The Value-Added Feeder Calf: Where does the buyer of your calves perceive value?

1. The Value-Added Feeder Calf:Where does the buyer of your calves perceive value? 2007 NCBA Cattleman’s College Robin Falkner D.V.M. Pfizer Animal Health Manager: Beef Veterinary Operations Stocker / Feeder Cattle

4. How do you determine “value” in the calves you sell?

5. You don’t. The only definition of “Premium” or “Value” that matters is that of those who might purchase your cattle. You are dealing primarily with an “investor”, not a “gambler”, philosophy.

6. What qualities are attractive or important to an “Investor”? What issues might be he be facing?

7. What Buyers Want:ConsistencyPredictability

8. Major drivers of profitability in cow/calf industry:Input CostsReproductive EfficiencyNo improvement in last 30 years.

9. I ask Feedlot Manager: “Show me the cattle you are feeding yourself.”

12. Why are these “Preferred Cattle”? • Consistency / Predictability • Profitable • Health • Efficiency—most efficient cattle fed (feed conversion). • Quality: 80+% Choice+ • Are they cheap? • Are they perfect? • Are they still “Preferred” today?

13. Premium Feeder Calf • A “premium feeder calf” in one market, place, and time may be a complete “dud” in another one. • An “admixture” of different “premiums” is only average, or worse. • To be “premium”, a calf must be prepared and marketed with a group of similar animals to someone whose goals and specifications they meet.

14. Survey of Feedlots 1000 head or more USDA NAHMS COFE 1994

15. Top 5 Concerns When PurchasingAccording to Calf Buyers (Feedlot, Stocker, Backgrounders) 1) WEANED 2) Vaccinated against specific diseases 3) Weaned for a certain length of time 4) Vaccination program properly timed 5) Specific vaccines used • (MLV vs killed, Brand name) Source:NCA-IRM Calf Information Task Force survey of 600 feedlot, stocker and backgrounding buyers

16. A small percentage of our total beef cows reside in larger 500+ head herds (14.4%).

21. This is where I live.

22. Multifactorial- “Complexes” Multiple Pathogens KEY: Management Profitable management is not about searching for “villains”, or finding “silver bullets”, or “perfect programs” but “removing straws” Diseases Parasites Nutrition Environment Weather Handling Management Genetics Straws

23. Progress? Source: (NAHMS) Changes is U.S. Feedlot Industry 1994-1999. August 2000.

24. What Can I Expect? • ISU: Commingled “Ranch to Rail-type” 1988-1997 • 2544 head from 20 producer “Feedlot Tests” • Average calves per consignor = 4.2 head • Morbidity range: 0-59% • Weighted Mean: 20.6% • Relapse Rate range: 0-81% • Weighted Mean: 39.2% • Case Fatality Rate (CFR) range: 0-22% • Weighted Mean: 6% Note the wide variability in health between groups of very similar cattle, handled the same way, in the same places. Faber et al: ISU 1999 Research Report 1648

25. Ranch to Rail Data: % of Calves Requiring Treatment After Arrival Adapted from: Texas A&M Ranch to Rail Summaries 92-93 to 2000-01 (9 Reports).

26. Ranch to Rail Data: 1992-2000Impact of Health on Profitability Adapted from: Texas A&M Ranch to Rail Summaries 92-93 to 99-2000 (8 Reports).

27. Ranch to Rail Data Half of the Measured Cost of Illness is “Hidden” in Reduced Performance and Carcass Quality.Feed Efficiency could not be measured in these studies Death Loss Medicine cost “Hidden” Costs Reduced Performance • Performance • ADG reduced 0.32 lb • Carcass Quality • % Choice reduced 33% Adapted from: Texas A&M Ranch to Rail North Summary 1999-2000

28. BRD: It keeps on giving! Busby et al. Effect of Postweaning Health on Feedlot Performance And Quality Grade. 2004 ISU Animal Industry Report. AS Leaflet R1885

29. My calves are healthy. I am not seeing diseases like BRDC in my herd. I am not part of anyone else’s problem. I wouldn’t be surprised if my neighbors calves got sick. I

30. Prevalence of Disease in Cattle Population • BVD-PI - 0.3% - 4.5% • BVD (titer) - 20-80% • IBR – 67% • Johne’s - 10% -20% • Neospora - 5% -10% • Bovine Leukosis Virus - 10% - 80% • Leptospirosis - 20% - 65% • Campylobacter - 16% What is the “impact” of “endemic” disease? Multiple references; European and U.S. studies

31. Exposure (non-clinical) may create “carrier” cow or calf (P.I., Latency, Flora) Colostral Immunity temporary protection No or few obvious problems in origin herd, but calves source of pathogen in marketing channels, subsequent segments, and home herd if kept for replacements. Calf Exposure (non-clinical) active immunity

32. Diseases (IBR, BVD) that are major causes of respiratory disease post-weaning are also the major contributors to reproductive losses in cow herds.

33. Health, Efficiency, and Profitability Today’s calf buyer looking for efficiency and predictability. Poor health messes up both.

34. Profit Falkner Feeder Cattle Profit Model R. Falkner 2006

35. Major Impacts of Health on Profitability • Direct Costs: (est. U.S. $1 Billion / Year) • Inefficiency (operation and cattle) • Indirect Costs (difficult to measure): Operational Inefficiency “Bottlenecks”

36. What’s wrong with this picture? Is there more than one type of “Empty Pen”?

37. Weekly Cash Corn Prices (CBOT) Source: Chicago Board of Trade

38. Cash Prices: January 22, 2007

39. 220 Feedlots, 1600 Pens, 1987-1996

40. Impact of recent price changes on profitability model • Price Received for Cattle Sold • Price Paid for Feeder Cattle/Calves • Feed (Cost and Efficiency)

41. If Feed is free, what will determine profits? • Price Received for Cattle Sold ($) • Price Paid for Feeder Cattle/Calves($) • Feed ($0.00 cost)

42. If Feeder Cattle are free, what will determine profits? • Price of Live Cattle ($) • Price of Feeder Cattle ($0.00 cost) • Feed ($)

43. Be sure to sign up for the free truck drawing!

44. “Old Market” – high F/E group lost $100 / hd -the profit from 2 other groups“New Market” --high F/E group loses $200+ / hd -the profit of 4-10 other groups. The “New Penalty” for Poor Feeding Performance is Severe

45. Impact of Health & Death Loss* Death Loss ADG FC Profit per head 0% - 0.5% 3.09 6.48 -$10.89 0.5% - 1.5% 3.00 6.65 -$20.41 1.5% and up 2.84 6.86 -$57.62 *800-lb. yearling-fed steers closed out in March 2006 Data: Tom Brink: Senior VP. 5-Rivers Cattle Feeding LLC

46. Variability in Feed Conversion Graph from: Dr.Robbie Pritchard, SDSU

47. The health and performance data you have already seen today strongly suggests that health is one of the biggest variables influencing efficiency—and the one we can change the easiest.

48. Estimating the Effects of Animal Health on the Performance of Feedlot Cattle Special Thanks to: Max Irsik DVM, MAB University of Florida For his Master’s Thesis and Slides

49. Morbidity and Performance Using these data, a 10-20% reduction in morbidity would be associated with improved Feed Conversion and reduced Cost of Gain by approx $3-$7/cwt (in a given type/class of cattle) Irsik, M. KSU Master’s Thesis. Cost of Gains calculated with $144/ton ration (DM)

50. Can Work for you and buyer?