Economics of feeding lambs in a high-cost, high-value environment | TSLN.com

Economics of feeding lambs in a high-cost, high-value environment

Alaina Mousel, Editor

A 60-pound feeder lamb is worth about $120 in today’s market. Growers weighing the decision of selling that lamb as a feeder, or feeding it out, should evaluate the return from lamb sales necessary to cover flock production costs and the ability of flock genetics to support a high level of growth performance to at least 120 pounds before making any decisions, cautioned Jeff Held, South Dakota State University sheep extension specialist.

Held cautioned producers that finish their lamb crop to keep current on marketing animals by selling them when they reach their genetic “natural endpoint.” For most lambs, that occurs when fat cover is 0.25 inches, or between a USDA Yield Grade 2/3. Historically high live lamb prices in today’s market are coupled with high feed input costs – both variables are important considerations to determine the optimum return in a lamb feeding enterprise.

Yet the most difficult factor to understand and see is the decline in growth performance that occurs during the lamb’s finishing phase.

“For many years, when finished, lamb performance dropped to 0.5 pounds of gain, or lower, since the cost of gain for any additional weight would be greater than the value,” Held said. In 2008, that minimum performance threshold crept up to 0.6 pounds of average daily gain (ADG) due to higher feed input costs, increasing the cost of gain. Currently, the economic model for high value and high feed input costs supports taking lambs forward until lamb growth performance falls to 0.5-, perhaps to 0.4-pounds of gain per day.

Held calculated breakeven numbers for finishing a lamb in today’s market:

A 60-pound lamb fresh from the farm valued at $120, with a target finish weight of 130 pounds, will require 70 pounds of gain. Using an average feed efficiency of 5:1 (5 pounds of feed per 1 pound of gain), it would take 350 pounds of feed to grow the lamb to its target weight. Valuing feed at $300 per ton (cash market) it will cost $0.15 per pound ($300/2,000 pounds). Upfront cost of feeding that lamb will be $52.50 per head (350 pounds of feed X $0.15). By the time the lamb has reached its market date, a producer has already spent $172.50 ($120 for lamb + $52.50 in feed). If on June 1 the lamb is valued at $1.50 per pound, a 130-pound lamb provides a $195 payback. Margin, per head, using this scenario would be $22.50.

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“There’s clearly room for profit in finishing lambs to the weight ranges producers have used for their lamb crop in the past,” Held reassured. Still, the temptation to take finished weights higher this year exists because of market prices. However, the counterbalance is a higher cost of gain. Market conditions at finished weight and the growth performance capabilities of the lambs fed are key variables in determining the level of profit potential for the 2011 lamb crop.

A 60-pound feeder lamb is worth about $120 in today’s market. Growers weighing the decision of selling that lamb as a feeder, or feeding it out, should evaluate the return from lamb sales necessary to cover flock production costs and the ability of flock genetics to support a high level of growth performance to at least 120 pounds before making any decisions, cautioned Jeff Held, South Dakota State University sheep extension specialist.

Held cautioned producers that finish their lamb crop to keep current on marketing animals by selling them when they reach their genetic “natural endpoint.” For most lambs, that occurs when fat cover is 0.25 inches, or between a USDA Yield Grade 2/3. Historically high live lamb prices in today’s market are coupled with high feed input costs – both variables are important considerations to determine the optimum return in a lamb feeding enterprise.

Yet the most difficult factor to understand and see is the decline in growth performance that occurs during the lamb’s finishing phase.

“For many years, when finished, lamb performance dropped to 0.5 pounds of gain, or lower, since the cost of gain for any additional weight would be greater than the value,” Held said. In 2008, that minimum performance threshold crept up to 0.6 pounds of average daily gain (ADG) due to higher feed input costs, increasing the cost of gain. Currently, the economic model for high value and high feed input costs supports taking lambs forward until lamb growth performance falls to 0.5-, perhaps to 0.4-pounds of gain per day.

Held calculated breakeven numbers for finishing a lamb in today’s market:

A 60-pound lamb fresh from the farm valued at $120, with a target finish weight of 130 pounds, will require 70 pounds of gain. Using an average feed efficiency of 5:1 (5 pounds of feed per 1 pound of gain), it would take 350 pounds of feed to grow the lamb to its target weight. Valuing feed at $300 per ton (cash market) it will cost $0.15 per pound ($300/2,000 pounds). Upfront cost of feeding that lamb will be $52.50 per head (350 pounds of feed X $0.15). By the time the lamb has reached its market date, a producer has already spent $172.50 ($120 for lamb + $52.50 in feed). If on June 1 the lamb is valued at $1.50 per pound, a 130-pound lamb provides a $195 payback. Margin, per head, using this scenario would be $22.50.

“There’s clearly room for profit in finishing lambs to the weight ranges producers have used for their lamb crop in the past,” Held reassured. Still, the temptation to take finished weights higher this year exists because of market prices. However, the counterbalance is a higher cost of gain. Market conditions at finished weight and the growth performance capabilities of the lambs fed are key variables in determining the level of profit potential for the 2011 lamb crop.

A 60-pound feeder lamb is worth about $120 in today’s market. Growers weighing the decision of selling that lamb as a feeder, or feeding it out, should evaluate the return from lamb sales necessary to cover flock production costs and the ability of flock genetics to support a high level of growth performance to at least 120 pounds before making any decisions, cautioned Jeff Held, South Dakota State University sheep extension specialist.

Held cautioned producers that finish their lamb crop to keep current on marketing animals by selling them when they reach their genetic “natural endpoint.” For most lambs, that occurs when fat cover is 0.25 inches, or between a USDA Yield Grade 2/3. Historically high live lamb prices in today’s market are coupled with high feed input costs – both variables are important considerations to determine the optimum return in a lamb feeding enterprise.

Yet the most difficult factor to understand and see is the decline in growth performance that occurs during the lamb’s finishing phase.

“For many years, when finished, lamb performance dropped to 0.5 pounds of gain, or lower, since the cost of gain for any additional weight would be greater than the value,” Held said. In 2008, that minimum performance threshold crept up to 0.6 pounds of average daily gain (ADG) due to higher feed input costs, increasing the cost of gain. Currently, the economic model for high value and high feed input costs supports taking lambs forward until lamb growth performance falls to 0.5-, perhaps to 0.4-pounds of gain per day.

Held calculated breakeven numbers for finishing a lamb in today’s market:

A 60-pound lamb fresh from the farm valued at $120, with a target finish weight of 130 pounds, will require 70 pounds of gain. Using an average feed efficiency of 5:1 (5 pounds of feed per 1 pound of gain), it would take 350 pounds of feed to grow the lamb to its target weight. Valuing feed at $300 per ton (cash market) it will cost $0.15 per pound ($300/2,000 pounds). Upfront cost of feeding that lamb will be $52.50 per head (350 pounds of feed X $0.15). By the time the lamb has reached its market date, a producer has already spent $172.50 ($120 for lamb + $52.50 in feed). If on June 1 the lamb is valued at $1.50 per pound, a 130-pound lamb provides a $195 payback. Margin, per head, using this scenario would be $22.50.

“There’s clearly room for profit in finishing lambs to the weight ranges producers have used for their lamb crop in the past,” Held reassured. Still, the temptation to take finished weights higher this year exists because of market prices. However, the counterbalance is a higher cost of gain. Market conditions at finished weight and the growth performance capabilities of the lambs fed are key variables in determining the level of profit potential for the 2011 lamb crop.

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