The United States is the leading beef producer in the world. Between 24 and 27 billion pounds of beef are produced annually in the United States. Beef consumption has been gradually decreasing since the 1970s, when it was over 70 pounds per capita, to less than 55 pounds today. While domestic consumption has been declining, foreign demand has been very strong with the U.S. exporting record amounts of beef in recent years.
Traditional cattle-feeding enterprises grow weaned calves (450 to 600 pounds) and yearling steers or heifers (550 to 800 pounds) to slaughter weights of 1,100 to 1,400 pounds. Cattle-feeding operations exist in all regions of the United States, but most large operations are in the Great Plains from Colorado and Nebraska to Texas. Most cattle-feeding operations are relatively small. Over 95 percent of all operations have fewer than 1,000 head, but these small feedlots market around 15 percent of the cattle fed each year. In the northeastern United States, a mix of beef breeds, crossbreeds, or dairy beef (mostly Holstein steers) are typically finished in feedlots.
Cattle feeding is a high-risk business. During some years, an operation may not recover out-of-pocket costs. The beef industry is very cyclical and cattle prices can fall dramatically when beef operations reduce herd sizes because of drought and the high cost of feed. Entry into the cattle-feeding business usually has few restrictions. Although facilities range from small lots with a few head to modern facilities with more than 50,000 head, there are economies of scale in cattle feeding. The cost of feeding per animal drops as the number of animals in the operation increases. Because of the high risks and the economies of scale that favor larger operations, beef feeding enterprises are not as well adapted to small-scale and part-time farms as are beef cow-calf operations. However, less land is required for a cattle-feeding operation than for a cow-calf enterprise.
Starting a Beef Feeding Enterprise
Thorough planning and preparation are essential for you to have a successful beef-feeding operation. Operators should determine where they will obtain feeder calves, which feeds will be required to finish the cattle to desired market weights and grades, and what type of shelter will be needed (because most feedlot cattle are on hand over the winter months). Feeders also should design a health program in cooperation with a veterinarian, decide what the starting and slaughter weights and grades should be, and assess marketing alternatives. Visit successful cattle-feeding operations to help determine what facilities are needed, such as a handling chute and head gate to properly restrain animals when they are vaccinated, implanted, or treated in a health program.
Various materials can be used for feedlot fences, including boards, wire panels, high-tensile wire, and steel cables. Barbed wire is not recommended. A seven- or nine-wire high-tensile fence is one of the most economical barriers. Another effective fence is a combination of high-tensile wire (which can be electrified) with three or four 2-by- 6-inch planks spaced between the wires.
Housing for feeder cattle does not have to be extensive or weather tight--open-sided sheds and more completely enclosed structures are equally effective. Younger cattle require more shelter than older cattle, especially for protection from winter winds. All facilities should be designed for the number of cattle fed and include a good manure management program.
Most feedlots use concrete feed bunks that allow cattle to feed from one or both sides, although feed bunks of treated lumber also can be used. Feed can be delivered through a mixer wagon, conveyor with a belt or chain, or a bucket loader.
To reduce mud, use concrete pads for areas around waterers and feed bunks. Mounds that are 3 to 5 feet high offer cattle relatively dry ground to rest on. The feedlot area should be well drained with topsoil removed to expose clay or other fairly impervious surface. Regardless of the type of feedlot surface, it must be cleaned periodically. The facilities should be designed to prevent manure runoff into steams or other waterways. Retention lagoons and diversion ditches should be planned with the advice and approval of regulatory agencies.
Grazing and Backgrounding
Some cattle feeders purchase lightweight feeder calves (350 to 550 pounds), graze them during the spring and summer, and then finish them in the feedlot starting in late summer or fall. Backgrounding is a special type of program that usually combines pasture systems and lightweight cattle. These cattle require extremely good nutrition, management, and health programs, but backgrounding can be profitable. Well-managed, high-quality pastures can be used effectively with these type of cattle. More information on grazing and backgrounding can be found in Beef Backgrounding Production.
