Steers In Ranch To Rail North
Program Average Near $60 Loss

By David Bowser

AMARILLO — The average steer in this year's Ranch to Rail North program lost $58.85, says the program’s final report.

The range in average returns varied from a $38.88 per head profit to a $240.27 per head loss. Fourteen percent of the ranches had a positive net return, profitable entries characterized by high rates of gain, low medicine costs and high grading, lean carcasses. Ranches that had large negative returns generally had a death loss or received substantial carcass discounts.

"These figures do not include trucking cost to ship the steers from the ranch of origin to the feedyard due to lack of access to all records to determine that figure," says Ted McCollum, program coordinator for the Ranch to Rail program in the northern part of the state.

"They also do not reflect interest on steer value or an opportunity value."

These factors and others need to be considered when determining profitability, he says.

Some 1019 entries from 103 ranches went on feed in October 1997, at Randall County Feed Yard south of Amarillo. The first group went to the packing plant on March 24, after 154 days on feed. The last of them went to slaughter on May 26, after 215 days on feed.

The steers were eartagged, weighed and processed on arrival, and each steer was assigned a value based upon local market conditions by the federal-state Livestock Market News Service as a basis for calculating theoretical breakevens and the financial outcome of the program. The steers were sorted into 10 feeding groups based upon weight, frame, flesh condition and biological type. Management factors such as processing, medical treatment and rations were the same as other cattle in the feedyard. Individuals were slaughtered when they reached the weight and condition regarded as acceptable by the feedyard manager.

The cattle were sold on a carcass basis with premiums and discounts for various quality grades, yield grades and carcass weights. Feed, processing and medicine costs were financed by the feedyard. All expenses were deducted from the carcass income and proceeds were sent to the owner along with detailed performance, carcass and financial summary reports.

Weather played an important role early in the program as blizzards moved through the area from October to December.

The off-truck arrival weight and sale weight, that is, a final weight less a four percent pencil shrink, were used to determine gain, McCollum says.

The average arrival weight was 629 pounds and average sale weight was 1119 pounds. The steers were on feed for an average of 189 days. The average daily gain for all steers was 2.59 pounds while the range varied from 1.45 to 3.32 pounds. Twelve percent of the cattle gained more than three pounds per day while 34 percent gained 2.5 pounds per day or less.

"Most of the low rates of gain were due to death loss, since total sale weight minus total off-truck weight divided by total head/days was the method used to calculate the performance of each ranch group," McCollum reports.

Feed consumption for each steer was determined by dividing total pen consumption by total head/days for the pen, and each steer was assigned its prorated share based upon its days on feed.

"This is based upon the assumption that all steers had equal access to feed, McCollum notes.

Steers of similar size and type were placed in the same pen to help assure equal access. Steers that gained faster had a more desirable feed cost of gain since feed cost was divided by net gain to calculate feed cost of gain. The average feed cost of gain was $56.10 cwt., the range from $43 to $109 cwt.

Total cost of gain per hundredweight averaged $62.69 and ranged from $50 to $131. Cattle with low total costs of gain were characterized by high rates of gain and low or no medicine costs.

The steers were sold on a carcass basis to IBP in Amarillo or Excel in Friona, McCollum says.

"Steers were sold in seven marketing groups, and prices were established each week based upon current market demands," he says.

Choice Yield Grade 3 served as the basis with premiums for Yield Grades 1 and 2 and discounts for Select and Standard, Yield Grades 4 and 5. Yield Grades 2 and 3 were split into A and B groups with 2A ranging from two to 2.49 and 2B from 2.5 to 2.99.

The dates on which the cattle were marketed influenced the prices received. The lowest prices were for steers marketed on April 8 (168 days on feed), and the highest prices were received for those marketed on April 22 (182 days on feed).

"The spread between the quality grades was very low this year," McCollum points out.

The Choice/Select spread was only one to two dollars per hundredweight, and the discount between Select and Standard was three dollars per hundred. Dark cutters, Yield Grade 4's, over-weight and underweight carcasses received substantial discounts.

"This really sends the economic message that ‘outliers’ are not wanted in the industry," McCollum says.

Carcass weights averaged 741 pounds and ranged from 477 to 922 pounds. Carcasses that weighed less than 550 or greater than 950 pounds were discounted. Eighty-five percent of the carcasses were in the weight range of 650 to 850 pounds, which is generally regarded as being acceptable by the industry, McCollum says.

Twenty eight percent of the carcasses graded Choice, 52 percent were Select and 13 percent graded Standard. Seven percent were dark cutters and were not assigned a quality grade.

