Preconditioning programs for feeder calves are designed to reduce stress associated with shipping calves at weaning,

strengthening calves’ immune systems, and improving performance in post-weaning production phases (i.e., stocker and

feedlot) (Avent, Ward, and Lalman). Health management of calves has been increasingly stressed for ranch managers in

recent years by several segments of the beef industry: academic educators and researchers, industry participants, and

animal health companies. Feedlot managers indicated significant performance differences favoring preconditioned calves

(Avent, Ward, and Lalman). Benefits identified from preconditioning included lower death loss, smaller percentage of sick

cattle, higher average daily gain, better feed efficiency, and improved carcass traits such as a higher percentage of

carcasses grading Choice and smaller percentage of severely discounted carcasses.

Preconditioning calf programs add value for buyers. Models estimated with data collected for calves certified under the

Oklahoma Quality Beef Network (OQBN) in 2001-2003 generally found premiums paid for certified, preconditioned calves

versus calves neither weaned nor vaccinated. Larger premiums were found when also marketing certified, preconditioned

calves in sale lots of 10 head or more. Clement E. Ward is a Professor and Extension Economist, Oklahoma State

University. He earned his B.S. degree from Iowa State University and M.S. and Ph.D. degrees from Kansas State University.

Chandra D. Ratcliff was a Graduate Research Assistant, Oklahoma State University. She earned her B.S. and M.S. degrees

from Oklahoma State University. David L. Lalman is an Associate Professor and Extension Animal Scientist, Oklahoma

State University. He earned his B.S. degree from Kansas State University, M.S. degree from Montana State University, and

Ph.D. degree from University of Missouri. The Oklahoma Cattlemen’s Association in cooperation with the Oklahoma

Cooperative Extension Service combined to sponsor a preconditioning and process verification program for calves

beginning in 2001. Certification requirements for the Oklahoma Quality Beef Network (OQBN) program specify a minimum

45-day post-weaning period prior to sale or shipment (http://okcattlemen.org). Bull calves must be castrated and

healed, and horned calves dehorned and healed. All calves must receive clostridial and bacterial vaccinations with boosters

and calves must be fed a concentrate supplement for a minimum of 14 days after weaning. An on-ranch, third party

verification by a certified representative is required to ensure calves have been weaned, castrated, dehorned, and health

records are complete. All certification steps must be completed 21 days or more prior to the sale or shipping date.

Previous research indicates buyers pay price premiums for preconditioned calves though the premiums alone do not

necessarily offset the added costs for preconditioning (Avent, Ward, and Lalman). This paper reinforces previous findings of

price premiums for preconditioning. However, unlike other research, it addresses the price premium risk associated with

marketing preconditioned calves. It also considers the combined benefits from preconditioning and marketing calves in larger

sale lots which has not been discussed in previous research. Estimated price premiums paid by buyers were from two

model specifications for OQBN-certified calves sold at 20 sales in eight Oklahoma livestock market locations between 2001

and 2003. The first model is similar to those used in previous research on feeder cattle traits. The second model is unique in

that it estimates premiums from interactions of several priceinfluencing factors associated with preconditioning along with

marketing calves in larger sale lots.

Previous Research

Numerous studies have estimated price differentials for feeder cattle traits (Buccola; Faminow and Gum; Lambert, et al.;

Marsh; Schroeder, et al. 1988; Smith, et al.; Troxel et al.; Turner, Dykes, and McKissick). Most are relevant to estimating

price effects for preconditioned calves. Avent, Ward, and Lalman discuss several feeder calf attributes and market factors

affected by preconditioning programs and a summary of expected price effects follows:

• Marketing calves after a 45-day post-weaning period typically means receiving lower prices for heavier calves compared with

marketing lighter calves at weaning.

• Castration of bull calves leads to higher expected prices for marketing steer calves compared with bull calves.

• Marketing polled or dehorned and healed calves typically results in higher prices compared with horned calves.

• Improved condition or fleshiness from precondition calves may lead to discounted prices for excessive condition.

• Healthy, preconditioned calves can expect to receive a price premium compared with calves that appear sick or unhealthy

and calves that are marketed immediately after weaning.

• Marketing calves in larger, uniform sale lots, either from a single owner or sorted and commingled, typically results in

higher prices.

