Retaining ownership of cattle through the finishing stage can be a financial risk for a lot of producers, but gathering knowledge about how cattle will perform in the feedlot and on the rail will help when it comes time to take feeder cattle to the sale barn or send them to the feedlot.
One low-risk way to get performance data for a herd is to participate in an extension steer feedout program. Eldon Cole, a livestock specialist with the University of Missouri Extension, runs a steer feedout program for Missouri cattle producers. He said the program offers an “eye-opening experience” for most producers.
Producers don’t always have the data to know whether their cattle are ‘cutting the mustard’ when it comes to what the industry wants,” Cole said. “People need to know if their cattle don’t perform well or if they’re prone to illness, so they can make adjustments.”
The Missouri program requires producers to send at least five head of cattle to an Iowa feedlot where they will be monitored for health conditions and rate of gain. Producers also receive carcass information after their cattle have been harvested.
“This program gives producers a good idea of how their cattle are going to perform once they leave the pasture,” Cole said. “Producers should be willing to send a good cross-section of their herd, so they’ll learn about any genetic weaknesses they may need to improve on.”
Cole said producers should be aware of how their cattle compare with the industry standard. In the feedout program, a 70-70-0 target has been established as a benchmark for producers.
“We tell producers that 70 percent of their cattle should grade choice or higher, 70 percent of their cattle should have a one or two lean meat yield grade and none of their cattle should be ‘outs’ – cattle that are dark cutters, too light, too heavy or that have no marbling,” he said. “If cattle don’t meet these targets, than producers know they need to reevaluate their management techniques and maybe introduce different genetics to their herd.”
Producers are responsible for transportation costs and expenses incurred while their cattle are at the feedlot. Brett Barham, University of Arkansas Extension, said this can be a hurdle for some producers who are used to receiving a check for their feeder cattle instead of investing more money in them.
“Cash flow is a major reason some producers choose not to retain ownership of their cattle,” he said. “Participating in a feedout program is a good way to gain confidence in your cattle’s ability to perform and to know whether the additional four to six months of expense are going to pay off in the end. It also helps producers set realistic expectations for their cattle’s performance.”
While Barham agrees that the 70-70-0 target used in the Missouri feedout program is a good standard, he said there is more than one way to make money in the cattle business.
“In my opinion, 70 percent choice is a good target, but one that may not guarantee any more profit than a 55 percent choice lot that had cheaper cost of gains in the feedyard,” he said. “When the choice – select spread is low, a heavy select carcass often times makes more money.”
Barham said that once producers are comfortable with the idea of retaining ownership, there are a few things to consider when choosing a feedlot. Whether choosing a small or large facility, produces should get to know the feedlot management to get the most information about their cattle’s performance and marketability.
“Having a working relationship with your feedlot management can make a big difference when you start looking to market your cattle, especially if they are too far away to visit and you have to trust the manager’s decision that your cattle are finished,” Barham said. “It can also open doors to partnerships on sets of cattle, receiving more in-depth information about rate of gain and performance and hedging opportunities for large sets of cattle.”
Barham said that while retaining ownership of cattle through the finishing stage can be a solid investment for some producers, it is important to remember that there are going to be times of loss, and producers should factor it into their break-even analysis.
“Cattle will get sick in the feedlot, and a small percentage of them will die. Often times it may be better to cut your losses on certain animals that continue to stay sick and sell them before they are finished,” he said. “If it is a problem with herd health, the feedout programs are a great way to realize those problems in a small number of cattle and get them worked out before an entire herd leaves the pasture.”
