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Feeding vs Calving Economics

3K views 4 replies 4 participants last post by  bent 
#1 ·
How in the heck do feedlots make money?


I sell about 1/2 my calves as feeders, the other 1/2 are either kept and raised as replacement heifers or freezer beef for the family and for sale.


Spring calves from 2013, sold in December of '13, I averaged about $1025 a head. The other half of that batch I'm selling off now I'm getting $12-1400. I can't see raising my beef price much, I'll lose customers and I'll end up trucking them to auction (the $1200 end of things). I also ain't feeding a critter for a year for less than $400!!! At least if you consider the opportunity cost of selling the feed rather than my production cost of making it.....But a feedlot buys feed?!?!?!


I purposely went back to 2013 calves, as the price I got for 2014 calves was stupendously high!


As Dad gets older, I get older, the kids move away...I was thinking of getting out of calving and just feeding. But how?
 
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#2 ·
I have wondered that for years. Always sold the calves as feeders, and has worked very well for me. My calves the first week in December averaged $1700/head, steers and heifers, after commission. How do the feedlots make a go at it? I sure hope they are happy at the end because I am, it takes two to tango though.
 
#3 ·
Feedlots work on volume and the availability to sell when the market swings. As well, that is their business and their system is honed to the least cost per lbs gained. Us farmers look at $300 a calf return and $100 dollar profit as piddly for a hundred calves but a feedlot thinks that's alright because they have 5000 or more calves. It's all volume.
 
#4 ·
Well, it's all volume.....at more volume by my math I'd lose more money. The ability to leverage your volume to your benefit and buy and sell when best can help yes. I'm getting 3 - $500 a calf return GROSS without feed, water, veterinary, and housing costs.

cptusa, I also got over $1700 a head this December. By that standard, I fed a critter an extra year for negative $400 a head.

I was thinking, if I calved on farm and raised them all to finish, it is crazy negative on the cash flow. In essence, on a yearly cash flow basis, you have 3 mouths to feed to sell 1, you have the mother, the current year's calf, and the finished calf. You gain a little selling cull cows, say 10% of the herd. But you lose the same raising heifers. You also have mother and calving losses, a bull......

I'd have no "entry costs". I would simply keep the calves and sell, then buy.

Honestly, making hay, fencing, calving while working off farm.....I can't see it continuing for very long. Sure love the taste of home raised beef though! I'm spoiled. I'd like to keep some livestock on the farm....but I don't have money to throw away.
 
#5 ·
Mostly, there are two kinds of feedlots. There are custom feeders, which only feed others calves for a fixed price per day. And there are packer owned feedlots. The packer just uses the feedlot as a holding facility for the slaughter house.

It seems often when a custom feeder sees lots of empty pens and buys cattle with his own nickle to fill the pens there is a bankruptcy coming.

Most of the feedlots are packer owned, either on paper or through some non-public arrangement. That way when the independent feedlots get some backbone and hold out for higher prices the packer stops buying and kills his own cattle until the independents cry "uncle".

The only true competition in the livestock markets is the feeder calf market. You cow calf guys need to embrace the auction markets. Hogs lost it 20 years ago.
 
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