Is it Profitable to Pasture Yearlings?
Agricultural land in Ontario is a valuable resource. Beef farmers must consider what the best option for its utilization is for their situation. If they have land that could grow annual crops, the plow may be preferred over the cow. Another option is to increase the cow herd to its maximum given the available land base (provided the number of birthings is not already the limiting factor). Or they could custom graze for other producers. The alternative which will be explored here is to use the land to pasture yearling cattle, either their own retained calves or purchased yearlings.
Compared with stored forages and grains, pasture is generally considered to be a low cost source of feed for beef cattle. With perennial pastures, the cost of equipment use for tillage and seeding is minimal over the life of the stand, and little herbicide is required. And if the legume content is significant, fertilizer costs are also low. The fact that we rely on animal power to harvest the feed and spread manure is also a plus. So using pasture as the feed for growing yearling cattle looks promising … but we have to closely examine whole budget picture. The following is intended to help producers make the best decision possible when considering whether or not to pasture yearling cattle.
Pasturing yearling steers provides an option for cow-calf producers to add value to calves they have retained, or for grass farmers who want to buy yearling cattle in spring, grow them on pasture, and then sell them as shortkeeps. The math may look easy at first glance, but we have to take into account all of the costs involved, including establishing and managing pastures, as well as animal costs such as fly tags and salt and mineral. Of course, another major factor impacting on profit is the revenue returned by the cattle. This is affected by the weight gain of the cattle as well as their off-pasture sale prices.
The following economic analysis is based on a Pasture Yearling Decision Guide (Excel spreadsheet). In this example, it is assumed that 725 lb steers go on pasture for 120 days, with an ADG of 2.0 lbs/day, and are sold off pasture at 965 lbs. Budget details are shown in Table 1.
|On-pasture price range||$1.00 - $1.80 /lb|
|Off-pasture price range||$0.80 - $1.60 /lb|
|Health and Vet||$5.00 /hd|
|Marketing / Trucking||$40 /hd|
|Fly tags||$4.00 /hd|
|Interest rate||4.0 %|
|Stocking rate||1.0 ac/hd|
|Maintenance /repair||$5.00 /ac|
|Cost per lb of gain||$0.43 /lb|
*On wt.=725 lbs, Off wt.=965 lbs, 120 days
Multiple scenarios were run to calculate the Net Margin which would result from various combinations of on-pasture and off-pasture prices. The procedure involved fixing the on-pasture price and then running a series of calculations with different off-pasture prices. The results were plotted on a graph (Fig. 1) to allow visual interpretation of the data. The resulting Net Margin values are measures of the amount of money which would be gained (or lost) from pasturing yearlings and selling them at 965 lbs, compared with selling them at 725 lbs prior to the pasture season.
There are 3 steps in determining whether you should pasture yearlings or not:
- Determine the price per pound you expect to be able to sell your overwintered stockers for in spring (or price you will pay if you are purchasing grass cattle). For this example, we will use $1.20 /lb as the price per pound for 725 lb stockers.
- Estimate the price that you expect to get for these animals if you pasture them and sell them in the fall. This may require a little more analysis to determine. One way to project the selling price in spring is to look at live cattle futures prices as an indication*. For this example we will predict the price for 965 lb shortkeeps in fall will be $1.15 /lb. (This is a price margin of $-0.05 /lb)
- Use the net margin graph below to determine if pasturing yearlings are expected to produce a gain or loss.
Using the Net Margin Graph
In this example, it is expected that 725 lb spring stockers would sell for $1.20 /lb.
- Locate the $1.20 on-pasture stocker price line (diagonal) on the graph (Fig 1).
- Now you have to estimate what price you would receive for those animals if you place them on pasture and sold them as 965 lb shortkeeps in the fall. In this case, we estimate that those shortkeeps will be worth $1.15 /lb. Locate that price on the horizontal axis on the graph, and draw a vertical line up until it touches the $1.20 stocker line.
- From that point, draw a horizontal line across to the Net Margin scale. In this case, it crosses that scale at the $50 point. This means that pasturing these yearlings and selling them in the fall would create an additional $50 of added value per head, therefore pasturing would be a profitable option.
The dotted green line on the graph indicates a Net Margin of zero, also called the Breakeven level. This occurs when the additional revenue from pasturing stockers is offset exactly by the additional costs incurred.
In these calculations, pasture and animals costs (including interest) have been taken into account, but not additional labour or risk. There can be wide variation in pasture conditions and productivity due to variables such as land type, fertilizer amount and cost, and grazing management.
In these examples, pasturing yearlings was always profitable when the margin between off-pasture price and on-pasture cattle was zero or positive [margin = off pasture price -on-pasture price]. When off-pasture price was $1.20 or greater, pasturing was profitable when the price margin was $-0.10 or less. At an off-pasture price of $1.60, a price margin of $-0.20 resulted in a breakeven situation.
Using a decision making tool such as this can help producers minimize risk and maximize profit potential when evaluating whether or not to pasture cattle.
Chicago Mercantile Exchange Feeder Cattle Futures
For more information:
Toll Free: 1-877-424-1300
|Author:||Tom Hamilton - Beef Program Lead - Production Systems/OMAFRA|
|Creation Date:||17 October 2012|
|Last Reviewed:||11 February 2016|