The cattle feedlot business is a risk-prone venture but its also potentially profitable

The cattle feedlot business is a risk-prone venture but it’s also potentially profitable

People love eating beef, lots of it; in 2016 Americans ate an average 55.6 pounds of beef.

In fact, the United States, the world’s largest producer of beef, churns out 24-27 billion pounds of beef annually.

Copious amounts of flesh are devoured locally and there’s a huge foreign market too. There is indeed huge market demand for high-quality grain-fed beef.

Lots of people love eating beef!

Lots of people love eating beef! How well do you know your meat?

Getting into the cattle feeding business therefore makes good sense.

As the owner of such a business, you’ll be running what government agencies refer to as a concentrated animal feeding operation (CAFO).

Basically, the word “animal” in this acronym means that your operation could be involved in rearing swine, broilers, dairy cows or beef steers.

In cattle business-speak, CAFOs are referred to as feedlots.

Owning a cattle feedlot means that you are in the business of growing weaned calves (450-600 lbs) and yearling steers or heifers (550-800 lbs) to slaughter weights of 1100-1400 lbs. The primary role of this business is to ensure efficient growth and weight gain of the animals.

Prudence is of the essence – this is a high-risk business but a potentially profitable one too.

Majority of feedlots in the US have less than 1000 head of capacity; you can however significantly reduce feeding costs by increasing the size of your operation.

In fact, feedlots with less than 1000 head supply a relatively small share of fed cattle to the market. In contrast, while feedlots with more than 1000 head make up less than 5% of total feedlots, they supply 80-90% of fed cattle.

Before you can start turning calves into money there are important considerations to ponder. Read on.

Find a suitable piece of land for your feedlot business

Find a suitable piece of land for your feedlot business

1. You’ll need some land

This is obvious.

Luckily, you don’t need as much land as someone who is in the cow-calf business which depends on range and pasture forage.

The size of your feedlot will be determined by the number of steers you intend to rear.

Each steer typically requires a minimum of 24sq.m of open space and 10sq.m of shaded area.

If therefore you wish to have 100 steers in each feedlot it means that you’ll need 2400sq.m of open space and 1000sq.m of shaded area.

Providing additional space will make each feedlot roomier which is important for reducing social stress among the animals.

Choose a site that will convenience all your operations

Choose a site that will convenience all your operations

2. The site must be appropriate

The following are some of the factors to consider during site selection:

  • Your site must allow easy access for trucks, both those supplying feed and those for hauling livestock
  • Your site must be well sufficiently far away from neighbors so as to spare them the nuisance that’ll be caused by dust, flies, odors and noise
  • You want a site that has electrical supply, adequate water supply (up to 20 gallons/head/day), wind protection (for winter), and exposure to breezes (in summer)
  • You need a south-facing site to facilitate winter feeding
  • The site should have a slight slope to guarantee good pen drainage
  • The site should be well separated from streams, ponds and lakes
  • If you intend to rear more than 1000 head of cattle your site should adhere to NPDES (National Pollutant Discharge Elimination System) requirements
  • You should of course think about future expansions.

Read more about these here.

You'll need to construct facilities and shelters for your feeder cattle

You’ll need to construct facilities and shelters for your feeder cattle

3. Facilities must be constructed

In constructing feedlot fences you can use a variety of materials including boards, wire panels, high-tensile wire, and steel cables.

Arguably one of the most economic options is a 7-or-9-wire high-tensile fence.

You can also think about combining high-tensile wire with three or four 2”X 6” planks alternating between the wires.

You can use planks of wood to build feedlot fences

You can use planks of wood to build feedlot fences

Using wire panels is another option

Using wire panels is another option

For housing the cattle you can either go for open-sided sheds or completely enclosed structuresBoth are considered to be equally effective.

Nevertheless, remember that younger cattle will require more protection from the elements, more so from winter winds.

Younger cattle are best housed in completely enclosed structures

Younger cattle are best housed in completely enclosed structures

In terms of shelter dimensions you’ll need to consider the number of cattle to be fed and how efficiently the manure will be managed.

