Economics of finishing cattle are mainly driven by what you sold fat cattle for minus what you paid for the feeder calves and your costs to feed, care for, house and sell them, including expense of capital.
According to Kansas State ag economists, 98 percent of variation in fed cattle profit can be explained by sale price, feeder price, price of corn, interest, feed conversion and daily gain. Sale price (50.7 percent), feeder price (27.2 percent) and corn price (16.7 percent) account for well over three-fourths of that – thus we have an industry segment that must focus greatly on procurement and marketing.
Set against that backdrop, average daily gain (ADG) and feed efficiency may have a lower percentage effect on gross profitability. However, in an era of thin margins, their impact on net profit may mean the difference between red ink and black ink on the bottom line.
Managing the risk
The genetic and nutritional background of feeder cattle is managed through decisions on nutrition (feeds used, mixed and delivered), response to weather, health challenges, variations in cost of grain, hay and supplement, death loss and market prices.
Net profit of feedlot steers is influenced by feed efficiency, marbling score, dressing percentage and weight (both live and carcass). Therefore, groups of cattle with high performance on these traits have more profit potential than low-performance cattle, and possibly even greater value than pens of cattle composed of both high- and low-performing animals.
Steers with high genetic power spend fewer days on feed because they gain faster, eat less total feed (because of fewer days in feedlot), and this results in a better feeding margin. Currently available to the feeder are DNA data on such traits as residual feed intake (RFI)/feed efficiency, docility, marbling, backfat, ribeye area and tenderness.
The advent of affordable DNA testing for selection of breeding stock and cow-calf production means feeders also can use the data to buy and group cattle into genetically uniform lots. So how much variation is there? The answer is, more than you may think, even within breeds (Figure 1).
Predicting performance
Variation in genetics of cattle headed for the feedlot has been managed to some extent via procurement and reputation of the supplier. Performance is assessed after the fact by combining health feeding records, carcass and other data.
The advent of DNA testing creates an opportunity to use predictions for multiple traits from a single report, based on unchanging DNA, and to make decisions before cattle are purchased or sorted.
As an example of how genomics may be used to predict performance of feeder cattle, we used data from two Western ranches on the Igenity beef dashboard database. (The animals are scored on a 1-to-10 scale.) We sorted them into the top and bottom 25 percent of feeders.
Figure 2 shows the high-power genetics (top 25 percent, 508 animals) have a much higher gain (8 versus 3.5), marbling (8 versus 4.5) and a lower RFI (5 versus 6.5; eats less feed) than the lower genetic power feeders.
Using DNA scores for three key traits, an index was developed and the traits in the index were weighed as follows: ADG 34 percent, marbling 33 percent and RFI 33 percent. The index differentiated high-power genetics (7.3 score, more profitable) from lower-power genetics (5.3 score, less profitable). The result is around $35 per head difference (Figure 3).
Cattle coming from more diverse sources would be expected to have even greater variation.
In Table 1, economic assumptions were based on:
- Initial feeder price for 700-pound feeder (7 x $160 per hundredweight) = $1,120
- Sale price of 1,400-pound finished animal = (14 x $120 per hundredweight) = $1,680
- Cost of feed, $ per ton DM = $190
- Average daily feed intake, as-fed basis = 23.4 pounds per day
- Estimated ADG = 3 pounds per day
These results are born out in real-world validation. A recent South Dakota study by the Red Angus Association showed a $50.60 per-head advantage between high- and lower-power cattle in a group of about 100 head.
The top 25 head versus the bottom 25 head were compared using DNA scores and then with actual carcass results. The higher-power genetic animals had higher DNA scores for daily gain and marbling than lower-power feeders. In the carcass test, the top end reached high Choice-quality grade (68 percent versus 48 percent) to a greater degree than the lower-power animals.
A win-win
DNA data has the potential to identify high-power genetics and offer a way to presort on the ranch prior to entering the feedlot. The industry is using several approaches to apply genomics in the feedlot sector, but we are probably just scratching the surface. There are several ways those selling and buying calves can use DNA data to create win-win situations.
Innovative supply-chain programs, such as Top Dollar Angus, are utilizing average DNA scores of replacement heifers as a tool to certify the quality of their steer mates. This provides a thrifty second use of DNA test results.
In other cases, seedstock breeders are buying back feeder calves from producers who buy their bulls. This enables them to affirm the quality of their genetics, plus capture the added value of quality cattle in their own feeding programs.
While the beef industry has been gradually adopting genomics, our friends in the dairy business are rapidly moving ahead.
In a widespread practice, genomics are used to stratify dairy replacement heifers. The higher-end dairy heifers are bred for milk production while lower-end dairy heifers are bred to beef bulls. The resulting half-dairy/half-beef progeny are sold as feeder cattle.
These dairies are making very rapid gains in genetic improvement, plus adding value to their calf production. This trend was recently cited in presentations at the Beef Improvement Federation and was of much competitive interest to many in the seedstock field.
To design genomic programs for conventional feedlots, cow-calf producers who use genomics to select their future cows and buy bulls have DNA data, which can be used by enterprising feedlot managers to sort and finish cattle. DNA may also be useful in fat cattle marketing as the same genetic code will govern lean gain, deposit of fat, ribeye size and tender cuts of beef.
Also, scientists are working on other significant areas in health management, feed efficiency, rumen microbiome genomics and future innovations that will create value in the cattle-feeding industry. 
John Paterson is also a professor emeritus from Montana State University with a Ph.D. in beef cattle nutrition.
PHOTO: Access to genetic and nutritional data on feeder cattle could help feedlot operators make more informed and less risky decisions on sale day. Staff photo.
-
John Paterson
- Territory Manager
- Neogen GeneSeek
- Email John Paterson
