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## Figuring the “Marginal Value” on Calf Weights

By   /  August 26, 2013  /  3 Comments

When you’re raising calves for sale, how do you know if you should feed that supplement, spend time and money on pasture improvements, or make other investments to increase weaning weights? Well, you do a little math. Here’s a calculator that can help!

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It is important that cattle producers know the cost of adding gain to cattle and the marginal value of that gain. These costs and values are often similar from year to year. But when the grain market or the finished cattle market changes, the cost and value of gain will change.

When grain prices are low, feedlot cost of gain is low and light cattle have greater value, making the marginal value of calf gain on pasture relatively low.  When grain prices are high, feedlot cost of gain is high and heavy cattle are valued more since they need less grain to finish in the feedlot.  This means that the marginal value of gain on pasture is  greater than when grain is cheap.

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## What is Marginal Value?

According to the Business Dictionary:  It is the incremental value that is achieved through additional output.

Figuring marginal value tells us if the investments we make in supplements, pasture management, pasture weaning and backgrounding are resulting in better prices for the calves we’re selling

[/wpcol_1half_end]It is a good practice to calculate these values each year to see what they are and how profitable current management will be or if management needs to be changed to keep in step with the markets.  Here’s how.

The marginal value of calf weight gain is based on the price slide between weight breaks of cattle being sold. The marginal value of calf gain is a little cumbersome since cattle are priced by their value per pound or hundredweight, not by their value per head. To calculate the marginal value of gain, first calculate the value per head within each weight groups. Then calculate the difference in value between animals in the weight groups of interest. Adjusted this to value per pound by dividing by the difference in weight per head between the two weight groups.

Here’s how it looks on paper using two sets of cattle, one weighing an average of 475 lb. selling for \$1.60/lb. and the second weighing 525 lb. selling for \$1.55/lb.

It is a good practice to calculate these values each year to see what they are and how profitable current management will be or if management needs to be changed to keep in step with the markets.  Ideally, we adjust what we’re doing based on what the market is demanding in terms of calf weights.

#### Ed Rayburn

Ed is the Forage Extension Specialist at West Virginia University. He works with other specialists, county agents, farmers, and NRCS staff in developing and implementing on-farm research and educational programs to support pasture-based livestock production and helps landowners develop economically and environmentally sustainable production systems on their farms. He was technical editor for the four volume NRAES book series on pasture-based livestock production. He previously worked for the USDA-Soil Conservation Service in western New York as a Grassland Specialist serving dairy and livestock producers in the 15 western counties of New York. Ed, his wife Sue, their three border collies, and 30 cows manage a pasture-based farm in Preston County West Virginia

1. Ted says:

So the \$107.50/cwt is telling me that heavier calves are bringing a tad bit more money than the lower weight calves in this example?

• Kathy Voth says:

It is confusing! But, yes, you’re right. 🙂

• Ed Rayburn says:

The \$107.50/cwt. is the value of putting another 100 lbs. gain on the lower weight cattle.

Reporting prices on a cwt. versus head basis is what makes it confusing.