Backgrounding

Knowledge Nuggets

Doing a breakeven analysis can help you decide whether to sell or buy cattle and how long you should keep the calves you have. Breakevens are easy to calculate. Use your personal numbers and use current market values, not generalizations.

Knowing your costs of production is essential to know if your selling price is good enough to successfully market your cattle.

If you are only doing the work of a hired hand, don't expect a manager's wage. If you want a manager's salary, spend most of your time doing the work of a manager.

Don't forget that feed produced on your land, whether it is grass, hay, silage or crop residues has a market value. Assign these values to your business, so you can begin to evaluate the value of your forage business.

As shrinkage increases, the potential for improving net returns from calves, feeders and fed cattle decreases. Shrinkage can be reduced by minimizing animal stress during handling, transportation and arrival at the auction market, feedlot or packing plant.

Before investing in grass cattle, calculate your margin and return on investment. This will allow you to make a better informed decision and increase the likelihood of making a profit. Watch for price breaks with grassers. There is often a major price point in the 7-8 weight range that can seriously erode any profit potential.

By separating your business into profit centers, you can allocate associated costs and profits in order to evaluate winners and losers. This separation will give you direction when deciding on future ventures or how to scale down your operation.

Track the profitability of your herd size. Bigger is not always more efficient. Knowing what herd size creates the most efficient use of your resources is important to increase profitability.

Each individual or business unit should identify and commit to writing goals. A goal is simply a statement of what an individual or business wants to achieve in the future. Three specific goals should be written for each beef business: 1] resource management goals, 2] personal goals, and 3] business goals. By writing these goals down, future management decisions become much easier.

Risk is a part of every business. Identify and understand the risks your business can and does face and plan how you will deal with them.

There are seven steps to marketing: 1] know your costs, 2] gather market outlook information 3] know your product, 4] set several target prices, 5] evaluate pricing and delivery alternatives, 6] stick to your plan, and 7] evaluate your plan. Don't skip a step, even if it requires extra time.

There are four main types of markets that producers can access. These include direct sales (farm gate and feedlot direct), commission sales (auction market), direct sales with commission (e.g. ranch sales, electronic auctions) and forward contracting. Understand what is involved in each of these methods, and decide which works the best for the product you offer.

There are seasonal effects on the pricing of different ages of cattle. Be aware of this and try to match the animals you sell to the best seasonal price for that class of animal.

Fact Sheets

Breakeven Analysis For Feeder Cattle

Calculated Yardage Expense

Custom Pasture Agreement - available in PDF format only

Farm Gate Values for Farm-Raised vs Purchased Calves

Grass Stocker Worksheet

Guidelines For Estimating 2003 Backgrounding Costs

Guidelines For Estimating Beef Grassing Costs

Rancher's Return Spreadsheet - Cow-Calf and Backgrounding Analysis Tool

2003 Guidelines For Estimating Shortkeep Feeders

Research Papers

Economics of backgrounding calves on Italian ryegrass (Lolium multiflorum) pastures in the Aspen Parkland - available in PDF format only

Let us know of more good research papers for this topic.