Weigh backgrounding challenges
When looking at whether it would be profitable to background beef calves this year, consider several factors, including:
• Backgrounding has been profitable in three out of the last five years.
• Profits have averaged $24.57 per head for the last five years.
• Several factors will affect your backgrounding decision this year.
- Prices. Feeder cattle had posted contract highs earlier this year, but the drought situation has caused commodities such as corn to move to higher levels, which in turn has lowered the cattle prices. Cattle had moved into feedlots earlier this year due to the droughty conditions.
Number of cattle has not changed from inventories posted by USDA, which showed the lowest number since the 1950s. Higher feeder cattle prices are forecast going into the first quarter of 2013.
- Feed availability. The amount of hay and roughage available will be spotty for many producers. They must also consider the question of what will be the costs of any grain and protein needed for the enterprise.
In the case of homegrown grains and feedstuffs, this is an opportunity to add value to those items, particularly for those not easily marketed.
- Other. Other issues for consideration should include the availability of labor, having adequate feedlot space, and the individual objectives of the producer.
- Profit potential. Doing a partial budget should help answer the question of potential returns based on the value of the calves at the time of weaning, the expected rate of gain and the future selling price. Adding value to the animals in your herd should be a main objective to increasing the profitability of the cattle enterprise.
You can find a budget worksheet for Excel at www.ag.ndsu.edu/livestockeconomics under “Backgrounding 550 lb. steers.”
Information on breakeven prices for feeding various weights of calves at different beginning values, along with assorted rates of gain with varied feed prices, can be found at ndfarmmanagement.com under the resources and tools section.
Data from the state report of the North Dakota Farm Business Management Education Program over the past five years suggests a background feeding operation was profitable in the past three years. The average profitability realized in the past five years was $24.57 per head.
The profitability realized by each producer will largely depend on his own cost of producing the additional weight.
Additional information on costs and returns for backgrounding cattle can be found on the Web at www.finbin.umn.edu.
Graner is a North Dakota Farm Business Management instructor, Dakota College at Bottineau, Rugby, N.D. Call 701-776-5095 or email [email protected].
This article published in the October, 2012 edition of DAKOTA FARMER.