Marketing And Cheap Feed Said
Critical In Preconditioning

By Colleen Schreiber

SAN ANGELO — Preconditioning - Will it Pay? That's a question that has been debated time and time again by experts in the cattle industry. Dr. Ted McCollum, Extension livestock specialist with the Texas A&M Research & Extension Center in Amarillo, is a frequent speaker on this subject. He shared his thoughts at a recent West Texas Rancher's conference here.

That answer in a nutshell, McCollum told the group of particpating ranchers, varies from year to year depending primarily on the price of feed and one's marketing abilities.

"The question behind that question is, number, one how much will it cost to do it, and second, how much additional value are you going to receive when you market those calves?

"Two or three years ago, feed prices were very different and at that time it was very marginal as to whether or not you would receive enough value for those calves to cover the cost of a preconditioning program. This year is different."

He gave listeners a series of questions to consider before going into a preconditioning program. Those included: Why are we doing it; who are we doing it for; what are we trying to accomplish when we precondition calves; and finally, how are we going to do it?

Reasons for preconditioning, he noted, are self-explanatory. The first reason is to reduce health problems.

He shared the example of a 65,000-head feedyard which recently dedicated its entire yard to an alliance program. All the cattle going through that program have been preconditioned for 45 days prior to coming to the yard.

"Before that program was implemented four or five years ago, the hospital crew plus the cowboy crew that worked on that 65,000-head feedyard numbered 21 people," McCollum said. "Today that cowboy crew and hospital crew totals six people. A big reason for that is because these calves don’t have as many health problems so they don't have to have people riding pens twice a day; they don’t have to have a large hospital crew doctoring these cattle."

The second reason for preconditioning is to add value to calves. He expounded on this by presenting Ranch to Rail data which showed profit differences between calves that were never sick in the feedyard versus calves that

were sick at least one time.

"Calves that were never sick have been worth $9-20 per hundredweight more as a feeder calf coming into the yard because they have fewer health incidences while at the yard.

"If you go through the expense of limiting sickness, you should be paid at least a portion of this extra value," he told listeners.

McCollum also presented data from one of Friona Industries' yards as well as some from the Matador Cattle Company when they were taking calves off their ranch and putting them into one of the feedyards they once owned.

Calves that were started at the feedyard had a two percent higher death loss versus those that were preconditioned at the ranch.

"On an 85-cent, 500-pound calf that’s a difference of almost $2 cwt. Medicine and processing cost was $30 versus $13," McCollum noted.

"Another example showed a three percent reduction in death loss with preconditioned calves, and about $30 a head less medicine and processing costs."

McCollum pointed out that contrary to what most think, the difference in value of these calves is not due strictly to a difference in medicine costs.

"Again, in the Ranch-to-Rail program, cattle that were sick at least one time lost about $75 more than cattle that never were sick. Only $23 of that $75, however, was due to medicine cost," he stressed. "The other $50 or so had to do with performance and carcass quality. The cattle that were sick were more often Select and Standard carcasses. There’s also about a three-tenths of a pound difference in daily gain in sick versus healthy calves.

"So the majority of the loss is due to daily gain, efficiency and the value of carcasses produced off the cattle."

The next question — who are we doing this for — is a no-brainer, McCollum said, if retained ownership either through the stocker or feedlot phase is part of the management plan.

"Don’t just load them up and ship them fresh off the cow, because you’re going to suffer in profits," he reiterated. "In this case the amount of money that you want to spend might be quite different than if you’re going to simply sell the cattle as preconditioned calves."

He told listeners that there are some programs available in which a company contracts with the producer to precondition their calves in return for a guaranteed specified premium. Such a program, he pointed out, gives the producer a better idea up front of what he can afford to spend on a preconditioning program.

For those who choose to sell preconditioned calves through an auction market, McCollum recommended working through a system that has been established especially to promote preconditioned calves.

