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The Cattle Business - LM1 VS The Average
Livestock Update, June 1997
Bill McKinnon, Animal and Poultry Sciences, Virginia Tech
What is the economic difference between being average and being the kind of cow/calf producer who makes only L1 and M1 feeder cattle? Looking at the prices for the last 5 fall seasons, $6 to $14 per head is the cost of being average. Table 1 looks at prices for only L1's and M1's versus the weighted averages across grades. The table also illustrates that as with most discounts; the discount for grade is more severe with lighter cattle. The fact that the grade discount is higher with lighter cattle on a per pound or percent basis is not surprising, but the discount is also higher on a per head basis.
Table 1. Prices ($/Cwt.) Received in VCA Fall Sales
| Steers | ||||||
|---|---|---|---|---|---|---|
| 92 | 93 | 94 | 95 | 96 | 5 Yr. Avg. | |
| 5-weights | ||||||
| LM1 | $ 87.61 | $ 92.21 | $ 76.62 | $ 65.08 | $ 61.99 | |
| All Grades | $ 85.48 | $ 89.82 | $ 74.22 | $ 63.42 | $ 58.27 | |
| Discount/Cwt. | $ 2.13 | $ 2.39 | $ 2.40 | $ 1.66 | $ 3.72 | $ 2.05 |
| Discount/Hd. | $ 11.72 | $ 13.15 | $ 13.20 | $ 9.13 | $ 20.46 | $ 11.28 |
| 7-weights | ||||||
| LM1 | $ 84.78 | $ 88.08 | $ 72.88 | $ 64.20 | $ 59.91 | |
| All Grades | $ 83.10 | $ 86.48 | $ 71.10 | $ 62.44 | $ 57.93 | |
| Discount/Cwt. | $ 1.68 | $ 1.60 | $ 1.78 | $ 1.76 | $ 1.98 | $ 1.47 |
| Discount/Hd. | $ 10.92 | $ 10.40 | $ 11.57 | $ 11.44 | $ 12.87 | $ 9.53 |
| 6-weights | ||||||
| LM1 | $ 82.12 | $ 85.33 | $ 71.00 | $ 63.36 | $ 59.16 | |
| All Grades | $ 80.76 | $ 83.88 | $ 69.38 | $ 62.27 | $ 58.29 | |
| Discount/Cwt. | $ 1.36 | $ 1.45 | $ 1.62 | $ 1.09 | $ 0.87 | $ 1.07 |
| Discount/Hd. | $ 8.84 | $ 9.43 | $ 10.53 | $ 7.08 | $ 5.65 | $ 6.92 |
| Heifers | ||||||
| 92 | 93 | 94 | 95 | 96 | 5 Yr. Avg. | |
| 4-weights | ||||||
| LM1 | $ 80.62 | $ 83.45 | $ 68.68 | $ 55.58 | $ 47.09 | |
| All Grades | $ 78.02 | $ 80.61 | $ 65.59 | $ 51.70 | $ 44.21 | |
| Discount/Cwt. | $ 2.60 | $ 2.84 | $ 3.09 | $ 3.88 | $ 2.88 | $ 2.55 |
| Discount/Hd. | $ 14.30 | $ 15.62 | $ 17.00 | $ 21.34 | $ 15.84 | $ 14.02 |
| 5-weights | ||||||
| LM1 | $ 78.22 | $ 82.64 | $ 66.02 | $ 53.88 | $ 47.62 | |
| All Grades | $ 76.52 | $ 80.63 | $ 64.24 | $ 51.99 | $ 46.28 | |
| Discount/Cwt. | $ 1.70 | $ 2.01 | $ 1.78 | $ 1.89 | $ 1.34 | $ 1.45 |
| Discount/Hd. | $ 9.35 | $ 11.06 | $ 9.79 | $ 10.40 | $ 7.37 | $ 7.99 |
| 6-weights | ||||||
| LM1 | $ 76.55 | $ 79.24 | $ 64.96 | $ 54.55 | $ 49.32 | |
| All Grades | $ 75.40 | $ 78.02 | $ 63.74 | $ 53.14 | $ 48.46 | |
| Discount/Cwt. | $ 1.15 | $ 1.22 | $ 1.22 | $ 1.41 | $ 0.86 | $ 0.98 |
| Discount/Hd. | $ 7.47 | $ 7.93 | $ 7.93 | $ 9.16 | $ 5.59 | $ 6.35 |
Table 2 depicts the fact that for the last five years the percentage of L1 and M1 feeder cattle sold through fall special graded sales has dropped. The table also illustrates that for the last five years only two thirds of those cattle have fallen in the L1 or M1 grades. Making better than two thirds of a producer's cattle acceptable to the market place is certainly feasible.
Table 2. Virginia Feeder Cattle Grades - VCA Fall Sales
| Year | L1 & M1 | LM2 | S1 |
|---|---|---|---|
| 1992 | 70.7% | 15.9% | 13.0% |
| 1993 | 70.0% | 17.2% | 12.8% |
| 1994 | 67.2% | 20.3% | 12.1% |
| 1995 | 59.2% | 30.4% | 10.1% |
| 1996 | 62.7% | 26.6% | 9.1% |
| 5 Yr. Avg. | 66.0% | 22.1% | 11.4% |
To be competitive the individual producer must do a better than average job in the long run. In terms of feeder cattle this means heavier than average cattle that grade better than two thirds L 1 and M1.
This may be the time within the cattle cycle to clean up our breeding programs to do a better than average job of keeping cattle out of grade "discount territory." If the extent of the grading problem is in the area of 25% or less poor grading cattle the problem is probably a few cow that need to be replaced with updated models. If the problem with LM2's or S's is higher than 25%, some bulls need to go to town with the problem cows. Replacing genetics will be cheaper now than two to three years later.
It is also high time that some folks quit "experimenting" with their breeding programs and get back to either some logical crossbreeding program or straight breeding, if that fits the operation. Putting too much dairy influence into the cow herd only increases the number of LM2's while usually increasing cow carrying costs and putting pressure on reproductive performance. Including some of the breeds out of the mainstream in the breeding program for reasons of extremes in calving ease, muscle, size, or novelty of hair coat, etc. are simply going to mean lost dollars at sale time. To stay in the mainstream of market demand for feeder cattle in Virginia, the cattle will need to show some, though not necessary all, influence of British breeding. Analyze the market carefully. The market will tell what it does not want. Figure out a system that does the best job of multiplying pounds times price per pound, while doing it at a cost effective price. Remember, in the long run, the survivors must be better than average.