Dark cutters are caused by depletion of muscle glycogen due to stress, McCollum explains.

"This generally is associated with excitable cattle and weather changes."

The percent Choice was lower than generally anticipated for steers on feed for this length of time. More days on feed may have achieved higher grading carcasses, but the cattle were marketed as soon as they were considered ready due to high feed costs and feed cost of gain, McCollum says.

Eighty-seven percent of the carcasses were Yield Grades 1 and 2 and received a premium over the 17 percent that were Yield Grade 3s. One percent were Yield Grade 4 and received discounts for being overly fat.

"Fat is one of the major factors that influences yield grade," McCollum says.

Average fat thickness over the ribeye this year was .37 inches. The range was from .08 to one inch. Some of the extremely fat carcasses were the result of overfeeding and a genetic predisposition to accumulate fat.

"Carcasses that are extremely lean often do not possess adequate marbling and are more prone to produce cuts that are tough due to cold shortening," McCollum says.

Carcasses with .2 to .45 inches of external fat are more optimal, he adds.

Ribeye area, a primary indicator of carcass muscularity and lean meat yield, this year averaged 13.5 square inches. The range varied from 8.6 to 19.4 square inches.

Extremes in ribeye size present problems in fabricating cuts, McCollum says. Ribeyes that range from 11 to 16.5 square inches generally have more utility in the beef industry.

Ribeye area is greatly influenced by carcass weight, since heavier carcasses tend to have larger ribeyes, McCollum notes.

Ribeye area per 100 pounds of hot carcass weight provides a measure of relative muscling. The average this year was 1.83 square inches per hundredweight, while the range was 1.13 to 3.11 square inches per hundred.

Higher values indicate increased muscling, but production-related factors such as calving ease necessitate not selecting for extreme muscling, McCollum warns.

"Those with over 2.2 square inches per hundredweight probably have more muscling than necessary, and those less than 1.8 square inches per hundred could benefit from increased muscularity to enhance lean meat yield," he says.

Railers accounted for a total loss of $2202.15, McCollum says. This includes their initial value, processing cost, feed and other expenses incurred prior to sale.

Steers that were sold prematurely due to poor performance or to salvage their value due to conditions such as chronic bloat or water belly are referred to as rallers or realizers. Six head were railed (.6 percent) at an average loss of $367.03.

Sixteen steers died for a 1.6 percent death loss with an economic impact of $9893.99.

Most of the deaths were due to pneumonia and occurred in the first month on feed.

"This indicates they didn't have adequate resistance to viruses and bacteria upon arrival," McCollum says.

The health status of steers in the feedyard had a major impact on performance and profit, he notes. The average medicine cost above processing was $7.02 per head. The range varied from zero to $32.73 per head. Twenty one percent of the ranches incurred no medicine expenses and an additional 49 percent had an average of $10 or less, while seven percent of the cattle had average medicine costs over $20 per head.

Healthy steers had an average of $70.16 more favorable return, McCollum says.

Steers that got sick averaged 620 pounds upon arrival at the feedyard. To recoup that difference in net return, he says, they would have to have been priced $11.32 cwt. less when placed on feed.

Medicine costs averaged $25.99 for the sick steers, which is a significant factor since 28 percent of the calves required treatment for respiratory disease. The remaining difference of $44.17, a range of from $70.16 to $25.99, was due to reduced performance, increased feed cost of gain, higher interest expense and lower quality grades.

"Cost of gain for sick steers was 13 percent higher, and they produced half as many Choice carcasses and had more Standard grade carcasses," McCollum says.

This points to a need for a sound health management plan, he adds.

"By implementing a sound vaccination program at the ranch of origin, you are adding value to your product, helping increase the consistency and predictability of your calves, and you are providing them the opportunity to express their genetic potential," McCollum continues.

This variability in health is built into the calf market, he says.

"Buyers factor this into what they are willing to pay since they buy calves as a commodity," he says. "There are cattle feeding operations that are willing to pay relatively more for properly immunized, properly backgrounded cattle of good quality."

The amount they can justify is dictated by the increase in value it benefits them and the volume of similar cattle available to be able to manage them as a unit, he says.

Extremes in net return, health costs, performance factors and carcass parameters among the Ranch to Rail entries reflect the variability that exists in the beef industry, McCullom says.

"Reduction of these variables and production of a product that meets the needs of all segments of the beef industry must be each producer’s goal," he says. "Ranchers need to assess their operations and implement cost effective management factors and adjust the genetics of their herd to make sure they are on target."

Value-based marketing at all levels of the industry is rapidly becoming a reality, and those who know what constitutes value and have a product that meets those demands will be competitive in the marketplace.