You Can Have Your Feed Efficiency and Eat it, Too

Let’s talk feed efficiency. That is, after all, very relevant to profitability in the cattle business, especially given today’s high feed costs.

But relevance is one thing. Reality is entirely different. And the reality is that feed efficiency has not received the focus it deserves as a key profit driver for beef producers.

That’s changing. Slowly, but it’s changing.

Here’s even better news: genetics and genetic tools exist to build cattle that are highly efficient while still meeting or exceeding the carcass quality targets that earn packer premiums and satisfy consumers.

Let’s Define Feed Efficiency

In its simplest terms, feed efficiency is the ratio of pounds of feed consumed to pounds of gain. So if you have two steers standing side by side at the feed bunk and one eats 6 pounds of feed to gain a pound and the other eats 5.5 pounds of feed to gain the same pound, the second one is more efficient.

In any scenario, that’s good. In a time dominated by high feed costs, that’s even better.

“If we talk about feedlot profitability, the biggest single driver is selling price,” says Dr. Kee Jim, CEO of Feedlot Health Management Services. “But that’s not something you can necessarily control. So then, feed efficiency or feed conversion is by far the most important production attribute.”

Feedlot Health Management Services offers a suite of feedlot consulting services covering all aspects of procurement, production and marketing. The company is globally the largest of its kind and has clients in the U.S., Canada, Mexico, Latin America, Kazakhstan, Russia and China.

It’s important to note that feed efficiency and average daily gain are not the same. In fact, in today’s marketing environment where most fed cattle are sold on carcass merit, average daily gain is only marginally important.

“Just measuring gain alone does not tell you how well they’re converting,” says Jerry Wulf, a cattle feeder, cow-calf producer and seedstock genetics supplier from Morris, Minn. “Average gaining cattle with below average dry matter consumption that equates to good feed conversion and good feed efficiency have more value than the fastest gaining cattle that aren’t converting as well.”

He has the experience and numbers to back that up. He’s been collecting feed efficiency data on a pen basis in his feedyards for more than 30 years and individual data on the cattle in his seedstock operation for more than 15 years.

What About Carcass Merit?

Without a doubt, beef producers have done an outstanding job of improving carcass quality. That’s clearly documented by the increase in Choice and Prime from around 64 percent in 2010 to 83 percent of all cattle graded so far in 2021, according to USDA’s Ag Marketing Service. Of the cattle grading Choice in 2021, 32 percent landed in upper two-thirds Choice.

That’s happened for several reasons. One of the results of improved genetics is that mature weights have increased. “We’ve selected very effectively for higher gaining cattle,” Jim says. “If you look at carcass weights over the last 30 years, they improved by about 7 pounds a year with roughly the same number of days on feed.”

That has given packers the green light to push cattle feeders to feed cattle longer and to heavier outweights. That’s because heavier carcasses improve plant efficiency.

Given the historic premiums for upper two-thirds Choice and Prime, it makes economic sense for feeders to maximize quality premiums by choosing to feed cattle longer on higher energy rations to heavier outweights. However, this can be an expensive proposition if animals are not genetically designed to convert nutrients to saleable red meat as they reach historically heavy live weights.

“Feed accounts for somewhere between two thirds and three-fourths of the input costs of the feeding phase,” says Dr. Bob Weaber, professor and director of the Kansas State University Eastern Kansas Research and Extension Centers. “So, feed intake and the utilization of those feed resources really gets at the heart of profitability in our business.” That’s even more pronounced as corn prices go up.

“The feed to gain number is directly corelated to cost of gain,” Wulf says. “And if you lower feed to gain, you lower cost of gain.”

What’s more, cost of gain increases the longer an animal is on feed. One-way cattle feeders can roll back cost of gain is finding genetics that convert feed to saleable end product more efficiently, even at heavier outweights.

That’s best achieved by crossbreeding, Jim says. Using a Continental breed such as Limousin or Lim-Flex on a British-based cow herd gives you the best of both worlds—the maximum combination of a balance between gain, feed efficiency and carcass quality.