Within the feedlots you’ll need to provide water troughs and feed bunks.

Feed bunks are typically constructed from concrete, treated lumber, fiberglass, rubber belting and steel, and are placed in a way that permits cattle to feed from both sides.

Placing the water troughs and feed bunks on concrete pads will help to make these areas mud-free and will also facilitate easy cleaning.

Water troughs should be provided

Water troughs should be provided

You can use different types of feedbunks

You can use different types of feed bunks

Ideally, feed bunks should be as long as the width of the respective feedlot; install feed bunks that will allow all the animals to feed at the same time.

More information is available here and here. This is a comprehensive guide for feedlot facilities.

Grazing and backgrounding can be considered if land is available

Grazing and backgrounding can be considered if land is available

4. Grazing and backgrounding are options worth considering

If you have adequate land with high quality pasture you might consider implementing a backgrounding program.

This involves purchasing lightweight feeder calves (350-550 lbs), grazing them during spring and summer, and then finishing them in feedlots in late summer or fall.

Despite lightweight calves requiring superior levels of nutrition, management and healthcare, this program has good potential for profitability. Read more about this here.

Buy calves that show potential for profitability

Buy calves that show good potential for profitability

5. You’ll need a strategy for purchasing feeder cattle

To ensure the profitability of your feedlots you’ll need to purchase suitable feeder cattle.

These purchases will hugely impact on the costs you will incur for feeding the cattle.

You’ll therefore need to develop an eye for identifying calves that show good potential for:

Feeder cattle for sale are sorted on the basis of breed, sex, weight, color, and feeder grade. There is however a multitude of other factors that play a role in determining the price of each calf.

Understandably, successful purchasing requires market-savvy that can only be acquired over time.

As a newbie in the business you may consider hiring the services of reputable cattle brokers, also known as order buyers.

Read more about cattle purchases here.

6. Issues of health and disease

Feeder cattle are prone to numerous health and disease issues.

Many of these conditions can however be prevented by ensuring proper daily management, providing proper balanced feed rations, vaccinations, and vitamin injections.

Generally, preconditioned and heavier feeder cattle are less prone to health problems.

Purchasing preconditioned calves can be advantageous for your feedlot operations

Purchasing preconditioned calves can be advantageous for your feedlot operations

Purchasing preconditioned calves may therefore work well for your strategy.

A preconditioned calf is one that has been:

  • weaned for 21-45 days prior to shipping
  • vaccinated for diseases prevalent in the destination area
  • dehorned
  • castrated
  • implanted
  • treated for external and internal parasites, and
  • started on grain-based feed from a feed bunk.

Preconditioned or otherwise, you should ensure that the following health precautions are always taken:

Other aspects of health that you must deal with promptly include:

Read more about feeder cattle health here and here.

Providing correctly mixed rations for all cattle types is absolutely vital

Providing correctly mixed rations for all cattle types is absolutely vital

7. Proper feeder cattle nutrition practices are critical

The rations fed are informed by the type of cattle and the required market grade.

In preparing rations you should also consider what your market requires in terms of cattle grade and weight.

Rations ideally increase in weight or volume as the cattle develop from calf stage (50-100 kg) to steer stage (400 kg and higher).

Based on the type of cattle, some of the rations you’ll be required to provide include:

To guarantee that the feed rations will enable the expected rate of gain to be achieved, you should ensure the following:

  • Correct ration balancing
  • Correct grain mix
  • Addition of proper protein and energy amounts into the grain at the feed mill
  • Full hay racks 24-7-365
  • That animals are fed the correct amounts of grain
  • That animals are genetically capable of attaining required weight at the expected rate
  • That animals are not suffering from any disease or parasite problem

The use of performance enhancers e.g. growth-stimulating implants is advisable. You should however consider whether this is agreeable to consumers in your market.

More information about feeding is available here and here.

