Why Calves Cost More than Yearlings
An agent was visiting an experienced cattle producer and was asked the following question: "Why do lighter calves bring more?"
It's a simple question, but I doubt that many farmers could easily answer it. Here is the answer, using an example:
Start with a 1200 lb. slaughter steer at $60 per cwt. It is worth $720/hd.
Now, we'll compare a 700 lb. steer with a 500 lb. steer, and we'll assume a cost of gain of about $.50 per pound in the feedlot.
So, it costs the feedlot $250 ($.50 times the 500 lbs of gain) to add 500 lbs. to the 700 lb. feeder, and it would cost $350 to add 700 lbs to the 500 lb. feeder to get it up to the 1200 lb. slaughter weight.
That leaves $470 ($720 - $250) for the feedlot to pay for the 700 lb. steer, which is $67 per cwt ($470 / 7). It leaves $370 ($720 - $350) for the feedlot to pay for the 500 lb. steer, which comes out to $74 per cwt. ($370 / 5).
In the real world, the cost of gain will be lower for the calf than for the yearling, but health costs and death loss will be higher. But this example illustrates the point -- and comes out with prices very close to current market prices.
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