The value of special calf sales

Source: Ministry of Agriculture, Food and Rural Affairs

The benefits of adopting best management practices associated with vaccinations, early disbudding/dehorning and castration, and other preconditioning criteria are well known. Castrating and dehorning at a younger age helps to reduce stress and pain to the animal, while an effective vaccination program is a critical component of disease prevention and overall herd health. These practices are necessary to set calves up for success in feedlots.

Over the summer, OMAFRA Agriculture Development Branch staff developed a set of questionnaires to seek insight into the buying preferences of cattle buyers (including feedlot producers) and the marketing and management practices of cow-calf producers within Ontario (Special Sales Analysis: Ontario Calf Buyers Questionnaire and Ontario Cow-Calf Producer Questionnaire, 2018, unpublished). In the cattle buyer questionnaire, respondents were asked to rank the factors that were most important with respect to making purchasing decisions (Figure 1). Out of the options presented in the questionnaire, calf quality came out on top, with vaccination status coming in a close second. Ninety-five percent of survey respondents indicated that they pay less for non-vaccinated cattle and 82% either strongly agreed or agreed that having the history of the performance of cattle makes accurate pricing easier.

Figure 1. Factors affecting purchasing decisions of cattle buyers.

Respondents (n=27) were asked to rank the listed factors according impact on purchasing decisions. The scale is based on a score calculated according to the ranking by questionnaire respondents. Special Sales Analysis: Ontario Calf Buyers Questionnaire, 2018, unpublished.

Preconditioning is a term that, generally speaking, refers to a set of management practices that help calves transition to a feedlot environment. By having calves dehorned, castrated, bunk trained and vaccinated prior to sale, calves are set up for better performance at the feedlots by being better able to cope with stress associated with transportation, co-mingling and the new environment. In the Special Sales Analysis: Ontario Cow-Calf Producers Questionnaire (2018, unpublished), 72% of cow-calf respondents indicated that they pre-wean their calves prior to sale. Some presale programs may not require calves to be weaned, but will still typically include vaccination, castration, and dehorning as a requirement of sale. A number of studies have demonstrated that preconditioned calves have lower treatment rates, reduced mortality, higher rates of gain and better feed efficiency compared to non-preconditioned calves. Results from a study conducted by Macartney et al. (2003) in Ontario suggest that conditioned and vaccinated calves have reduced risk of treatment for BRD (bovine respiratory disease) in the feedlot. In the study, the researchers found that vaccinated calves purchased through special calf sales were 0.68 times as likely to be treated for BRD in the feedlot as control calves purchased through conventional auctions.

Special calf sales in Ontario target consignors who adopt preconditioning/presale programs and buyers who are looking for those specific attributes in calves. In the aforementioned study, Macartney et al. (2003) found a $0.06/lb premium for calves sold at special sales compared to conventional sales through the Keady Livestock Market. There are differences between each special calf sale in the province. Some sales may require specific protocols of consignors with respect to calf management. Others may catalogue lots of calves, advertising specific presale practices adopted by the consignor(s) for each lot. Some sales will pre-sort calves for like attributes in an effort to create consistent and uniform lots, while others will maintain owner-specific lots. Thus, there is greater opportunity at special calf sales to realize better returns on preconditioning or presale programs.

Price discovery will be impacted by different conditions at each sale. Each sale has a unique set of consigners and buyers and each sale has different management requirements for consigners, which are typically advertised with the sale. Depending on the special sale, any combination of vaccination protocols, dehorning, castration, age verification, breed influence, and bunk training will be required for consigners to sell calves through the special sale. Individual auction venues should be contacted for more information on sale details and consigner requirements. With the known health and performance benefits of preconditioning practices and lot uniformity, is there an economic benefit to marketing calves through special calf sales?

Table 1. A comparison of market data between special calf sales and regular sales in 2018

Sale Location 1

Sale Location 2

Sale Location 3

Note: Steer pricing only. Where more than one special sale occurred in a week, special sale pricing was averaged. Market data obtained from BFO Market Reports and expressed in CAD.

*Local same week price summary unavailable. Following week pricing used alternatively.