Purchasing Feeder Cattle
Anyone purchasing feeder cattle must keep up-to-date on market conditions. Graded feeder-calf sales are held in both fall and spring; some feedlot operators use cattle brokers and tele-auctions to obtain their feeder cattle. Feeder-cattle prices can fluctuate considerably in almost every season of the year. Higher-grade feeder cattle sell for a higher price per pound than lower grades. Lighter-weight cattle of the same grade cost more per pound than heavier feeder cattle. Although feeder grade is not supposed to be influenced by the amount of fat on an animal or its overall condition, cattle in better shape are usually assigned a higher grade and sell for a higher price per pound. The difference between the purchase and the sales price (the cattle margin or price spread) of feedlot cattle is often greater for healthy, but thinner, lower-grade feeder calves or yearlings because these animals are more likely to increase in quality between purchase and sale time. Additional costs for thinner, lower-grading cattle include higher medical treatment costs, lower sales prices, and higher death-loss rates. Even with these disadvantages, lower-grading feeder cattle can be profitable; operators should consider the entire market for finished cattle. Market prices are better for higher-grading, uniformly finished cattle than for less uniform, lower-grading cattle.
Feeder-cattle purchases represent a large part of costs for feeding cattle. Many feeder-cattle producers offer cattle that have been weaned and vaccinated and received booster vaccines for respiratory disease, the primary health problem encountered in feeder cattle. The objectives for purchasing feeder cattle are to buy calves that have the genetic ability to grow and add sale weight, efficiently convert feed to weight gain, have a high potential for reaching "Choice" quality grade after feeding, and stay healthy during feeding. Feeder cattle are usually sorted by breed, sex, weight, color, and feeder grade when being offered for sale, which increases the uniformity of marketing the finished cattle.
Health Maintenance Program
Because preconditioned and heavier feeder cattle tend to have fewer health problems, purchasing preconditioned calves can be a good investment for the cattle feeder. Preconditioning includes weaning 21 to 45 days before shipping, vaccinating for diseases prevalent in the area, dehorning, castrating, implanting, treating for external and internal parasites, and starting the cattle on grain-based feed from a feed bunk. If heavier cattle are used (700 pounds or more), preconditioning is not as important. Because respiratory and enteric (digestive) diseases can affect cattle of all ages, they should be properly vaccinated, preferably before they are moved to the feedlot. If there is any doubt about an internal parasite infection, fecal samples should be taken to a veterinarian to determine the severity of infection. Control of external parasites such as lice and flies is also important; inexpensive, effective treatments are available. Feeders can reduce potential health problems by carefully planning a health maintenance and disease prevention program with the assistance of a veterinarian.
Cattle weighing 700 pounds or more should be fed a ration containing 11 percent crude protein in a ration composed of grain (usually corn, but barley and wheat are often also used), protein sources, and roughage. Larger-framed cattle tend to require a ration with a higher percentage of grain to achieve the same carcass quality grade as cattle with smaller frame sizes. Therefore, the ration that is fed depends on the type of cattle and the desired market grade. The weight and grade required by the market receiving the cattle also must be considered when selecting a ration. Cattle weighing 650 pounds or less initially can be fed a growing ration rather than a finishing ration. Growing rations supply additional hay or other forage in place of grain. To achieve the desired carcass grade, the ration can be modified to include less forage and more grain as the cattle grow.
The feeding system for a cattle-feeding enterprise should remain flexible. For farmer-feeders, corn silage and occasionally hay crop silages can be incorporated into the feeding program. The extent that forages contribute to a ration is determined by the price of feed grains or food processing by-products with equivalent feed value. Increasing forages in the diet of feedlot cattle will generally increase the cost of weight gain (due to slower weight gain and higher carrying costs) when grain prices are reasonably low. Specific ration composition is determined by the combination of available feedstuffs that will minimize the cost of weight gain, provide a balanced diet, and reach desired endpoints for the market. This feed combination will vary as grain prices change.
Performance enhancers such as growth-stimulating implants can also be used. Research has shown that they provide the greatest return of almost any feedlot practice with complete safety to consumers. The final market for your beef and consumer acceptance, however, will dictate whether you should use performance enhancers.
In the normal course of operations, farmers handle pesticides and other chemicals, may have manure to collect and spread, and use equipment to prepare fields and harvest crops. Any of these routine on-farm activities can be a potential source of surface water or groundwater pollution. Because of this possibility, you must understand the regulations to follow concerning the proper handling and application of chemicals and the disposal and transport of waste. Depending on the watershed where your farm is located, there may be additional environmental regulations regarding erosion control, pesticide leaching, and nutrient runoff. Contact your soil and water conservation district, extension office, zoning board, state departments of agriculture and environmental protection, and your local governing authorities to determine what regulations may pertain to your operation.