Preconditioning premiums are estimated after considering several factors affecting feeder calf prices; such as weight, lot

size, frame size, muscling, condition, and others. Avent, Ward, and Lalman estimated models with detailed feeder

calf sale data from three consecutive-day sales in December 2000 at the Joplin Regional Livestock Market. One sale was

the regular weekly public sale and two were special preconditioned calf sales for two separate, commercial preconditioning

programs. In one program, producers followed a single protocol whereas the other program gave producers a choice of

alternative protocols. The estimated premium for the singleprotocol program was $3.36/cwt. compared with the regular

weekly auction, while the multiple-protocol program generated an estimated premium of $1.96/cwt. The higher premium for

the first program could be attributed to more stringent and uniform management requirements. Dhuyvetter, Bryant, and Blasi

estimated models for detailed feeder calf characteristics from two sales per year over five years (1999-2004) at a livestock

market in Holton, Kansas. Half the sales were in the fall and half in the winter. Preconditioned calves on average received a

$4.62/cwt. premium in the fall sales and a $3.22/cwt. premium in the winter. Fall premiums over the five years ranged from

$3.90/cwt. to $5.45/cwt. while winter premiums ranged from $2.30/cwt. to $4.63/cwt. Dhuyvetter, Bryant, and Blasi also

pooled the sale data into a single model in which the estimated premium was $2.95/cwt. for fall sales and $1.41/cwt. for

winter sales. King and Seeger (2004) estimated price premiums for feeder calves sold at the Joplin Regional Livestock

Market in 10 special sales during the November-March period of 2003-2004. Estimated premiums for two preconditioning

programs were $5.33/cwt. and $4.84/cwt. The two preconditioning programs differed in required vaccinations and whether or

not calves were put on a backgrounding nutritional program. Unexpectedly, the program receiving the largest premium

required fewer vaccinations and no backgrounding. King and Seeger (2005) estimated premiums paid by buyers for

a commercial preconditioning program at Superior Livestock Auction’s video sales each year from 1995-2004. Price

premiums were estimated for three value-added health programs over the ten years. Premiums increased for each

preconditioning program over time and differed by degree of management practices required. The highest annual average

premium was associated with the most stringent management program. The premium associated with this protocol ranged

from $2.47/cwt. in 1995 to a high of $7.91/cwt. in 2004, averaging $4.37/cwt. over the ten years. For the middle

preconditioning program in terms of management requirements, premiums began at $1.35/cwt. in 1995 and increased to

$3.47/cwt. in 2004, averaging $1.91/cwt. for the ten years. Lastly, the program with the fewest management requirements

had an expectedly smaller premium, beginning at $0.70/cwt. in 1995, increasing to $1.71/cwt. in 2004, and averaging

$1.07/cwt. over the ten-year period.

In summary, research to date consistently indicates buyers pay premium prices when purchasing preconditioned calves,

though the premium magnitude varies. Premiums were affected by time of year when preconditioned calves were sold, sale

location, and required management practices in the preconditioning program. The Avent, Ward, Lalman study involved one

sale location and sales for three consecutive days. The Dhuyvetter, Bryant, Blasi study involved one location, though two

sales per year over five years. King and Seeger (2004) involved a single location with pooled sales across years; while King

and Seeger (2005) involved a single market with calves consigned from many states and data pooled across several sales

each year. In the study reported here, price premiums were estimated in two ways for 20 individual sales from eight market

locations over a three-year period. In general, significant premiums were paid by buyers for preconditioned calves relative to

calves not weaned and for which vaccinations were unknown. However, considerable variation in premiums was found among

sales, raising questions regarding the risk associated with receiving preconditioning premiums. Larger premiums were paid

when considering the effects from preconditioning plus marketing calves in sale lots of 10 head or more and in sales with

larger numbers of preconditioned calves.

Data and Models Estimated

Table 1 summarizes OQBN sales for 2001-2003. All but one sale occurred from October to December and the lone

latewinter sale (in February 2002) was omitted from the analysis since the preconditioning program primarily focuses on

fallweaned calves. In most cases, livestock market managers began their sale with publicly-consigned sale lots. At a

predetermined time, buyers were told the next x lots were OQBN-certified calves. Following those lots, the sale resumed

with remaining publicly-consigned lots. Data from one sale in 2003 was omitted because the market manager failed to

identify the OQBN sale lots to buyers. One market which sponsored two sales each year required calves to have EID

(electronic identification) tags that were scanned so calves could be sorted into more uniform, 50-lb. weight groups.

Two models were estimated for each sale. The objective of the first model was to determine the market price premium for

OQBN-certified, preconditioned calves compared with other calves sold in the same sale.1 The objective of the second model

was to estimate the interaction effects for several variables associated with preconditioning and with marketing calves in

10-head lots or larger. Model specification for both objectives was similar to hedonic models cited earlier to determine price

differentials for feeder cattle characteristics. Models were of the form (1) where price (P) for sale lot i at sale j was assumed

to be dependent on k sale lot characteristics and feeder calf traits (T). The model estimates the value (V) of each sale lot

characteristic and feeder cattle trait. Variables included in Model 1 were lot size, average weight, breed group, fleshiness,

muscling, frame size, sex, horns status, sale lot uniformity, healthiness, and