Table 1 provides sale data from three different auction locations across Ontario for 2018 fall calf sales. The data was obtained from Beef Farmers of Ontario Market Reports between October 1st and November 30th 2018 and highlight the differences between prices at each auction for special sales and regular sales, and average prices across Ontario market during the same timeframe. In most cases, calves between 400 and 800 lbs marketed through special calf sales sold stronger compared to those sold through regular sales at the same location and, on average, across other auctions during the same week.

Table 2. Impact of average market prices at special calf sales versus regular sales

Table 2 shows the financial impact of marketing strategies (special calf sales vs regular sales) for individual calves sold at 550 lbs (on average) when marketing 50 steers. While special calf sales generally bring stronger prices for calves, there are other factors that will impact prices received for calves between sales and between lots (discussed further below). In 2018, premiums received on 550 lb calves marketed through special calf sales ranged (on average) between $0.20-$0.35/lb.

What do the trends look like year over year? As part of a Special Calf Sale Study (2018, OMAFRA, unpublished), an analysis of premiums received at special calf sales over a 10 year period was conducted. Special calf sales, for the purpose of the study, were defined as “sales that have requirements for health and management protocols and/or have a unique label on calves”. The study looked at prices received for calves at special calf sales at four different locations across Ontario. Some sales were pre-sort sales, while others sales catalogued lots of calves and auctioned them in owner-lots.

Figure 2. Premiums received at Ontario special calf sales and regular sales over a 10 year market cycle, expressed as percent difference to average Ontario sale data for the same time period.

Figure 2 shows market data over a 10 year market cycle, comparing special calf sales and regular sale data from 4 different auctions across Ontario. The dataset covers 9 weeks during the fall calf run (September and October each year). The x-axis represents the average sale data (including special calf sales) in a given year across all sales in Ontario over the 9 week period. The red bars represent the percent difference on prices received for calves marketed through special calf sales through the four auctions within the 9 week period of a given year, compared to the average market data across the province. The blue bars represent the percent difference on price received for calves marketed through regular sales at the same auctions, compared to the average market data across the province.

While the data generally show a positive trend for special calf sales in the province, Figure 3 demonstrates that conditions differ between sales, and these conditions will affect price discovery at each auction. The data in Figure 3 show the percent difference between special calf sales at each of the four sale locations and the average sale data across Ontario over the 9 week period in a given year. Price discovery will be impacted by different conditions at each sale. Each sale has a unique set of consigners and buyers, and further to that, each sale has different management requirements for consigners, which are typically advertised with the sale. Any combination of vaccination protocols, dehorning, castration, age verification, and bunk training will be required for consigners to sell calves through the special sale and these requirements will influence the buyers and the sellers that attend the sale. Individual auction venues should be contacted for more information on sale details and consigner requirements.

Figure 3. Premiums received at Ontario special calf sales over a 10 year period at four different auction locations, expressed as percent difference to average Ontario sale data.

The potential financial benefit of a preconditioning or presale program can be assessed by considering the costs of a preconditioning or presale program and potential increased revenue from calf sales. Preconditioning or presale program returns can be measured by the following equation: revenues from preconditioned calf less revenues from calf sold without preconditioning less costs of preconditioning (Canfax Research Services, 2015). In addition to price premiums on preconditioned calves sold through special marketing channels, economic benefits can also potentially come through the additional weight gain calves attain between date of weaning and date of sale. However, returns on preconditioned calves must be balanced against costs of preconditioning and potential price slides due to seasonal decline that can off-set any increase in calf weight. The Beef Cattle Research Council has a tool available online to help producers determine the costs and revenues of preconditioning programs. Additionally, Beef Farmers of Ontario has a cost of production calculator tool available and resources are also available on OMAFRA’s website.

In summary, there are a number of marketing options for Ontario calves. Special calf sales can benefit both cow-calf and feedlot producers. Depending on the sale, feedlots owners can purchase lots of calves that have been reared under specific preconditioning protocols to attain better uniformity in lots and health of calves. There is opportunity for cow-calf producers to receive premiums on calves through special calf sales. Producers must do some research to understand sale-specific requirements for consigners and observe price discovery dynamics at each sale.

The authors would like to thank James Byrne and Steve Duff with OMAFRA for their assistance on the analysis.

Author: Megan Van Schaik, Beef Cattle Specialist (OMAFRA), and Evan Chaffe, Beef Cattle Livestock Assistant (OMAFRA)