You should carefully consider how to manage risk on your farm. First, you should insure your facilities and equipment. This may be accomplished by consulting your insurance agent or broker. It is especially important to have adequate levels of property, vehicle, and liability insurance. You will also need workers' compensation insurance if you have any employees. You may also want to consider your needs for life and health insurance and if you need coverage for business interruption or employee dishonesty. For more on agricultural business insurance, see Agricultural Business Insurance. For more information on farm liability issues, see Understanding Agricultural Liability.
Second, check to see if there are multi-peril crop insurance programs available for your crop or livestock enterprises. There are crop insurance programs designed to help farmers manage both yield risk and revenue shortfalls. However, individual crop insurance coverage is not available for all crops or livestock enterprises. If individual coverage is not available for what you produce, you may be able to use the AGR/AGR-Lite program to insure the revenue of your entire farm operation. To use AGR-Lite you must have five years of Internal Revenue
Service (IRS) Schedule F forms. For more information concerning crop insurance, contact a crop insurance agent or check the Penn State Extension website.
Another way to manage risk in the livestock industry is by forward contracting through the futures market. You can use the futures market to both "lock in" your cost for purchased feed and the price you receive for your livestock. The idea behind forward contracting is to reduce income variability and set a price well in advance of when the animals are sold. Waiting until the sales date to determine the price for your cattle involves much risk. Although you may receive higher prices in some years, lower prices are also a distinct possibility. Obtaining a higher price than expected is certainly good news, but obtaining a lower price may have a major negative impact your ability to weather the volatility inherent in the cattle market. Using the futures market allows you to eliminate this concern and lock in a price that meets your business goals and cash flow requirements. However, using the futures market does not ensure that you can generate a profit. During periods of high feed costs and low livestock prices there are often very few livestock producers who can generate a profit.
Included in this publication are three sample budgets summarizing costs and returns for feeding beef cattle. The first is for feeding steers; the second is for feeding heifers; and the third is for feeding yearlings. These budgets should help ensure that you include all costs and receipts in your calculations. Costs and returns are often difficult to estimate in budget preparation because they are numerous and variable. Think of these budgets as an approximation and make appropriate adjustments using the "your estimate" column to reflect your specific production conditions. Additional livestock budgets can be found in the Penn State Extension website. More information on using livestock budgets can be found in Enterprise Budget Analysis.
You can make changes to the interactive PDF budget files for this publication by inputting your own prices and quantities in the green outlined cells for any item. The cells outlined in red automatically calculate your revised totals based on the changes you made to the cells outlined in green. You will need to click on and add your own estimated price and quantity information to all of the green outlined cells to complete your customized budget. When you are done, you can print the budget using the green Print Form button at the bottom of the form. You can use the red Clear Form button to clear all the information from your budget when you are finished.
Sample Budget Worksheets
Initial resource requirements for slaughter-beef production
less than 1 acre
- Feeder steer: $850-900
- Feeder heifer: $775-850
- Yearling: $800-850
- Existing buildings, improvements, and fencing: $100-125/animal
For More Information
- Becker, J. C., L. F. Kime, J. K. Harper, and R. Pifer. Understanding Agricultural Liability. University Park: Penn State Extension, 2011.
- Comerford, J. W., L. F. Kime, and J. K. Harper. Beef Backgrounding Production. University Park: Penn State Extension, 2013.
- Comerford, J. W., L. F. Kime, K. E. Knoll, and J. K. Harper. Dairy-Beef Production. University Park: Penn State Extension, 2008.
- Greaser, G. L., and J. K. Harper. Enterprise Budget Analysis. University Park: Penn State Extension, 1994.
- Kime, L. F., J. W. Adamik, E. E. Gantz, and J. K. Harper. Agricultural Business Insurance. University Park: Penn State Extension, 2004.
- Thomas, H.S. The Cattle Health Handbook. North Adams, Mass.: Storey Publishing, 2009.
- Thomas, H.S. Storey's Guide to Raising Beef Cattle. 3rd ed. North Adams, Mass.: Storey Publishing, 2009.
Prepared by John W. Comerford, associate professor of animal science; Lynn F. Kime, senior extension associate in agricultural economics; and Jayson K. Harper, professor of agricultural economics.
This publication was developed by the Small-scale and Part-time Farming Project at Penn State with support from the U.S. Department of Agriculture-Extension Service.