Custom Cattle Feeding Services

& Cost of Gain (COG)

The following discussion will help you understand the custom cattle feeding fees and what it will cost to feed cattle to market. There are many variables to the final outcome and Cost of Gain (Total of all feedlot-related costs (feed, yardage, processing, medicine, death loss) divided by total gain during the feeding period). If any of these terms are unfamiliar to you within this discussion please visit the Cattleman's Guide to Feedlot Lingo.

Typical Custom Cattle Feeding Charges

• Feed

• Vet/Medicine

• Yardage

• Cattle and Feed Interest

• Processing

There is generally a mark-up on feed of around 10%. Vet/Medicine fees may or may not include a processing/chute fee of $1.00 per head, otherwise Medicine fees are priced at market value. Yardage will run around 28 to 32 cents per head, per day. The industry average for Custom Cattle feeding fees (excluding feed/cattle) are around 32 to 34 cents per animal per day. Not a bad deal if you consider that it costs an average American at least $40 per day for a roof over their head and no maid to serve you breakfast, lunch, and dinner.

 

*chart based on average performances and assumptions

Delivery Weight	Gender	ADG	Vet/Med	Conversion Spring	Conversion Summer	Conversion Fall	Conversion Winter	Out Weight	DOF
400-450	Steer	2.80	20.00	5.24	5.19	5.16	5.24	1250	295
451-500	Steer	2.80	20.00	5.24	5.23	5.18	5.24	1250	277
501-550	Steer	2.80	20.00	6.24	6.26	6.17	6.17	1250	259
551-600	Steer	2.80	15.00	6.24	6.26	6.17	6.17	1250	241
601-650	Steer	3.00	12.00	6.29	6.30	6.21	6.23	1250	208
651-700	Steer	3.20	12.00	6.32	6.39	6.34	6.32	1250	180
701-750	Steer	3.40	9.00	6.38	6.44	6.43	6.36	1250	154
751-800	Steer	3.40	9.00	6.48	6.54	6.53	6.46	1325	162
801-850	Steer	3.50	9.00	6.63	6.69	6.68	6.61	1325	143
851-900	Steer	3.50	9.00	6.73	6.79	6.81	6.74	1325	129
451-500	Heifer	2.40	20.00	6.22	6.18	6.18	6.22	1175	292
501-550	Heifer	2.55	20.00	6.52	6.52	6.48	6.48	1175	255
551-600	Heifer	2.60	15.00	6.52	6.48	6.48	6.48	1175	231
601-650	Heifer	2.60	12.00	6.52	6.48	6.48	6.48	1175	212
651-700	Heifer	2.80	12.00	6.48	6.52	6.48	6.48	1175	179
701-750	Heifer	3.00	9.00	6.58	6.58	6.58	6.58	1200	158
751-800	Heifer	3.10	9.00	6.68	6.72	6.68	6.68	1200	137
801-850	Heifer	3.40	9.00	6.83	6.87	6.83	6.83	1200	110

Average Daily Gain (ADG): Average weight gained per day throughout the feeding cycle

Conversion: Dry Matter; how many pounds feed to convert into one pound of gain

Days on Feed (DOF); How many days, approximately, the feeder calf will be on feed

vet/med; the amount of actual medicine and hospital time, within the age/weight class.

As you read the chart above, notice the different values assigned to each category. The chart is broken down into weight classes, gender, projected health costs, seasonal feed conversion measurements, out weight and days on feed (DOF). Notice the significant differences of Conversion (how many pounds of feed to gain one pound on a dry matter basis) as you move down the list and from season to season. Younger/lighter weight cattle feed intake is less than the heavier cattle feed intake, although, lighter cattle gain fewer pounds a day (ADG) than older/heavier weight cattle. Gender plays a huge factor as well. Heifers do not gain as many pounds per day, nor are they as efficient feed converters. Also notice, the younger/lighter weight animals take longer to feed and they do not weigh as much at market time on average. These chart figures are examples and one must take into consideration genetics, previous owner's management, and the condition of the cattle upon arrival to the Feedyard. Some cattle may perform significantly better; some significantly worse.

