownership or participating in a small-scale feedout. Hilton says the bottom line is that health pays, but it pays more when marketing matches management.

“If you are not adding value to your calves, you are making a huge mistake leaving money on the table and giving my feedlot owners a lot poorer quality cattle,” Hilton says.

Hilton says the best way to move toward more preconditioning is for feeders to send the signal.

“When you’re buying high-risk calves, you’re telling the industry that you’re going to take advantage of somebody,” he says. “When you buy preconditioned, high-quality calves you’re telling the beef industry that producers of preconditioned, high-quality calves are your partners.”

- Reiman is Industry information assistant director, Certified Angus Beef

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