HUNTIN' DAYLIGHT -- PICKING WHAT YOU CHOOSE
by: Wes Ishmael
You can be for implants or against them. You can believe that dewormers add to the bottom line or are nothing more than hogwash. Never doubt, though, the level of production efficiency and cost competitiveness these and other technologies add to the beef industry.
According to a recent landmark economic analysis conducted by John Lawrence, director of the Iowa Beef Center at Iowa State University, selling prices would have to increase by 36 percent to cover the increase in costs if the following pharmaceutical technologies were not used: parasite control products, growth promotant implants, sub-therapeutic antibiotics, ionophores and beta-agonists
Across all production segments, this analysis indicates these technologies produced a combined direct cost savings to producers of $365 per head of beef cattle raised. Keep in mind, this is gross dollars not accounting for the cost using the technology.
Also, the more cynical in the crowd will note this study was funded by the Growth Enhancement Technology Information Taskforce. This is basically a collaborative of major animal health companies who fund research and provide information to producers, relative to the technologies these companies manufacture and market. So, yes this group has a vested interest in the study's outcome. But that's why you allow folks like Lawrence at Land Grant universities to take the reins and provide a third-party analysis.
Moreover, this study is unique in that it is built upon what is termed meta-analysis. In simple terms, the impact of multiple studies for the impact of dewormers on cattle performance, as an example, were combined to arrive at an average impact and distribution, weighted for the populations of each study.
Information from more than 170 research trials—most conducted by universities—during the past quarter-century were included in the analysis. In other words, using the impact of implants on the Average Daily Gain (ADG) of stocker cattle as an example, the analysis accounts for the fact that some trials report a negative impact, while some indicate a positive outcome, and they account for the range in between.
These results were then used to estimate the economic value of the technologies mentioned earlier at the farm-ranch level in 2005. You can find the complete report and methodology at www.beeftechnologies.com.
across All Segments
Deworming made the largest economic impact in the cow-calf segment, effecting weaning rate by 23.62 percent and calf weaning weight by 4.24 percent. Growth implants came next at 2.54 percent and 3.07 percent, respectively, (Table 1).
“In combination, these three technologies have a significant impact on the cost of production in beef cow operations. Removing these three technologies is expected to increase the breakeven selling price nearly 47 percent or $225 per head with the results being different than 0 with a 99 percent confidence,” says Lawrence. “In many cases, producers have a fixed land base which limits the number of beef cows they can maintain. As weaning rate and weight decrease, there are fewer calves sold to cover the cost of maintaining the herd. Producers must still retain replacement heifers but do so from a smaller number of calves. Thus, the cost-per-calf sold increases dramatically.”
Pregnancy rate and calf weaning weight were the considered performance variables. The changes in calf ADG affect the weaning weight and, therefore, the sale weight.
For analysis, researchers assumed that: the calves are weaned on a fixed date and sold at weaning; feed consumption was the same at higher weaning weights as it is at lower weaning weights when pharmaceutical technology is used.
Lawrence notes, “This analysis is based only on the impact of pregnancy rate and sale weight and not on any value difference due to a prescribed vaccination or treatment program. A sensitivity analysis determined that the results are robust to changes in feed costs in all cases.”
At stocker level, dewormers also made the largest economic impact of the included technologies. In the study dewormers impacted production costs $20.77 per head, followed by implants at $18.19 and ionophores at $11.51. Along with fly control and sub-therapeutic antibiotics, the total is $80.79 (Table 2).
Since ADG is the only change in production efficiency for stocker operations attributed to technology and consistently reported in research, it was the only parameter included in the analysis. Researchers assumed animals were sold when they reached a desired live weight. The changes in ADG affect the number of days the cattle remain in the operation to reach the desired final weight and, therefore, impact costs.
“The greater the effect of a technology on production efficiency, the larger its impact on cost of production,” explains Lawrence. “Eliminating dewormers affected the breakeven price by 2.7 percent, which represented a cost of $20.77 per head produced. The second most important technologies are growth promoting implants which have an effect of 2.3 percent on the breakeven price, a cost of $18.19 per head. Ionophores and sub-therapeutic antibiotics have an expected cost-of-production impact of $11.51 per head and $9.57 per head, respectively. Fly control has a smaller impact. All the results are robust to changes in feed prices and feeder cattle prices.”
The study estimates the impact of eliminating these five technologies on breakeven stocker prices to be 10.4 percent or $80.79 per head.
“As expected, efficiency and performance-enhancing technologies have a larger impact when feed prices are higher. The cost savings decreased when higher calf prices were compared to the base price of feed. Operating costs were then a smaller percentage of total costs,” says Lawrence.
As many would guess, implants in the feedlot made the most significant impact on ADG at 14.13 percent. Also as some might have suspected beta-agonists impacted feed conversion (FC) the most at -12.59 percent. The impact of implants on FC was -8.79 percent; beta-agonists had a 14.04 percent impact on ADG (Table 3).
“Of the technologies considered, implants have the largest cost savings effect with a savings of 6.5 percent or $68/head — savings that would be lost if these technologies were eliminated,” say researchers. “Dewormers generated the second largest cost savings. Ionophores and beta-agonists reduce costs approximately $12-13 per head or about 1.2 percent. The impact of beta-agonists is smaller because they are used for a relatively few days at the end of the feeding period. Sub-therapeutic antibiotics have an important, but smaller cost reduction.”
Pharmaceutical technologies also had a significant impact on breakeven selling prices in the feedlot segment. Combined, implants, ionophores, antibiotics, beta-agonists and dewormers in the study impacted breakevens by 12 percent or $126.
Increasing or Capping
Perhaps the most provocative finding of this study is the impact that eliminating these technologies would have on the industry.
Lawrence also analyzed these results using the Food and Agricultural Policy Research Institute (FAPRI) model of U.S. agriculture to estimate the impact on beef production, price and trade if these pharmaceutical technologies were not available. The FAPRI model indicates that U.S. beef industry would be impacted as follows:
• 14 percent smaller calf crop
• 18 percent reduction in total beef produced
• 180 percent increase in net beef imports
• 13.5 percent increase in retail beef prices
• Pork and poultry production would expand to fill the void for domestic and export customers.
“Cattle prices (in this scenario) do increase, but not as fast as cost of production. Packers and feedlots adjust to maintain operating margins similar to current levels resulting in lower returns to beef cow herds and a smaller feedlot and packing industry. Pork and poultry production expand to fill this void for domestic and export customers,” says Lawrence. “The complete elimination of efficiency-enhancing technologies would result in high beef prices to all consumers, and the U.S. would need to import significantly more beef to meet its demand. The smaller beef industry would mean fewer cattle operations and less employment in rural communities.”
What's just as true, though less readily apparent is that such a move would also cap the industry's prospects to grow.
In this case, more cows and more acres would be required to produce less beef, rather than what has heretofore been cattle producers' enviable ability to feed more with less.