The chart below shows the potential Cost of Gain for cattle based on the Delivered Weight of the cattle, Gender, Cost of Cattle, and the season of Feedlot Placement. Variables are held constant (interest, 8.25%; yardage, $0.30 per head/day; Conventionally Fed; Death loss,.0025%; and Corn, $2.25/bushel). The incoming cattle cost per hundred weight starts** at $135 to $101, with a $3.00 to 5.00 slide assigned to the heifers.

Delivery Weight	Gender	Cattle Cost	COG Summer Placement	Market Month	COG  Winter Placement	Market Month
450	Steer	608	45.37	Mar-May	45.08	Nov-Jan
600	Steer	750	50.16	Jan-Mar	49.77	Jul-Sept
750	Steer	863	50.24	Nov-Jan	50.19	Apr-Jun
850	Steer	935	51.48	Oct-Dec	51.43	Apr-Jun
500	Heifer	655	54.24	Mar-May	54.24	Aug-Oct
650	Heifer	787	50.16	Jan-Mar	49.90	Jun-Aug
825	Heifer	833	50.78	Nov-Jan	50.86	Mar-May

Again, these are average COG values. Notice that it costs less per pound to feed the lighter weight cattle, but fewer pounds are gained per day and you keep them in possession longer. In today's cattle feeding world, if you were to buy a 450 pound moderate sized and moderate flesh condition it would cost you approximately $608.00 for the animal and $360.64 (45.08*2.8*286) to feed that animal to fat market weight. The total cost of each animal within the enterprise would be $948.27 while your breakeven would be $77.45 per hundredweight. (Breakeven is simply the sum total of all costs, cattle, feed and care, divided by the projected market weight of the feeder calf.) On the other hand, if you purchased an 850 pound steer at $935.00 and put $245.04 (51.48*3.5*136)in feed and care, your total enterprise cost per animal would be  $1180.04 with a breakeven of $89.85 per hundredweight.

As with buying a house, your biggest cost in your cattle feeding enterprise is the cattle themselves. The cost of feed and care are approximately a third of the total enterprise. You must also consider the bottom line first and foremost. It may cost less to purchase and feed the lighter weight animal but what if the light weight animal was projected to be marketed in July. The July Live Cattle Futures Board projected fat cattle to be worth $78 and your breakeven on the light cattle was $77.45. Those cattle are priced at breakeven without much regard given to the basis. The basis is the difference between the future's price on the Chicago Board of Trade versus the cash price of a particular location. For simple figures, the basis is generally $1.00 below the board (nearest futures month).

On the other hand, the cattle you purchased at 850 pounds were projected to be marketed in February, while the Live Cattle Futures quoted $93.00. Your potential profit would be around $26 per head. If you are financing the cattle with $150.00 up front equity, that is a fairly decent return in 4 or 5 months time.

Also note, a good custom feedyard will keep the death loss down to an average of fifty to a quarter of a percent (.0050 to .0025%), but there are always risks that the cattle can die while they are on feed. The typical reasons for death are respiratory (pneumonia) and bloat. The custom feedyards in this program have quality pen riders who catch sickness early. They also have "hospital" facilities for adequate treatment while segregating healthy animals from the sick.

Always remember, when you are dealing with mother nature and a biological animal, there will be variations. That is why we look at averages and never assume that just because cattle performed well one year will they perform that way every year. With market volatility and performance variability...it is very important for risk management. Those who agree to a risk management strategy will be in business for years to come. Those who don't might make a home run hit one year and lose everything the next. For more information on Risk Management, please view Iowa State University Extension and the Chicago Mercantile Exchange discussions for a broad overview in the following links.

<<<Back to Round Table Feedlot Directory

 

• Cattleman's Guide to Feedlot Lingo

• Industry History

• Links and Resources

• FAQ's

• View our Cost of Gain discussion.

• Chicago Board of Trade Feed Cost Risk Management Discussion (PDF)

• Risk Management For Cattle Feeders Using Options (PDF), ISU Extension

• Risk Management For Feeders Using Futures and Forward Contracts (PDF), ISU Extension

**Cattle prices are determined by supply, demand, future expectations and the assumed feed costs.