High energy feed such as grain corn is most often used in finishing rations for beef cattle. However, other feeds, generally in combination with corn or corn products can also be used. The issues this year are cheap corn (currently valued below cost of production) and relatively strong replacement prices, particularly for light weight grass type cattle. Other factors to consider when making purchasing decisions are a potentially weak summer fed market and a high Canadian dollar. Some would argue cheap feed and green grass means expensive replacements thus evaporating any potential profit.

Let's start by looking at feedlot performance and cost of production (COP).

In its simplest form the profit equation is:

Profit = [Price Received - Cost of Production] x Volume.

Many feedlot operators aim for a gain of 100 lbs/month, or an average daily gain of 3 lbs. or better per animal. For lots of reasons there can be a great range in gain or performance of feedlot cattle. This in turn affects cost of gain, breakeven price and potential profit.

Healthy cattle fed a balanced, quality ration, combined with the right genetics and body condition, are the keys to high performance. Youthful cattle that have the potential to perform well, are worth more when purchased by feedlot operators. Cow/calf operators and backgrounders should always remember this!

Feed (despite low corn price) is still the single largest expense when calculating cost of gain. The following example looks at a typical high energy corn diet and ration cost.

As indicated in Table 2, the price of corn can have a huge impact on cost per pound of gain.
Other costs such as yardage, health, marketing and interest can easily account for another 25¢ per pound of gain and have to be included to calculate Total Cost of Production.

The fall of the year is the time when most calves and yearlings are sold and purchased. The following three charts look at the potential breakeven sale price based on purchase price and cost of production. If you know your COP, then these charts can be used as a tool to help determine the economics of feeding cattle.

*Example: The highlighted breakeven sale price of $1.04/lb is based on COP of $0.75/lb of gain and a purchase price of $1.20/lb

*Example: The highlighted breakeven sale price of $1.06/lb is based on COP of $0.75/lb of gain and a purchase price of $1.30/lb

Points to Ponder ……OTM (Over Thirty Months) cost to beef producers

For further information on using budgets to calculate your cost of production, refer to our website http://www.omafra.gov.on.ca/english/busdev/bear2000/Budgets/budgettools.htm

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