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$.48 per pound (assuming a yield of 62 per-
cent).

Though this analysis represents an oversim-
plification of the nature of the price relation-
ship, it does indicate that, at best, producers of
“grown-out” cattle could expect to receive
only about 92 percent of the price of “high-
good” slaughter cattle. Further, if it is as-
sumed that the price of good grade cattle is at
92 percent of the price of choice grade cattle,
then the “grown-out” cattle could be expected
to bring no more than 85 percent of the price of
choice cattle.

To follow through with the implication of
these relative prices for beef cattle producers,
assume that a 750-lb. feeder animal could be
purchased for $.52 per pound. In a traditional
feeding program this animal would be expected
to gain at least 2.5 lbs. per day and could be ex-
pected to reach a slaughter weight of 1,050 lbs.
in 120 days and grade high-good to low choice.
If interest costs of 10 percent per annum and a
selling price of $.48 per pound (high-good
quality grade) are assumed, the animal would
net $101.00 to pay all feeding, marketing, and
death loss costs. The same animal, if put in a
“grow-out” program, could be expected to gain
only about 1.75 lbs. per day and would reach a
slaughter weight of 1,050 lbs. in 171 days at
which time it would be sold for $.44 per pound
(92 percent of $.48). The animal in the “grow-
out” program would net only $53.00 to pay all
feeding, marketing, and death loss costs (again
assuming interest costs of 10 percent per
annum on the purchased animal). If it is fur-
ther assumed that marketing and death loss
costs are the same for both programs, feeding
and other costs (such as transportation) in the
“grow-out” program in this example would
have to be less than half of the feeding costs in
the traditional program to make the “grow-
out” program an attractive alternative enter-
prise to producers.

In the case of Southeastern United States
producers, one might assume that a ryegrass-
wintergrazing operation could be used to pro-
duce the “grown-out” cattle. Recent studies,
however, show that the cost of the pasture
alone for such programs would be between $70
and $90 per head [1].

Despite the oversimplified and approximate
nature of this analysis, it shows that the
development of “grow-out” programs to fur-
nish a source of relatively lean beef for the
ground beef trade is not generally plausible.
This is not to say that such programs could not
be profitable under certain circumstances. For
example, certain types of feeder cattle which
might generally be poorly suited to producing
good and/or choice grade carcasses in a tradi-
tional feeding program might be well suited to
a “grow-out” program. These cases, in the
opinion of the authors, would be exceptional
and certainly not common enough to offer a
significant number of beef producers in the
Southeastern United States an attractive
alternative beef production enterprise.

REFERENCES

[ 1] Brodnax, H. D. Jr., W. C. Couvillion, and F. H. Tyner. “Economics of Winter Grazing 300-600
Pound Calves in Mississippi 1978,” Publication No. 932, Mississippi Cooperative Exten-
sion Service, 1978.

[ 2] Crom, R. A Dynamic Price-Output Model of the Beef and Pork Sectors, USDA, ERS Tech-
nical Bulletin 1426, Washington, September 1970.

[ 3] “Current Comments,” Weekly Report, American Meat Institute, Washington, Volume 21,
Number 39, September 29,1978.

[ 4] “Daily Market and News Service,” The National Provisioner, TheNationalProvisioner, Inc.,
Chicago, September 11-22,1978.

[ 5] Fleming, Bill. “Hamburger Beef: It Changes Your Feeding System,” Beef, Volume 15, Sep-
tember 1978, pp. 26-45.

[ 6] Freebairn, J. W. and G. C. Rausser. “Effects of Changes in the Level of U.S. Beef Imports,”
American Journal OfAgriculturalEconomics, Volume 57, November 1975, pp. 676-88.

[ 7] “Hamburger Cattle-What are They Like?” Progressive Farmer, Volume 93, October 1978,
pp. 30-31.

[ 8] Helming, W. C. “Future Will Bring Two Markets for Grain Fed Beef,” Beef, Volume 14, May
1978, pp. 18-21.

[ 9] Ikerd, J. E. “What’s Happened to the Demand for Beef,” Proceedings, 13th Annual OSU
Cattle Feeders Seminar,
Oklahoma State University, February 2-3,1978, pp. Cl-C15.

[10] Langemeier, L. and R. G. Thompson. “Demand, Supply and Price Relationships for the Beef
Sector, Post World II Period,”
American Journal of Agricultural Economics, Volume 49,
Number 1, Part 1, February 1967, pp. 169-83.

[11] Root, Lynal, quoted in “Hamburger Chain Works on Supply and Demand—Right Now Cheap
Cow Meat Fits Their Operation,”
Beef, Volume 14, January 1978, pp. 106.

[12] Schwanz, Lee. “Your Customers Demand the Hamburger Steer,” The Farmers Digest,
Volume 41, April 1978, pp. 12-17.

26



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