The Cattle Business -- ROP Update

Livestock Update, November 2000

Bill R. McKinnon, Extension Animal Scientist, Marketing, Virginia Tech

The most recent closeout information from 194 cattle shipped early last December as part of Virginia's Retained Ownership Program provide some interesting insight into the performance of Virginia cattle. The cattle were fed at Decatur County Feed Yard near Oberlin, Kansas and were sent to slaughter from March through August of 2000. The shipment was comprised of 160 steers and 34 heifers.

Some basic summary information on the performance and economic measure of the cattle is presented in Table 1 below.

Table 1.

Dec. '99 ROP Shipment Summary
Profit	$3.91/hd
Profit w/o deads and railer	$13.28/hd.	(steers - $11.57; heifers - $21.19)
Average Daily Gain (on feed)	3.51 lb.
Average Daily Gain (Va. weight)	3.19 lb.
Feed Conversion	6.07
Cost of Gain	$.409/lb.
Finished Weight	1181 lb.
Average Days on Feed	154

Profit for each head was determined by first assigning a opportunity cost for each steer or heifer as they left Virginia based upon current graded feeder cattle sale prices. An interest charge of 9% was assumed on the value of the feeder cattle and the trucking costs to the feed yard. These costs in addition to the feedlot costs were subtracted from the value of each steer or heifer as they were marketed on a carcass value grid basis. Though this particular shipment penciled only a modest profit, much of the feeding industry has been in the red for most of the summer and early fall months.

The cattle are sorted for sale at finishing based upon several criteria. Two factors that primarily dictate the date of cattle marketing are a maximum backfat thickness of .43 inch and that the incremental cost of gain not exceed the expected value of a pound of gain. This logic prevents overfeeding while waiting for the fed cattle price to improve which is a practice that has plagued the industry for much of the summer of 2000. Table 2 illustrates the carcass grades produced by the ROP cattle.

Table 2.

Carcass Summary

Yield Grades GradeNumber of Head% 131.57 28544.51 3A (3.0 - 3.49)8242.93 3B (3.5 - 3.99)2110.99 Quality Grades GradeNumber of Head % Prime152 CAB63.14 Sterling Silver63.14 Choice7639.79 Select9449.21 No Rolls73.66 Dark Cutter1.52

When the cattle are sorted into thirds based upon profit/loss from retaining ownership, some interest differences are illustrated. There was nearly a $170 per head difference in profit from the low to the high profit third of the cattle.

Table 3.

Relative Economic and Performance Measures
Measure	Average	High 1/3 Profit	Low 1/3 Profit
Profit (w/o deads and railer)	$13.28	$99.41	-$68.35
Average Daily Gain	3.51	3.58	3.33
Feed Conversion	6.07	5.82	6.24
Cost of Gain/Lb.	$.409	$.403	$.426
Va. Starting Wt.	681	648	695
Finished Wt.	1181	1275	1115
Days on Feed	154	185	141
Carcass $/Cwt.	$112.07	$115.19	$108.13
Added Carcass Value/Head over Current Live Bid Price	$4.00	$41.36	-$21.80
Feeder Cattle Market Price $/Cwt.	$80.70	$80.84	$81.61
True Feeder Cattle Value $/Cwt.	$81.86	$94.57	$70.15

The factors which seem to have contributed most to the difference in profit between the high and low profit cattle were the amount of gain put on, the carcass value per pound and the interaction of the two. Cattle that put on more pounds at the relatively cheap cost of gain in 2000 had a distinct advantage. If pounds of gain added to the high profit cattle also sold at a higher price because of increased carcass value, they have a decided economic advantage. Even though the higher profit cattle sold later during the feeding period while the fed cattle market was lower, they tended to bring higher carcass prices based upon carcass merit.

The next shipment of the Virginia Retained Ownership Program is scheduled for Wednesday, December 6, 2000. This is one week later than earlier announced. Consignors can send as few as five head of steers or heifers. Cattle should be preweaned, feed bunk and water trough trained and vaccinated with a 7 strain clostridial vaccine, an IBR, BVD, BRSV, PI3 viral vaccine, and a pasteurella vaccine. Additional recommendations on a backgrounding program are available from the local Extension agent. Gaining feedback on the feedlot and carcass performance of their cattle is the first step for a beef producer in deciding on the future direction for the herd.

Go to "Consignment Form, Retained Ownership Program ."

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