Adding Value to the Calf

February 2, 2012 05:58 AM

Having a better understanding of markets and selecting the right programs are important when considering raising value-added calves. For some producers value-added programs benefit them, for others it’s just a hassle that they don’t have the time to deal with. Value-added programs should be considered on a case-by-case basis. Attendees of Cattlemen's College at the 2012 Cattle Industry Convention and National Cattlemen's Beef Association Trade Show received a little advice from someone who did his homework.

Lance Zimmerman, CattleFax analyst studied Superior Livestock Auction (SLA) video calf auctions. SLA video auctions were chosen because these video auctions define national price incentives and discounts for calf management in the marketplace. Zimmerman’s goal in this study was to understand the evolution of these auctions as a calf pricing and marketing tool and to quantify the price effect of vertical coordination at the cow-calf sector.

Existing feeder calf pricing research was reviewed. The price effects the following characteristics were quantified: lot, genetic, management, marketing, and market conditions. Price effects were then applied to evolving ranch management practices.

There are some important considerations to note about the video auction market. First, national market conditions do not equal local market conditions. Other factors include avoiding unknown marketing risks, taking into account location and management goals of sellers and buyers, and the fact that premiums do change over time.

What Zimmerman found was that value-added management strategies do work in the right environments. Strategies such as certified vaccination programs showed clear increases in revenue at a high of $5.42/cwt compared to a high of $3.29/cwt for non-certified health claims. Weaning programs proved beneficial with a premium worth around $4.51/cwt for home-raised and weaned calves.

Other value-added programs such as natural, non-hormone implanted, and age and source verification may also work for some producers. One thing to note though, with the possibly of the Japanese market reopening to cattle younger than 30 months, age and source verification may be on their way out. One additional value-added program that should be highlighted is breed influence. In Zimmerman’s research, predominately Angus cattle brought a higher premium of nearly $7.00/cwt, along with black-hided cattle at a high of $6.71/cwt compared to all other breed influences.

Most times value-added practices are bundled in nature and this should be taken into consideration when determining whether to implement one. When entering into any type of value-added program, documented quality becomes an important factor in dictating market premiums. Buyers are more receptive to seller claims if they are backed up. In the long run small details like value-added programs can have a significant impact on what sellers’ get for their calves.

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