Virginia Retained Ownership Program Summary - Fall 2003 Shipments

Livestock Update, October 2004

Scott P. Greiner, Ph.D., Extension Animal Scientist, Beef, VA Tech

The following table presents a summary of the closeout information on Virginia Retained Ownership Program steers shipped in September and December 2003. A total of 383 steers from 24 individual producers, were placed on feed at three cooperating feed yards in southwest Iowa. The steers were fed in four pens, and harvested on nine dates between January 25 and July 13, 2004. Each pen was sorted prior to harvest to optimize the endpoint of each steer, and the cattle were marketed on a carcass-value grid with IBP-Tyson. Harvest endpoints were determined based on rib fat thickness (target 0.40-0.45 inches), composition of gain, and market projections. Due to the large number of harvest dates and fluctuating market conditions over time, carcass prices were adjusted to a weighted average price for the purposes of data analysis. For comparison purposes, data representing the average of the steers in the most profitable one-third and those in the least-profitable one-third are presented along with the average for all 378 steers. Retained ownership profit (or loss) for each steer was calculated as the difference between total carcass value and Virginia feeder calf value, less all feeding costs (feed & yardage, trucking, health, carcass data collection & program fees). Five head of steers were not included in the analysis. These included four steers which died, and one alternatively marketed as a result of health problems.

Substantial differences in feed yard growth performance are evident between the profit groups. The most profitable steers gained 0.76 pounds per day faster than the least profitable steers, resulting in heavier live and carcass weights at harvest with similar days on feed. Correspondingly, the high-profit cattle had superior feed conversion- more efficiently converting feed to live and carcass weight gain. The superior health of the high-profit cattle likely contributed in a positive fashion to their growth advantages. Overall, approximately one in six steers received one or more health treatments during the feeding period. Only one in ten of the high-profit group were treated, whereas one in four of the least profitable steers were pulled and treated one or more times for health reasons.

More total carcass value on the rail was realized in the high-profit cattle as a result of their heavier carcass weights and higher grid carcass prices. Carcass fat thickness and average yield grade was similar across all groups, which was to be expected as steers were sorted at harvest with target fat thickness of 0.40 inches. While there were differences in ribeye area between the profit groups, these differences can be attributed primarily to differences in carcass weight with the heavier carcasses having correspondingly larger ribeyes. The most significant difference between groups for carcass merit was found in quality grade. The high profit cattle graded 96% low Choice and higher, with 20% qualifying for Certified Angus Beef (CAB; average and high Choice quality grades). This is above the industry average of 15% CAB certification rate. The low-profit group was 33% low Choice and higher, 60% Select, and 8% Standard grade. Research has demonstrated that cattle that poor health negatively impacts quality grade in fed cattle. This may explain a portion of differences seen between the high and low profit groups. Yield grade distribution was very similar between the profit groups. The high-profit group exceeded the often-quoted industry goal of 70-70-0 (70% Choice, 70% YG 1&2, 0% "outs").

The weighted average base carcass grid price has been expressed as a low Choice, yield grade 3. During the time frame these cattle were harvested, the base price fluctuated between $121.82 and $127.79 cwt. Similarly, CAB premiums ranged from +$3.47 to +$9.86 per cwt., and the Select discount from as low as -$4.85 to as high as -$15.75 per cwt. Yield grade premiums were fixed at +6.50 and +$2.50 for Yield Grade 1 and 2 carcasses, respectively. The combination of superior quality grades and desirable yield grades for the high profit group resulted in a weighted average grid carcass price advantage of $8.30 per cwt. compared to the low-profit group. This higher carcass price coupled with heavier carcass weights resulted in a $172 advantage in net carcass value for the most profitable steers.