8. Human resource requirements

Your operations will be more successful if your employees clearly understand their roles and how their actions will impact on the overall success of the feedlot.

Read more about this here and here.

Proper risk management will ensure your operations' sustainability

Proper risk management will ensure your operations’ sustainability

9. Risk management is crucial

Insuring your equipment and facilities is imperative.

The other various categories of insurance cover you may consider going for include property, vehicle, liability, workers’ compensation, life and health, business interruption and employee dishonesty plans.

Forward contracting through the futures market is another way to mitigate risk in the cattle feedlot business.

Your aim here is to reduce income variability and to determine a price well before the date when you will sell the animals.

This is a great way to stabilize your business’ cash flow objectives; it takes away the concerns and risks involved in waiting until sales day to set a price on the animals.

Read more about this here and here.

Manage your feedlot prudently for profitability and sustainability

Manage your feedlot prudently for profitability and sustainability

10. Proactive operational management is required

Effective management of your feedlot will enable you to achieve repeatable and predictable results. The following practices will be crucial:

Operations consistency – Having designed a system that works well, you will need to do things the same way every day. This applies for cattle inspection, feeding time, bunks reading, rations mixing, etc. It will be advisable to develop a written protocol detailing everything that should be done and how it should be done.

Information gathering and utilization – Successful management requires measuring and recording of various operational concerns on an ongoing basis. You should then use this information to facilitate progress monitoring, decision making, and evaluation of alternatives.

Savvy marketing – You will be required to proactively seek market information such that you are always up-to-date about price movement and trading conditions. Keeping a handle on minute-by-minute market developments will be especially crucial when your cattle are trading. You’ll also want to network and create an amicable relationship with potential buyers.

Facilities maintenance – You must ensure that your feedlots are maintained in such a way that facilitates optimal cattle performance and worker efficiency.

Ensure that your operations don't result in water pollution

Ensure that your operations don’t result in water pollution

11. Environmental impacts must be monitored

Feedlot operations typically require the handling of various chemicals (mostly pesticides), manure collection and spreading, and the use of equipment for field preparation and crop harvesting.

Accordingly, feedlots, and CAFOs in general, are required to comply with, and have permits for, National Pollutant Discharge Elimination System (NPDES) and General State Disposal System (SDS) requirements where applicable. This document clarifies the factors determining permit requirement.

You’ll therefore need to identify potential sources of pollution and implement recommended measures to prevent the same.

Generally, you’ll need to monitor surface water or groundwater pollution, pesticide leaching, soil erosion, and nutrient runoff.

Read more on this here.

This article describes how a feedlot owner manages manure innovatively and profitably.

12. Adopt the habits of profitable feedlots

  • Good record-keeping
  • Careful budgeting
  • Careful monitoring of seasonal price trends and hedging input costs
  • Prudent feed bunk management
  • Use of alternative feed-stuffs
  • Use of feed additives
  • Careful protein and mineral supplementation
  • Use of implants
  • Guaranteeing animal comfort
  • Timely and prudent cattle marketing

These are explained in more detail here.

Read about what feedlot owners can do to ensure their operations profitability here and here.

 

 

 

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Comments
  1. Gideon kambirongo says:

    Hi! I’m Gideon from Namibia I to start feedlot can you plz help me.

    Like

  2. onkgolotse says:

    hi I onkgolotse lesetlhe from Botswana I want to start a feed lot so can you please help

    Like

  3. onkgolotse says:

    yah I have got a borehole, so I do not know where to start

    Like

  4. Siya Madolo says:

    Hi, Siya here from South Africa. I have always been interested in starting feedloy. PLease assist

    Like

  5. Magagula David says:

    Wow! That’s really so motivating, I am actually overwhelmed and into this business. I am David in South Africa,are you guys having some more workshops or kind of training. please hook me up

    Like

    • Hi Magagula,

      I’m happy you liked the post, hope it will be useful in making your feedlot a success. Sorry, no workshops or training, just solid posts intended to be as informative as possible.

      Regards.

      Like

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