Derivation of an economic shipping
Creators: name: Ranta, James Lawrence
Publisher: name: University of British Columbia
Year: 2011

description: In recent years research has expanded the knowledge one has of the actual costs Involved in the growth process of meat producing animals. These studies have shown that at the higher weights a larger proportion of the gains are made up of high cost fat tissues. Initially it was thought that this fat deposition served a useful purpose in making meat tender, but it is now known that this original premise was incorrect. Fat is no longer desired by the consumer above a certain minimum level. The feedlot operator therefore has the option of taking advantage of this phenomenon and shipping animals at a lighter weight, at a lower cost, and with the possibility of doing this at a higher profit margin than is the case at present. A study has been made of the total costs involved in the production of a pound of live animal weight under feed-lot conditions and of the changes in these costs that occur as the animal achieves a higher total body weight. It was found that on the average, each additional pound of gain requires between .006 and .028 more pounds of feed than did the previous pound. As a result of these studies, an Economic Shipping Weight was proposed as a means of signifying the beginning of an increase in the average cost of production and hence, a decrease in. the rate of return to investment. The Economic Shipping Weight was defined as that weight at which the feed cost of an additional pound of gain is equal to the current value of a pound of live animal weight. In the application of this theoretically derived shipping weight to a practical feedlot operation having a total fixed investment of $162,938.00, it was found that the total return to investment was increased from $8,822 to $22,503. This increase resulted in a change in the rate of return to investment from 5.44% to 13.81%. The major part of this increase in the total margin was due to a reduction in the average feed cost of each pound of gain from 20.2¢ to 17.4¢. The total margin between sales revenues and animal purchase and feed costs was increased by $5,485.00. This reduction in feed costs was caused by a lowering of the average amount of feed required per pound of gain as the animals were theoretically shipped 41 lb. lighter than in the actual operation. Originally they were sold at an average weight of 998 lb. Seventy-six percent of them received a Choice grade. The analysis was carried out under the assumption that they would only receive a Good grade price at the Economic Shipping Weight. Other savings arose from a reduction in the total interest charges on feed purchases because of the lower total feed consumption, and from a reduction in the total feed freight bill. These two savings amounted to $4,716.00. The remaining saving resulted from a smaller in process feed cost. A study was also made of the relative advantages for the beef industry of stressing the production of Good grade beef as opposed to Choice grade beef. It appears that an economic advantage could be gained by the packing house operators, feedlot operators, and retailers, if this were to become the main grade produced. As consumers are now making most of their meat purchases on the basis of a lack of fat, Good grade meat is also more acceptable to them. The feasibility of using Dairy breed animals as a meat source was examined as a means of producing leaner meat at a lower cost than beef breed meat. These animals were shown to have a definite economic advantage at any body weight because they used feed more efficiently. Dairy breed bulls were also shown to produce meat more economically than any other dairy or beef breed animal and resulted in meat which is more desirable to the consumer. Because of their greater efficiency they had an Economic Shipping Weight of 1050 lb. as opposed to 900-950 lb. for beef breed animals. There was, however, a certain risk involved in their production because of the wide variation in the grades they may receive.