But in an effort to chase grid premiums for upper two-thirds Choice and Prime, the industry has tended to sacrifice another key profit driver—feed efficiency.

As a result, Yield Grade (YG) 4 and 5 carcass have increased as well. “At this point in time, the percentage of cattle that are in Yield Grade 4 and 5, we’re not in single digits anymore,” Weaber says.

Then there are those carcass premiums. While those dollars are certainly worth chasing, there are some caveats to ponder.

“Feedlots are only paid a premium if the cattle grade better than the plant average” Jim says. “You have to exceed the baseline in the plant (for quality grade) and you’re paid on the portion that exceeds that baseline.”

So, it becomes a game of diminishing returns. “When we’re getting up there to 80% or better Choice and Prime, how much room for improvement do you really have?”

Now consider feed efficiency. “The difference with feed conversion is it’s a trait that the cattle feeder constantly gets paid for on the entire population of animals each time,” he says. “And it’s connected to corn or feed grain price. So if we’re in a relatively high feed grain environment like we are today, a 10 percent improvement (in feed efficiency) is more than a 10-cent improvement in cost per pound of gain.”

Here’s how Jerry Wulf does the math.

“You can neglect feed efficiency and just chase marbling and breed cattle that blow past the averages on Prime and CAB. But you need to make sure it’s not costing you too much to get there.” Too many YG 4s and 5s being a good metric.

For discussion purposes, assume a $30 per cwt premium on Prime. Then assume you moved the needle from 8 percent Prime to 18 percent on a pen of 100 steers. At a $30 premium, you added $3 per cwt to each animal in the pen. On a 1,350-pound steer, that comes out to $40 per head across all the steers in the pen, Wulf says.

“I can pick up $40 per head by improving feed efficiency by a quarter of a point,” he says. That’s not hard to do if you work at it. “With some effort and stretch, we’ve improved it by upwards of 20 percent.” That’s a combination of genetic improvement and better feeding strategies.

For cattle feeders, the three main factors that drive margin are health, feed efficiency and carcass value. From a health perspective, that’s why feedyards will pay up for feeder cattle that have been weaned and preconditioned.

But, agreeing with Kee Jim, Wulf says in today’s feeding environment, feed efficiency is by far the most important.

Cattle health and death loss will vary from pen to pen, but let’s say death loss is at 2 percent. That’s roughly $20 per head, spread out over the pen, Wulf says. Again, just a slight improvement in feed efficiency can make that less painful.

What about carcass premiums? “You look at cattle with a half-pound difference in feed efficiency, it’s probably a $75 per head difference,” Wulf says. “The likelihood of you picking up a $75 premium on an entire pen of cattle on a carcass grid, that’s tough.”

And you have to factor in how many YG 4s and 5s are in the pen, Jim says. “You can indeed get into a scenario where you’ve increased carcass grade, but you haven’t gotten anywhere because your 4s and 5s have come up too much. And the discount on those cattle can be severe.”

Genetics For Both

Can you have feeder cattle that convert feed at better-than-average gain and still produce a Choice or better carcass? The short answer is yes.

If you look at the U.S. Meat Animal Research Center (USMARC) data and data from Europe, where researchers have been collecting individual animal feeding data for years, Continental breeds have generally shown better carcass-adjusted feed conversion than British breeds, Jim says. “And amongst the Continentals, Limousin cattle consistently show better feed efficiency, mainly because the dressing percentage is higher.”

In other words, while two breeds may be similar in terms of feed intake to live weight gain, those differences become wider when you analyze feed intake to carcass weight gain—and carcass weight is what most feeders get paid for on value-based grids.

“So, we’ve taken a breed that as a whole is inherently more efficient, and we’re making even more improvements there,” Wulf says. “And we’re doing it in balance with paying attention to the carcass traits that drive value, and that’s quality grade. So, we have cattle now that convert pretty efficiently and they hang up a desirable carcass.”

“As market signals have been passed through the pricing system for commercial cattle, seedstock producers have focused on improving marbling and accelerated that trait improvement over the past five years,” says Dan Hunt of Oxford, Neb., a cattle feeder, seedstock producer and president of the North American Limousin Foundation (NALF).

