by Dale Blasi, stocker, forages, nutrition and management specialist
Cow/calf producers who may be considering the retention of their calf crop and adding weight (and additional value) for a short period of time rather than marketing calves directly off the cow are encouraged to consider using Beefbasis.com to assist in their decision making process. Beefbasis.com is the result of a partnership with the Department of Agricultural Economics, USDA’s Risk Management Agency and Custom Ag Solutions, Inc and was developed because of the recognized volatility of basis of the futures markets to lighter weight calves.
One unique aspect of Beefbasis.com is the Value of Gain (VOG) forecasting tool that can be used to calculate this important value for comparing the potential for adding revenue relative to the calculated cost of gain. Simply defined: value of gain is the net value after the price slide of light to heavy cattle has been calculated. To calculate the value of gain, the total price (or value) of the purchased (or owned) calf is subtracted from the total price of the sold animal (into the future). This price is then divided by the pounds of gain to determine the value of gain per pound.
Once you are at the Beefbasis.com homepage (I like the legacy version, http://legacy.beefbasis.com/), click on the drop down menu on Forecasting Tools and look for the Value of Gain tool. Within the Value of Gain tool (Figure 1), a producer would enter information regarding buy and expected sale date(s), calf sex, initial and final weight, head count, frame and grade. The information entered will be “crosslinked” with the closest auction market location to generate the necessary feeder cattle and corn futures price that most closely aligns with the reference contract and transaction date.
The example used above cites a buy (or wean date) of October 16th and assumes a feeding period through December 19th or about 63 days. The generated results show a broad range of animal daily gain’s (ranging from 1.23 to 1.85 lb/day) and the associated projected value of gains for each generated sell date. Using December 19th, the projected value of gain is $103.12/cwt or $1.03 per pound.
This calculated number is important to the producer contemplating the retention of his/her’s calves. Do they have the expertise and necessary labor, feed and equipment resources to achieve daily gain costs less than this value?
By using the Beef Ration and Nutrition Decision Software (Brands) that is widely available in many Kansas District and County Extension Offices, a producer can essentially formulate a ration using available feedstuffs as well as any necessary byproducts/supplements that must be purchased to achieve the daily gains necessary to “bracket” the maximized value that can be realized. From the example above, it would appear that December 19th or 22nd would be most ideal to avoid the risk of the Christmas Holiday season as well as the tax implications of marketing into the new year.
The ration formulated above (Figure 2) for 600 lb calves includes brome hay ($60/ton), dried distillers grains ($145/ton) and rolled corn ($3.80/bu) with a daily yardage of 40 cents/hd/day. With all of the costs included, the estimated cost of gain is approximately .73/lb gain.
As calculated above from Beefbasis.com, the value of gain of $1.03/lb realized by delaying the marketing of these calves from Oct to Dec can result in a potential gross value increase of approximately $103.12 per head. With a cost of gain equal to .73/lb gain (with 40 cents of yardage included), the potential value added to each calf is approximately $30 dollars per head above calculated costs.
Producers are encouraged to evaluate all options at their disposal to improve the value of their calf crop. The combined use of Beefbasis.com and BRaNDS nutrition evaluation software can be used to help producers make the decision on what is best for their operation.