"That way you'll know that there are buyers in the barn that day who are interested in preconditioned calves and are therefore willing to pay a little more for them."

He encouraged producers to be aware of premiums currently being paid in today's market for preconditioned cattle. Those premiums on average range from nothing to eight dollars.

"That's a big difference. It's no money versus maybe a $40 a head premium on a 500-pound calf."

As a rule, he noted, the industry standard is more in the $3-4 cwt. range. The $8 premium, he added, has to be searched out.

Preconditioning, McCollum told listeners, is all about improving the ability of calves to cope with stress. The first step in that process is to strengthen the immune system through a proper vaccination program. Vac-45 is a vaccination program developed by Texas A&M a number of years ago and approved by the Texas Veterinary Medical Association. The program has a proven track record, and because of that it is recommended for calves going through the Ranch-to-Rail Program, McCollum said.

Each year, participants in the program are mailed a copy of the brochure which clearly outlines the proper protocol for the program. Yet fewer than 10 percent of the people who consign cattle to Ranch To Rail follow these guidelines, he noted.

"Then they wonder why they have trouble."

Another reason people have trouble with preconditioned calves is because the calves did not receive adequate nutrition, particularly protein during the 45-day period.

Protein, he pointed out, is important because immunoglobins and antibodies that are needed are made out of protein.

"We see a lot of people feed three to four pounds of 12 to 14 percent crude protein supplement a day. That may sound like a lot of feed, but its not enough in terms of actual nutrients," McCollum said. "It's better to start with a higher protein cube, either a 38 or 41 percent."

Another shortcoming in many preconditioning programs, the speaker said, is that many don't provide an adequate mineral in the ration.

"Many put out mineral, but most can't tell you what was in it and it generally isn't consumed at adequate levels," he remarked.

Citing Ranch-to-Rail data again, McCollum showed the significance of a mineral program. In one year 90 percent of the ranches that had calves with a zero pull rate were feeding a complete mineral to their cow herd. More important, only 30 percent of the ranches with an 80 to 100 percent pull rate were using a complete mineral in their cow herd.

"That ought to tell you that using a complete mineral is important to your cow herd and it can affect performance of those calves," McCollum said.

A complete mineral program, the speaker noted, means supplying proper levels of macro minerals like magnesium, potassium, calcium and phosphorus, as well as trace minerals like copper, zinc, etc. in adequate amounts at pre- and post-weaning. A good rule of thumb, he added, is to supply at least half the daily trace element requirements in the mineral supplement. A cube can be formulated with proper levels of mineral.

For those using a medicated ration, McCollum stressed the importance of feeding it at the appropriate levels.

"Don’t cut the recommended dose in half or quarter it," he said. "If you do, you're wasting your money because it won't provide any benefit if you don't follow the directions."

Additionally, he said, "If you want to go to the trouble of feeding vitamins, Vitamin E can be helpful – research shows that you’re better off to feed it rather than inject it."

McCollum told listeners that the use of milled feeds should be kept to a minimum in most cases, simply because year in and year out it's hard to recover the cost of that feed. This year, he added, might be the exception.

"You may want to use a milled weaner receiving ration for a few days to get them started, but generally, using that ration for the entire 45 days will not pay out," he reiterated.

Along with proper health and nutrition, another stress reducer means adapting the cattle to their new environment.

"You have to adapt the cattle socially," McCollum reminds. "That means get them used to being in confined areas.

"Bawl them out so that they get used to being without their mother and used to being part of a crowd rather than just part of a few. Additionally, make sure they know how to drink water and eat from a bunk," McCollum advised.

The livestock specialist said it's not necessary to adapt cattle to a feedyard concentrate.

"The first thing they will have to eat when they arrive at the feedyard is hay, and then they'll work them up to that feedyard ration," he noted.

McCollum also said high rates of weight gain during the preconditioning phase are not necessary.

"A lot of times when calves are fed an expensive preconditioning ration they put on good weight gains, but then the buyers discount them because the calves are too fleshy.