Genomic marker panel updates by International Genetic Solutions (IGS), a multi-breed genetics effort which Limousin is a part, along with updated USMARC data, document the significant improvement in marbling characteristics for both Limousin and Lim-Flex cattle, Hunt adds.

“Genomic testing, breeder focus and the heritability of carcass traits have enabled all of us as seedstock producers to make rapid genetic gain in carcass quality,” he says. “In fact, the marbling EPD value in our breed reflects an improvement of 0.25 to 0.35 for both Limousin and Lim-Flex, making them very comparable to other Continental breeds.”

What’s more, Limousin and Lim-Flex cattle have been able to achieve this improvement while still maintaining a significant lead on ribeye and backfat EPDs. “That gives us actual retail and cutability advantages,” Hunt says.

So yes, Wulf says, the genetics exist to produce high grading carcasses and do it efficiently. And that’s a win-win, he says, because it lowers cost of production while meeting consumer expectations.

“It’s always good if we pull cost of production out of the system. On top of that, if we get better resource utilization, it lowers our carbon footprint. Given the era we’re living in, where cattle are in the crosshairs of being part of climate change and we want to be part of the solution, that’s a good story to tell.”

Feed Efficiency and the Commercial Beef Producer

Up to now, there has been little incentive for cow-calf producers to select for feed efficiency because there hasn’t been a good way to monetize it.

That’s certainly true if you sell your calves into a commodity market. But just like proper health management on the ranch, there are potential premiums for cattle with a genetic ability to convert feed to gain more efficiently while still producing high-grading carcasses.

According to Dr. Bob Weaber, professor and head of the Eastern Kansas Research and Extension Centers with Kansas State University, the heritability of feed efficiency is around 0.3 to 0.4. That makes it moderately heritable, much the same as the production traits of weaning weight, yearling weight and carcass characteristics.

Given the remarkable improvements the beef business has made in increasing upper two-thirds Choice and Prime carcasses, it’s clear the same genetic strides can be made in feed efficiency. But you can’t capture that value if you sell your calves at weaning.

Fortunately, there are value-added programs that allow cow-calf producers to capture the carcass value they’ve bred into their herd. The benefits of feed efficiency flow to all cattle, whether they’re marketed conventionally or are in value-added programs, says Jerry Wulf, a Morris, Minn., cattle feeder, cow-calf producer and seedstock genetics supplier. That’s because, in today’s marketing environment for cattle feeders, feed efficiency is the number one driver for potential profitability.

However, when feeding cattle for value-added programs that don’t allow production technologies, genetics, specifically better feed efficiency genetics, is the only lever to pull, he says.

So how can a cow-calf producer make money by selecting for feed efficiency? One way, according to Wulf, is to become part of a value-added program that rewards more efficient cattle that also produce the upper two-thirds Choice and Prime beef that consumers demand.

The other is to work with feedyards in producing the type of cattle they demand and will pay up for. “Work with a genetics supplier who is measuring individual feed intake and producing bulls with the genetic potential to increase the feed efficiency of your calves,” he says.

“And if you aren’t owning the cattle all the way to harvest, work with a feedyard and start building a history on your calves and how they perform. Track improvements from year to year so that you’re able to capture that value.”

That can be best achieved with crossbreeding, says Dr. Kee Jim, CEO of Feedlot Health Management Services. There’s no question the genetics exist to produce Yield 1 and 2 cattle that marble well. “Generally, that’s most easily achieved through crossbreeding (a Continental breed such as Limousin or Lim-Flex on British-based cows) to get the maximum combination of a balance between gain, feed efficiency and carcass.”

According to the North American Limousin Foundation, the Limousin and Lim-Flex marbling EPD value has improved 0.25 to 0.35 over the past five years. What’s more, Limousin and Lim-Flex cattle have achieved this improvement while still maintaining a significant lead on ribeye and backfat EPDs. That gives Limousin and Lim-Flex actual retail and cutability advantages. And that’s a win-win all around.