Price Premiums from a Certified Feeder Calf Preconditioning Program
Source: American Society of Farm Managers and Rural Appraisers, by Clement E. Ward, Chandra D. Ratcliff, and David L. Lalman
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.
Abstract
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
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