By Jerad Jaborek
Production costs and market prices for cattle fluctuate from year to year, month to month, and even week to week. As a cattle producer, it is imperative to know what your breakeven selling price is for finishing beef cattle. As a freezer beef customer, understanding the costs that contribute to selling freezer beef is important so you can compare local freezer beef prices versus retail beef prices found in the store as you shop for the best deal. Michigan State University Extension and the University of Wisconsin-Madison Extension teamed up to create Excel spreadsheet tools for pricing grain-fed or grass-fed freezer beef.
In the Grain-Fed Freezer Beef Pricing Worksheet and the Grass-Fed Freezer Beef Pricing Worksheet, cattle production costs such as animal, feed, transportation and market, yardage including labor, and other miscellaneous costs can be accounted for to determine the total cost of raising this animal for freezer beef. To compute these input costs for freezer beef cattle, consider using the Feedlot Enterprise Budget Tool from Michigan State University (MSU) Extension.
After identifying the cost of production for raising the animal, it’s time to determine the sale price for the animal being sold for freezer beef. The agreed sale price is determined by both the seller and the buyer. For the producer selling the freezer beef, make sure the agreed sale price covers your input costs for producing the animal. Usually, the agreed sale price is cheaper than retail store bought beef, equating to a savings for the customer.
Let’s work through an example.
It costs a beef producer $3,065 to produce a grain-fed steer weighing 1,400 pounds live weight. After slaughter, approximately 62% to 64% of that weight remains on the carcass for beef-type cattle, and 57% to 60% for dairy-type cattle, which is called the dressing percentage. The dressing percentage for a grass-fed steer would more likely be between 50% and 60%.
With a 63% dressing percentage in this example, the carcass weight of this steer equates to 882 pounds. If the agreed price between the seller and the buyer happens to be $3.80 per pound on a carcass basis, the carcass value totals $3,351.60. Notice at this agreed price the beef producer can recover their input costs and earn an extra $286.60 for selling the steer to the customer for freezer beef. The breakeven price for the beef producer to earn $0 extra would be $3.73 per pound.
Source : msu.edu