Primarily due to a strong fed cattle market, retained ownership on this set of cattle was advantageous. The average steer returned an additional $62.11 over their assigned value as a feeder calf departing Virginia. Despite this, tremendous variation in individual profitability existing among the steers fed. This is demonstrated by the $165 difference in average return from retained ownership between the high profit and low profit steers, which translates to a difference in excess of $25 per cwt. as a feeder calf. This $165 difference is directly related to higher carcass values and lower feeding costs of gain for the high-profit steers. The cost of gain advantage for the high-profit steers is attributed to their superior gain, feed conversion, and health. There was little difference between the profit groups in their assigned feeder calf price or total feeder calf value when they departed Virginia. The value differences estimated here agree with similar data collected previously through the Virginia Retained Ownership Program and elsewhere. Over the years, analysis of Virginia ROP data has demonstrated a $120-$200 value difference between superior and inferior cattle, regardless of the prevailing market or feeding conditions.

This summary further emphasizes the importance of superior genetics and management. For producers who have made a strong effort to add value to their cattle through improved genetics and management, retaining ownership past weaning provides an opportunity to reap more of the financial benefits of truly superior cattle. The Virginia Retained Ownership Program is designed to provide feedback to progressive cow-calf producers who desire information on the industry suitability and profitability of their cattle post-weaning. Gaining feedback on the feedlot and carcass performance of cattle is the first step for a beef producer in deciding on the future direction for the herd. For more information on the Virginia Retained Ownership Program, contact Scott Greiner at 540-231-9163 or sgreiner@vt.edu.

Virginia Retained Ownership Program
Closeout Summary: September & December 2003 Shipments
Summary includes steers from 24 producers shipped between September 26 and December 10, 2003. Steers were fed in four pens at three TCSCF cooperator feedyards in southwest Iowa, and marketed on one of nine dates between February 25 and July 13, 2004 and harvested at IBP-Tyson, Inc. in Denison, Iowa. Weighted average carcass prices utilized in analysis to remove effect of variable market conditions across harvest dates.

	Group Average 378 head	High Profit 1/3 126 head	Low Profit 1/3 126 head
Growth Performance
VA shipment weight, lb.	639	640	647
Slaughter weight, lb.	1175	1227	1120
Days on Feed	171	171	169
ADG, lb./day	3.15	3.44	2.86
Estimated feed:gain	6.88	6.71	7.00
Sick pulls, % treated	17.2%	10.3%	27.0%
Carcass
Carcass weight, lb.	724	764	683
Fat thickness, in.	0.41	0.41	0.38
Ribeye area, sq. in.	12.5	12.9	12.1
Yield Grade	2.7	2.7	2.6
USDA Quality Grade	71% CH- & better	96% CH- & better	33% CH- & better
	0.2% Prime	1% Prime	0% Prime
	11% CAB	20% CAB	4% CAB
	26% Select	3% Select	60% Select
	3% Standard	0% Standard	8% Standard
USDA Yield Grade	12% YG1	13% YG1	17% YG1
	55% YG2	57% YG2	56% YG2
	33% YG3	30% YG3	27% YG3
	0% YG4&5	0% YG4&5	0% YG4&5
Base carcass price (CH, YG3), $/cwt.	$136.52	$136.52	$136.52
YG premium/discount, $/cwt.	$2.18	$2.25	$2.52
QG premium/discount, $/cwt.	-$2.53	$1.06	-$7.43
Carcass price, $/cwt.	$136.14	$139.83	$131.53
Total carcass value	$986	$1,069	$897
Equivalent live price, $/cwt.	$83.90	$87.06	$80.03
Financial
Actual feeder calf price, $/cwt.	$87.68	$87.00	$87.81
Actual feeder calf price, $/head	$560	$557	$568
Cost of gain, $/lb.	$0.605	$0.560	$0.649
Feed cost of gain, $/lb.	$0.439	$0.417	$0.454
Health costs, $/head	$16.34	$14.48	$20.15
Retained ownership profit/loss, $/head	$62.11	$142.91	-$22.83
True feeder calf value, $/cwt.	$87.68 (base)	$100.16	$73.46
True feeder calf value, $/head	$560 (base)	$641	$475

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