As demonstrated the last couple of weeks, in the report http://www.cabpartners.com/news/research/CABProfitProfiles.pdf" target="_blank">Profit Profiles: Factors Driving Cattle Feeding Profitability from Professional Cattle Consultants (PCC) the most profitable pens of cattle are associated with fast gain, heavy carcass weights, and high quality grades.  However, with each of these characteristics, there is a point where returns diminish, and a threshold where too much of a good thing may not be that good.  A few thresholds where profitability ceases to improve and actually gets worse are listed below.

• Out Weight: Profitability increased substantially until final weights reach around 1,400 lbs, and once final weights reached about 1,500 lbs, the number of lots with Low profitability increased markedly.
• Average Daily Gain: Similarly, profitability increased as ADG increased, until about 4.3 lb/d.  The number of Low profitability lots that gained 4.3 lb/d or more increased.  This is related to final weight and carcass weight, and these high performing cattle just got too big and received significant discounts on the grid.  Likely, these cattle outperformed their expectations, were marketed too late, and may have been more profitable if marketed at a more optimum endpoint.
• Quality Grade: The top 1/3 most profitable lots of cattle had a higher percentage of cattle that graded US Choice or greater.  As cattle reached higher quality grades, they did not tend to decrease in profitability.  However, about 30% of the pens of cattle that graded 90% Choice or higher were in the low profit group.  It is against common thought to think that high grading cattle gain well, but in the PCC analysis, ADG was positively correlated with quality grade (as ADG increased, quality grade improved) until the pen reaches 70 to 75% Choice.  At that point, ADG gets worse as quality grade improves. 
• Quality Grade Part 2: In relation to Quality Grade, another important threshold is on the bottom end.  In general, the percentage of cattle grading Choice had to exceed 50% for pens of cattle to get out of the low profit group.

The PCC analysis certainly pointed out some factors related to profitability of fed cattle that make sense and some that do not make sense without further consideration.  The trends presented are not a failsafe to making money in cattle feeding as many factors including markets, risk management, and the environment impact profitability.  In general, feeding cattle to an end point that is slightly beyond what is expected – a little heavier, and a little more finished – tends to improve profitability.  Some discounts for Yield Grades 4 and 5 or heavy carcasses may also be tolerable as long as profit of the total pen is improving.  Adjusting to market conditions, being able to narrow variability in a pen, and properly identifying when the pen is at the optimum endpoint are important skills for a cattle feeder to hone.

For more information, contact Ben Holland (605-688-5460).