Question
- Thread starter gcreekrch
- Start date
I haven't commented here in years. Recently jumped back on with the thought or reaching out to the community asking how they calculated cost of gain and run breakevens for feeder cattle. That was months ago & I've been lurking ever since. I'm a consulting nutritionist and what I see working with smaller feedlots (under 5,000 head) is poor grasp of cost of gain and where profitabilit breaks. I'm in the very early stages of attempting to build an app that calculates cost of gain & break even prices for the user after they input purchase price & purchase weight, sale price & sale weight, adg, death loss, vet/med cost, hedge costs, in shrink%, & yardage/ day, interest rate, cash equity, NEm % increasement (typically 0, but could be say 15% or more with a hard winter or mud). The user would also input their rations & feed costs and days on each ration. The app then uses NEg to estimate the as fed intake needed to gain the user suggested ADG for cattle. User can move intake however they see fit. The user inputted intake number and ADG plus all other costs then generate cost of gain & the breakeven purchase price (price you can pay and make $0) and the breakeven sale price (price you need to sell at to make $0). It would also generate its on projection for performance based on NEg & what you say intake is (financial project is based on user inputted ADG, this ADG would be based on Neg & user inputted intake). Would also project the pounds of ever feedstuff used.
Sorry for a 200 plus word tangent. I've been working on it for nearly a year when I have time. The combination of cattle and numbers turn me into a cowboy nerd. 900 plus pound steers killing today are reporting about $1.05 COG at commercial yards with about 140 days on feed. Same category but heifers are closing out at about $1.20. Those would be averages of large commercial yards. To calculate a specific cost of gain projection you would need to give numbers for all the variables i talked about in my 200 word tangent. If you want me to run one I'll run it through the prototype & tell you all what it spits out.
Sorry for a 200 plus word tangent. I've been working on it for nearly a year when I have time. The combination of cattle and numbers turn me into a cowboy nerd. 900 plus pound steers killing today are reporting about $1.05 COG at commercial yards with about 140 days on feed. Same category but heifers are closing out at about $1.20. Those would be averages of large commercial yards. To calculate a specific cost of gain projection you would need to give numbers for all the variables i talked about in my 200 word tangent. If you want me to run one I'll run it through the prototype & tell you all what it spits out.
I know what my cost of gain is here, was hoping to compare. I am feeding some steers at home that were bulls, stags and other misfits along with steers I bought to get the number I needed. I am also feeding 100 steer calves in a custom lot. The customer calves are eating $2.52 per day and gaining 2.45 on a ration thought to make a 1.7 gain. I am quite happy. We will be forward contracting these steers shortly for March delivery at 850 lbs. Expect to get north of $3.65 per lb for them Can. funds.
In the northern plains its been running around $1.40-1.50/ day feed only for a typical growing calf. That's figuring around $4.50 corn a slight premium over corn for distillers and market hay prices. 17 pounds dry matter intake. Yardage is running $0.40/day. That's $170/ ton dry matter feed costs. I've seen some up around $200 a ton as well that would get you up to that $1.65 at the same intake no yardage.
But taking the cost to feed cattle per day/ ADG does not equal cost of gain. That's feed cost of gain. Which is the point of my long tangent. Cost of gain is all costs associated with feeding cattle/gain and is the true measurement for profitability. It's not hard math - but it's a lot of math (a lot, lot if you are trying to project it, not as much in hindsight). Looking at Interest on 120 days cattle & feed and 7% money is going to be north of $0.10/pound of gain. Every 1% death loss is roughly another nickel just for the dead animal not counting the lost feed it ate, yardage, drugs & other costs. Adding in all those cost likely gets you to about $0.1/pound for every 1% death loss. Trucking & sale barn feeds add costs as well & everything else i mentioned. Haven't talked hedge fees either. Obviously none of those other cost may matter to you, I'm not saying you in particular have to look at all the other costs. But the industry as a whole needs to sharpen their pencils. The margins are getting thin and the cost of production is high. A guy can get upside-down really fast these days & with those thin margins it could take a long time to climb out of a hole.
But taking the cost to feed cattle per day/ ADG does not equal cost of gain. That's feed cost of gain. Which is the point of my long tangent. Cost of gain is all costs associated with feeding cattle/gain and is the true measurement for profitability. It's not hard math - but it's a lot of math (a lot, lot if you are trying to project it, not as much in hindsight). Looking at Interest on 120 days cattle & feed and 7% money is going to be north of $0.10/pound of gain. Every 1% death loss is roughly another nickel just for the dead animal not counting the lost feed it ate, yardage, drugs & other costs. Adding in all those cost likely gets you to about $0.1/pound for every 1% death loss. Trucking & sale barn feeds add costs as well & everything else i mentioned. Haven't talked hedge fees either. Obviously none of those other cost may matter to you, I'm not saying you in particular have to look at all the other costs. But the industry as a whole needs to sharpen their pencils. The margins are getting thin and the cost of production is high. A guy can get upside-down really fast these days & with those thin margins it could take a long time to climb out of a hole.
Not into hedging, insurance, or other things I don't understand. Buy good quality calves that can have value added to them and forward contract when there is a profit to be had. KISS method of doing most things has worked out for us far more often than otherwise.
We lost $60,000.00 in feed on 200 heifer calves we backgrounded in 2015 but the book keeper said we still made 40k because there would have been a 100k tax bill without them. I would far more rather lose money on cattle and use the carry forward than give the government any to waste.
We lost $60,000.00 in feed on 200 heifer calves we backgrounded in 2015 but the book keeper said we still made 40k because there would have been a 100k tax bill without them. I would far more rather lose money on cattle and use the carry forward than give the government any to waste.
artesianspringsfarm
Well-known member
Words I've been living by for 12 years and I hope I can come up with a third option someday but I'm not holding my breath! :-D
