Angus VNR: Capturing More Value
Maintaining ownership of calves after weaning, to sell finished cattle on a grid is one way to get paid for herd improvement—and it leads to even higher quality, according to a South Dakota rancher.
“Once you've retained ownership and got your feet wet in it, and if you have those above-average cattle, you'll never get paid for the total value on a commodity market, whether you've sold them the highest at the sale that day or not,” says Britton Blair of Blair Ranch.
The stakes are higher, including mortality risk in the feedyard, but vaccination programs help allay that. Price volatility is another matter.
“The other risks are swings in the market, but the market gives you a lot of opportunities to hedge in a profit, and you have to be ready to pull the trigger and be ready to be happy about it,” Blair says.
The key to happiness there is knowing what price will break even.
“I've come to the conclusion that the easiest way to decide to do it is to run a simple break-even. There's sheets out there all over the place on the internet. Find one you can use, or a feedlot will run one for you and tell you, be pretty fair and honest with it,” he says.
Feedyards may offer a range of ownership percentages while financing cattle and feed till marketing time.
“A lot of people don't know that some feedyards will finance the cattle, the feed and the risk protection,
Blair says. “It makes it pretty easy because if you send your cattle there, they'll send you back around 75% of the value of your calves and keep 25% as essentially down money and they'll finance the rest.”
These feedyard partnering programs generally offer individual carcass and feeding performance data for help in planning for future calf crops.
“You can use that carcass data to either make changes or at least have a baseline to know where you're at, to know if you should feed cattle and sell them live; feed cattle, sell them on a grid, and kind of what grid to hit. There's a grid for anything, really, and if you know what yours do, then you can pick the grid that fits best for your operation,” he says.
Genetics focused on growth and carcass quality do well on marketing grids, but they must also do well within the cow herd.
“There's a huge difference in genetics in this industry. Genetics with higher feedlot performance and higher carcass quality are going to make a lot more money on the right grids, and those are pretty well identified out there,” Blair says. “The problem is you have to kind of balance between feedlot efficiency and the efficiency of your cows.”
Blair says retained ownership is hardest the first time, because so much is unknown and market prices may cause concern.
“I think the time to start, even though it's the hardest way, is in a bad market, because when things are high and you're profitable, you can sell those calves. When things are tough and you're not making any money, you need to kind of get every nickel you can, and even buy yourself some time for the market to go up,” he concludes.
It's just another example where experience can be the best teacher.