FAQs

Cost of gain is figured by dividing the total cost by the total pounds gained. If your total cost to feed your cattle from 600 lbs. to 1,200 lbs. (600 lbs. gain) was $356.94 per head, your cost of gain would be 59.49 per pound ($356.94 total cost divided by 600 lbs. gain). Feedyards can estimate the cost of gain on your cattle, but normally will not guarantee a cost of gain because of the many factors that affect the bottom line — many of which the feedyard has little control over.

Breakeven is the figure that tells you at what price you need to sell your fed cattle in order to break even on the transaction. It’s a simple division, taking the estimated cost to produce a fed animal divided by its expected endweight. Feedyards can predict fairly accurately what the feed bill, medicine bill, interest and other expenses will be and estimate a breakeven on your calves. As an example, assume you purchased 600 lb. calves at $1.09per cwt. with a 3% pencil shrink for an average cost per calf of $634.38. Other costs are estimated to total $356.94 for total expenses per head of $991.32. If the calves weigh 1,200 lbs. when sold to the packer (including a 4% pencil shrink), the breakeven is $82.61 ($991.32 divided by 1,200).

Most feedyards feed cattle twice a day, some three times. An employee called a bunk reader drives the feedyard and checks consumption on every pen. The bunk reader then adjusts the amount of feed given to each pen to ensure no feed is wasted, yet the cattle receive all they can eat. Electronic scales on board the feed truck weigh the feed given to each pen to ensure you’re only billed for the feed your cattle are given.

Feed costs represent 70% to 80% of the total cost of gain and can be reported on either a dry matter or as fed basis. Feedyards generally price feed ingredients into the ration at cost and add a “markup” to cover operational costs. Ration costs, usually priced per ton, vary from feedyard to feedyard, with moisture and net energy levels accounting for most of the variation.

The amount of time your cattle spend in the feedyard depends on how much they weigh coming in, their rate of gain and mature size potential. Feedyards feed cattle to finish around 1,100 to 1,200 lbs., the weight that packers prefer. A 600 lb. steer that gains 3 lbs. per day will be on feed 167 days to reach 1,100 lbs., while a 750 lb. yearling will be on feed 133 days to reach 1,150 lbs.

While that question is impossible to answer down to the penny, there are seasonal movements in the fed cattle market that affect price. In addition, the price for fed cattle is affected by total cattle supplies and supplies of competing meats.

Most feedyards offer risk management help for their customers. While using options and futures can’t guarantee that you’ll lock in a profit, they can help you manage your investment by protecting you from downside moves in the market and give you an idea about your income at the end of the feeding period.