Friday, June 4, 2010

Economics of Creep Feeding Calves

There are only three things that matter when it comes to the effectiveness of creep feeding calves:

1) Feed conversion,
2) Cost of gain
3) Price slide in the market place

One and two you can control, number three you can’t do much about and you can’t predict it either, although it has a big impact on whether creeping calves pays.

Feed conversions

Knowing the feed conversion of different feeds used in a creep feeding program is important so you can calculate cost of gain. The problem is I figure you probably don’t know what the conversions are and neither do I.

What I can tell you is that from trials we’ve run out at SDSU Cow Camp, Purina’s AccuRation has a feed conversion that runs about 6:1 (6 pounds of feed will generate 1 pound of gain). Many other feeds run about 8:1 – 10:1.

Cost of gain

To calculate cost of gain, simply take the cost/pound of the feed ingredient and multiply it by the conversion rate. That will give you the cost per pound of gain.

Example 1

So if I take AccuRation for example, it runs about $290/T.

So if I take $290/2000 lbs. per ton = $0.145 per pound.

Now if I take that times a 6:1 feed conversion ($0.145 x 6lbs/lb of gain) = $0.87 per pound of gain.

Example 2

Let’s look at a mix of ½ corn and ½ soybean hulls that runs $180/T

$180/2000 lbs per ton = $0.09 per pound

At an 8:1 conversion you get $0.09 x 8 lbs per lb of gain = $0.72 per pound of gain

The following table has cost of gain based on several different feed conversions up to $220 per ton. Above that you’ll just have to calculate it yourself.

So, to calculate the returns to creep feeding your calves, take a look at the following example:

In this example, the calves that were creep fed netted $6.75 more per head than did the calves that weren’t creep fed. It is important to remember of course, there is a big difference between gross and net.

Intuition tells you that the heavier calves should have netted way more than $6.75/head when compared to the non-creep fed calves, but that price slide on the heavier calves negated much of the value gained through the supplemental feeding.

Remember though, we’re just estimating the slide, if you catch the slide at $8/cwt rather than the $11/cwt we used in this example, now the return per head jumps to $27 per head.

So, as you might be asking yourself, how do you know how much calves will gain from a particular feed? In short, you don’t and I don’t either. But there are a couple of guidelines to go by:

1) Our trials show that Accuration generally delivers a pretty consistent 2.5 lbs per day on calves less than 500 lbs. It can vary a little, but not much.
2) Our trials also show that pretty much any commonly used concentrate feed that is not 100% corn will deliver at least 1.7-2.0 lbs per day gain on calves less than 500 lbs. You might get more than 2.0 but usually not less, all things being equal.

It’s not an absolute, but those are some guidelines to follow.

The other thing to consider is the price slide as your calves gain extra weight. As I said before, there isn’t anything you can do about the slide, it is an inherent value discovery mechanism in the market. But you do need to accurately represent the slide in your analysis or you will accidentally pencil the projected return wrong.

As a general rule, you can expect a $10 per cwt slide for every 100 lbs of additional weight. Sometimes it’s more, sometimes it’s less, but that’s what it is on average.

To calculate your projected returns from creep feeding, use the following blank template.

You can view the article I just wrote on this subject by copying and pasting the following link you’re your web browser.

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