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Capturing the Value of Preconditioning
Preconditioned calves add value for buyers and sellers
CHRISTIANA, Tenn. (Nov. 6, 2009) – In today’s feeder calf market, preconditioned calves are the standard versus the exception. However, there is more to capturing value in the market than simply giving vaccinations and weaning.
“Sellers need to look at opportunities in the market to capture the most value for preconditioned calves,” says Robin Falkner, Pfizer Animal Health managing veterinarian. “There is a premium in the market for calves that go through a recognized, branded preconditioning program. It’s up to the seller to market those calves to capture the most value.”
Falkner points out that a significant number of calves are born in the spring of the year and marketed in the fall of the year. Seasonal trends show higher feeder calf prices in September and early October than in late October through December.
“The premium for preconditioning is diluted because of too much supply and not enough demand,” explains Falkner. “There is greater demand for preconditioned feeder calves at the beginning of the fall run because pens are empty and feeders are looking to fill those pens.”
Falkner says that preconditioned calves are important to the market to move cattle through the system. He explains that when you look at the business model for stockers and feeders to operate profitably and efficiently the first bottleneck in the system is with the amount of time, labor and facility space available to get calves started.
Efficiency & Predictability
“Calves that aren’t weaned and haven’t been through a preconditioning program require additional labor, time and facilities to get them started,” says Falkner. “Preconditioned calves are more efficient and more predictable.”
“The predictability and peace of mind that comes with preconditioned calves lets us really work our business model,” says Falkner. “To really make the model work, you need to be able the purchase the cattle you need in a timely manner. If you are already busy treating sick cattle or using additional resources to get calves started, then it is a struggle to get the grass stocked or pens filled.”
Capturing the Most Value
From a seller’s perspective there are several ways to capitalize on an established health program and solid preconditioning program. “A producer won’t capture the full value of a branded preconditioning program if he doesn’t follow through and market the cattle,” says Falkner. “You can’t just drop them at the sale barn with a statement of, ‘the calves have all their shots’, and think you will get the highest price for them.”
“You need to look at opportunities in the market cycle to capture the most value,” says Falkner. “Markets tend to trend down in November and December and along with it the premium for preconditioned calves. If you have a spring-calving herd, you need to get calves to market early in the fall to capture more value.”
Falkner says contracting a price early for later delivery is one option. Another option is to wean earlier and sell earlier. “We need to take the focus off of gross pounds and dollars per head and look at overall profitability of the operation,” says Falkner. “The calves may be lighter at weaning but different markets look for different weights. Wheat pasture backgrounders are looking for 400 to 500 pound calves so they might be a market you haven’t had available to you with heavier calves.”
“There is always demand for calves that have completed a name-recognized preconditioning program,” concludes Falkner. “We need communicate to the buyer that we’ve used quality products, weaned the calves and we are providing a premium product. But to garner the most value for those calves, we also need to hit the market at a time when there aren’t a lot of other calves like ours on the market.”
Pfizer Animal Health, a business of Pfizer Inc (NYSE: PFE), is a world leader in discovering and developing innovative animal prescription medicines and vaccines, investing an estimated $300 million annually. Beyond the U.S., Pfizer Animal Health also supports veterinarians and their customers in more than 60 countries around the world. For more information on how Pfizer works to ensure a safe, sustainable global food supply with healthy livestock and poultry, or how Pfizer helps companion animals and horses to live longer, healthier lives, visit www.PfizerAnimalHealth.com.
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