“Holy Buckets!”: There’s seemingly always an exclamation of surprise when discussing current prices for day-old beef-X-dairy (BXD) calves with producers. And that’s generally followed with skepticism: “Are you sure?”
But maybe it makes more sense than we think. Let’s approach it from a cow/calf perspective to discern the value of day-old calf at the farm or ranch (versus the dairy).
Cow Cost: The obvious place to begin is allocation of cow costs. Outlined below are some basic assumptions:
- The cost meter starts clicking once the previous calf is weaned – call that day 205. Even if the cow was NOT pregnant at weaning, maintenance cost up to weaning would still be assigned to the weaned calf. That leaves us 160 days of pregnancy from weaning to calving assigned to the newborn calf.
- Assume annual $1100/cow maintenance cost – or roughly $3/day.
Total assigned cost = $480/calf
Bull Cost: This gets somewhat trickier with more room for varied assumptions. Depending on an operation’s individual budgeting, the cost may be absorbed by the annual cow cost as outlined above. However, given we’re not detailing the full year for the cow, it’s appropriate to include this as a separate item.
- Keeping it straightforward, assume a bull’s net service cost is $3,000 over his lifetime (purchase less salvage value). On average (key emphasis), his useful life will be three years. (Some bulls work much longer but others fail to ever service a cow.). Last, we’ll suppose he sires 25 calves per year. That works out to ~$40/calf.
- Conservatively assume it costs roughly $1250 annually to maintain a bull – that equates to $50/calf.
Total assigned cost = $90/calf
Interest: The current median interest rate on operating notes is roughly 8.5%. We’ll assign that rate for 160 days on the cow side and a full year on the bull side. That works out to roughly $18 plus $8, respectively.
Total assigned cost = $26/calf
Death Loss: Based on historical USDA survey data, assume 3% of calves will be lost due to dystocia and/or other causes. Another 4% are born alive but die prior to weaning. Assigning one-fourth of those post-calving losses equals 1%. Therefore, we’re left with a 96% survival rate ready for sale. That adds an additional $25/head to the cost.
Total assigned cost = $25/calf
Total Direct Costs: Based on averages, IF someone wanted to purchase day-old calves from your farm or ranch, you’d require total direct cost just to breakeven. We can fuss with the numbers here-and-there but it provides a ball-park figure of the cost assigned to every calf.
Total direct cost: $621/calf
Intangibles: But we need to stretch beyond just those considerations. IF the following things were to occur, you’d require even more dollars to ensure you’re adequately compensated for your management:
- Cows bred to known sires with propensity for superior feedlot and carcass performance;
- Ensure each calf receives colostrum AND has its navel dipped;
- Individually identify every calf with an eID;
- Ranch provides ready access to comprehensive data management system enabling potential access to sire and dam (and other pertinent) information to buyer;
- Provide easily-accessible facilities to pick calves up with minimal hassle;
- Facilitate steady, reliable source of calves year-around.
All of those items provide added value to the buyer. As a producer, you’d accordingly want to be rewarded for such. Not to mention, there needs to be some consideration for profit in all of this.
Total Assigned Cost = +$10, +$25, +$50, +More???
Bottomline: Markets are amazingly efficient. The end result is uncanny; the numbers are remarkably similar to current prices for day-old calves (i.e. sizeable quantity of high-quality, well-managed calves). And from that perspective, the two sides of the business (beef versus dairy) really aren’t all that different. I noted in a previous column that, “What used to be considered a highly discounted after-thought (straight dairy steers/heifers) is rapidly transforming into a meaningful source of production (BXD steers).” With all that in mind, perhaps the day-old BXD market really isn’t as far off-base as we might have first thought.