"Buyers are really looking for calves that have been gaining about a pound to a pound and a half a day over this 45-day period," McCollum insisted.

The final piece of a preconditioning program — perhaps the most important piece — has to do with marketing.

"We've all heard people say that they did this but no one paid them for it. That’s because they didn't do a very good job of trying to present those calves on a market where they could get paid for it," McCollum said.

"Think of the four 'P's' when planning a preconditioning program: product, price, placement and promotion. I like to add a fifth one, perception. You have to have people wanting to buy these calves who have the perception that preconditioned calves are worth more money," he stressed.

"The best way I know to sum this up," he continued, "is that there are buyers with the perception that preconditioned calves are a product worth more and therefore are willing to pay a higher price for those preconditioned calves. However, the seller — you — must present these calves by placing them in a market that promotes preconditioned calves and attracts the interest of the buyers. That market may be you working directly with cattle buyers developing your own market or it might be working with an auction barn that has special preconditioned calf sales that promote and attract the buyers in. This is the only way you will be paid. You have to work on marketing," McCollum concluded.

The livestock specialist walked listeners through some different preconditioning examples using different kinds of feeds.

The first was an example using a weaner starter ration for the entire 45 days.

"Say the feed costs about $135 a ton, which is realistic today, and they eat 16 pounds per day on average. By the time interest and labor and care costs are added in, we're up to $63 a head to do this for 45 days. The question is how much premium or weight gain do we need to make this work?" McCollum asked.

"If you sell the calves with no premium, they will have to gain 76 pounds in 45 days in order to break even, to get that $63 back. That’s about 1.7 pounds per head per day and that’s on the upper end of what I think you can realistically do in a 45-day preconditioning program."

With a $4 premium, which the livestock specialist said should be attainable in today's market, the calves would only have to gain about 50 pounds in order to break even.

"In other words, they only have to gain a little over a pound a day. This is doable," he told the group.

If one managed to market the calves with an $8 premium, they would only have to gain 23 pounds or half a pound a day for 45 days.

"If you go back a couple of years and this ration cost $200 a ton instead of $135, this picture changes tremendously."

Another example using a starter weaner ration for 10 days and hay and cubes for the remaining 45 days was also given.

Under this scenario, McCollum calculated a total feed cost of $42 per head based on $9 of starter weaning ration for 10 days, $80 a ton hay and 38 percent cubes at two pounds per head per day.

Without a premium, calves must gain about 50 to 55 pounds to break even on this kind of program.

"That’s a little over a pound a day, and that may or may not be doable depending on how good your hay is," the speaker said.

With a $4 premium, calves only have to gain 25 to 30 pounds, less than a pound a day.

"Unless you have truly poor hay, this is achievable in most cases," McCollum noted.

With an $8 premium, calves don't have to gain any weight to break even.

"This should be a good example of why you should minimize the use of completely milled feeds."

Using hay and 38 percent cubes for the entire 45 days costs about $50 per head.

Without a premium, cattle would have to gain a pound and a quarter to a pound and a half, or 60 pounds to pay out. With a $4 premium, the cattle have to gain a little over half a pound versus 10 to 15 pounds with an $8 premium to break even.

In the last example, cattle were kept in traps and fed cubes and grazed for 45 days. He used a $6 a month pasture cost and added an additional $34 for supplement.

"If you don’t expect to get a premium, calves need to gain about 45 pounds, about a pound a day to break even," he told listeners. "With a $4 premium the cattle need to gain 14 to 20 pounds; less than a half a pound a day. If you can get an $8 premium the cattle can actually lose weight and still break even."

McCollum concluded by telling listeners that in today's market and given today's feed prices, preconditioning will pay if calves gain a pound to three quarters of a pound a day. He also pointed out that preconditioning programs are likely to play a large role in the future because of the growing trend toward integration and cooperation among the various segments in the industry.