Beef Tips

August 2015 Feedlot Facts

“The Value of Carcass Gain”

 by Chris Reinhardt, feedlot specialist

 This is dangerous territory; the topic of fed cattle marketing fills volumes and greater men have failed. But there is one aspect of fed cattle marketing of which to be acutely aware this time of year: marketing endpoints.

If you market fed cattle based strictly on live price, the simple rule for when to pull the trigger and send the cattle to town is this: when the COST of a day’s gain (cost of feed + yardage) exceeds the VALUE of that day’s gain (live price × that day’s gain), feeding for more days will cost more than it will return.

If you sell cattle in the beef (carcass weight basis rather than live weight basis) with no direct premium or discount for any specific carcass parameters, the equation changes slightly. Your decision is still based on value of daily gain vs. cost of daily gain, but it changes to the cost of that day’s gain vs. the value of that day’s CARCASS gain.

This is where it gets interesting. Although the dressing percentage of an animal may ultimately be 62-64%, the dressing percentage of each pound of live weight gained during an animal’s time in the feedlot is actually much greater—the dressing percentage of the next pound of live weight added at the end of the feeding period may exceed 80%.

How is this possible? The explanation is remarkably simple: an animal walks into the feedlot with nearly 100% of the head, hair, hide, horns, hooves, and viscera with which it will leave the feedlot. In other words, non-carcass components don’t increase very much during the feedlot life of the animal; nearly all of the animal’s live weight gain is carcass rather than non-carcass.

Another way to look at it is, if the steer is gaining 2.5 lbs/day live weight, carcass gain during that same time period is roughly 2 lbs/day. Therefore, because of the increasing dressing percentage with increasing days on feed, rate of carcass gain does not decrease as rapidly as rate of live weight gain as animals fatten.

The reason this is important is that for the carcass weight-based or for the grid-based seller, net value of gain does not decrease as rapidly at the end of the feeding period as it does for the live seller. If you’ve recently switched from selling cattle on a live weight basis to a carcass weight basis, keep this in mind when determining the optimum marketing endpoint.

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