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Study Finds Backgrounding A Positive Economic Strategy by David Bowser Backgrounding calves has a lot of advantages, according to a study by a Texas A&M University graduate student and his professor. Jaret Schulte, a graduate student from Nazareth, Tex., and Dr. Ernie Davis, an economist with the Texas Agricultural Extension Service and TAMU professor, recently completed a study of commingled and backgrounded cattle sales in Central Texas. Funded by the Texas Beef Initiative, the study focused on the full economic cost of preconditioning calves, the prices paid at the commingled sales compared to the U.S. Department of Agriculture's Texas Combined Weekly Weighted Average Report and determining premiums and discounts due to selected characteristics of the cattle. "When we say characteristics, we're talking about breeds, frame size, muscle score, and weight." Schulte says. "We also have a little bit of lot size. We want to see if 50 to 65 head lots that are ready to ship are bringing more than just one head is bringing." While backgrounding during the time period of the study proved to be a positive strategy, Schulte and Davis said that there are additional cost involved, but the biggest danger appears to be the additional risk of holding the cattle another 45 days, particularly in a volatile market. Schulte and Davis found that nutrition costs for average daily gain are highly variable, between 60 to 75 percent of the total costs in the preconditioning program. Average daily gains ran from a negative half-pound per head to 1.84 pounds per head. The average was a quarter pound per head. The cattle were backgrounded an average of 53 days. "The minimum was 43 days," Schulte says. "One went all the way up to 70." Schulte says 45 days proved to be a good economic number for backgrounding cattle. After that, it becomes more of a feeding operation. The weaning shrink weight was 569 pounds on average. He says they shrunk every calf six percent to get them all even, then took the weaned price off the USDA report, using the same quality of cattle and the same weight for that week to get weaned value. Going in at $435.59 on the average, the range was $386.69 to $499.83 per head. Total net gain, on the average, was 12.5 pounds per head. The range was from a minus 24.70 pounds to 85.5 pounds per head. Schulte says there is a close correlation between the gain and the feed the calves received. The average daily gain was 0.25 pounds per head. The range was from a minus half pound to a plus 1.84 pounds. The health cost averaged $7.03 dollars per head with the costs ranging from $4.53 to $10.06. Because the auction barn they used required basic vaccinations, health costs were not a major factor. Nutrition costs averaged $38.73. The range was from $18.71 to $60.86 dollars per head. Some of the calves in the study were on pasture during an exceptionally dry time in Texas. Some of the costs reflected supplemental feeding. Schulte and Davis also included a five percent return to management on gross revenues and labor costs. That leaves a total average cost of $61.68. The total costs for all the cattle ranged from $35.54 to $92.96 dollars per head. Schulte says they suggest at least a dollar a day when figuring costs of backgrounding cattle, although some producers can do it for less. "If you're getting $35 or lower, you're on the bottom end," Schulte says. "If you're getting up to $92, I may suggest you look at a little better ration." Schulte indicated that nutrition should not rise above 70 percent of the total cost. In a flat market, a producer will need $10.29 per cwt. above what the calf's worth was when it went in the backgrounding program to cover the costs and risks of holding that calf another 45 days. |
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