Factors that were determinants of profit variability in calf-fed and yearling beef production systems were identified and ranked. The analysis indicated cattle prices have the greatest influence on profit variation for both systems and on all backgrounding and finishing phases of the yearling system. Prices of feedstuffs (i.e., corn prices, wet corn gluten feed prices, and pasture and cornstalk rental rates) were the next most important factors explaining profit risk. Cattle performance variables and interest rates had the smallest impact on profit variation

Klopfenstein, Terry J., Klopfenstein

Mark, Darrell R

Small, Rebecca M

English

UNL | Libraries

University of Nebraska - Lincoln 
DigitalCommons@University of Nebraska - Lincoln 
Nebraska Beef Cattle Reports Animal Science Department 
2010 
Determinants of Profit Variability in Calf-Fed and Yearling 
Production Systems 
Rebecca M. Small 
University of Nebraska-Lincoln, small_becky@hotmail.com 
Darrell R. Mark 
University of Nebraska-Lincoln, dmark2@unl.edu 
Terry J. Klopfenstein Klopfenstein 
University of Nebraska-Lincoln, tklopfenstein1@unl.edu 
Follow this and additional works at: https://digitalcommons.unl.edu/animalscinbcr 
 Part of the Animal Sciences Commons 
Small, Rebecca M.; Mark, Darrell R.; and Klopfenstein, Terry J. Klopfenstein, "Determinants of Profit 
Variability in Calf-Fed and Yearling Production Systems" (2010). Nebraska Beef Cattle Reports. 592. 
https://digitalcommons.unl.edu/animalscinbcr/592 
This Article is brought to you for free and open access by the Animal Science Department at 
DigitalCommons@University of Nebraska - Lincoln. It has been accepted for inclusion in Nebraska Beef Cattle 
Reports by an authorized administrator of DigitalCommons@University of Nebraska - Lincoln. 
Page 52 — 2010 Nebraska Beef Report  © The Board of Regents of the University of Nebraska.  All rights reserved.
Determinants of Profit Variability in Calf-Fed and Yearling 
Production Systems 
Rebecca M. Small
Darrell R. Mark
Terry J. Klopfenstein1
Summary
Factors that were determinants of 
profit variability in calf-fed and yearling 
beef production systems were identified 
and ranked. The analysis indicated cat-
tle prices have the greatest influence on 
profit variation for both systems and on 
all backgrounding and finishing phases 
of the yearling system. Prices of feed-
stuffs (i.e., corn prices, wet corn gluten 
feed prices, and pasture and cornstalk 
rental rates) were the next most impor-
tant factors explaining profit risk. Cattle 
performance variables and interest rates 
had the smallest impact on profit varia-
tion.
Introduction
An understanding of the relative 
impact of profit determinants can 
help producers identify which vari-
ables of production and financial risk 
to focus on managing. Based on cattle 
feeding budgets that use actual histor-
ical cash prices of inputs and outputs, 
as well as variation in cattle feeding 
performance based on research tri-
als described by Griffen et al. (2007 
Nebraska Beef Report, pp. 58-60), this 
research identifies the magnitude of 
year-to-year variability in profits in 
calf-fed and yearling production sys-
tems. 
A large amount of research has 
evaluated the difference in cattle feed-
ing profit variability based on profit 
determinants in calf-fed and yearling 
finishing systems. However, less re-
search has been done to consider the 
impact of the backgrounding phases 
on the yearling system’s total profit-
ability and profit variation, driven by 
determinants unique to each particu-
lar backgrounding phase. The present 
study evaluated profit variability of 
both systems and the corresponding 
profit variability of multiple phases 
in the yearling system. The objective 
was to identify determinants of profit 
variability and measure each determi-
nant’s relative impact on each system’s 
profit risk.
Procedure
For the calf-fed system, the vari-
ables to explain the variation in 
profits included fed cattle sales price, 
feeder cattle purchase price, corn 
price, interest rate, ADG, and F:G. 
Fed cattle sales price was used in the 
model to represent revenue, while 
feeder cattle sales price was included 
as one of the main cost variables in 
the calf-fed system. Another main 
cost variable for this system was feed, 
measured here by corn price. Interest, 
or opportunity cost of money, was 
charged on variable costs associated 
with feeding cattle. All cattle prices 
and corn prices were market prices 
reported by USDA’s Agricultural Mar-
keting Service, and interest rates were 
reported by the Kansas City Federal 
Reserve Bank’s Survey of Agricultural 
Credit Conditions. The impact of 
ADG and F:G on profits also was mea-
sured in the econometric model from 
experimental trials. 
As discussed in Small et al. (2009 
Nebraska Beef Report, pp. 40-42), the 
yearling production system incurs 
costs associated with backgrounding 
calves on crop residue in the winter 
and native grass pasture in the sum-
mer and finishing in the fall in a feed-
lot. Thus, explanatory variables in this 
study included fed cattle sales price, 
feeder cattle purchase price, average 
cornstalk and summer pasture rental 
rates, corn prices during feeding, 
average interest rates across the three 
phases, ADG for the three phases, and 
F:G in the feedyard finishing phase. 
Sources for these prices were the same 
as for the calf-finishing system, with 
the addition of cornstalk and pasture 
rental prices from Nebraska Farm 
Real Estate Reports (Johnson), which 
are included because they represent 
the bulk of feed costs for the two 
backgrounding phases. Also, to better 
account for all phases in the yearling 
system, the entire system’s ADG was 
calculated based on initial weight go-
ing onto cornstalks, final weight at 
marketing, and total days owned. 
The yearling system’s profit rela-
tionship also was divided into three 
production stages, and profits were 
calculated for each by valuing the 
feeder steer at the end of the winter 
grazing phase (start of the summer 
grazing phase) and the end of the 
summer grazing phase (start of the 
feedlot phase). The winter cornstalk 
grazing variables included feeder 
cattle price margin (difference in the 
price of the calf going onto cornstalks 
and the price of the calf coming off 
cornstalks); feeder cattle purchase 
price; the average cornstalk rental 
rate; the average price of wet corn 
gluten feed (WCGF) fed as a supple-
ment during winter phase; interest 
rate; and ADG.
In order to rank the relative impact 
of variables on the summer pasture 
grazing profits, the following variables 
were included in the econometric 
model: the feeder cattle price margin 
(difference in the price of the calf 
going onto pasture and the price of 
the calf coming off pasture); feeder 
cattle purchase value at the beginning 
of the summer; the average pasture 
rent; interest rate during the summer 
phase; and ADG during the summer 
phase. The yearling system finishing 
phase profit variation model included 
the same variables as the calf-fed 
model, but measured only during the 
yearling steers’ time in the feedyard.
The feeder cattle price margin 
for the winter and summer grazing 
phases was used in place of the feeder 
cattle sales price to lessen econometric 
problems associated with inclusion of 
both feeder cattle sales price and feed-
© The Board of Regents of the University of Nebraska.  All rights reserved. 2010 Nebraska Beef Report  — Page 53 
Figure 1. Calf-fed profit variation caused by prices and performance, 1996-20071.
1Solid bars represent statistically significant coefficients, whereas striped bars are associated with 
coefficients that are not statistically different than zero. 
Fed Cattle
Sales Price
Feeder Cattle
Purchase Price
Corn Prices
Interest Rates
Average Daily Gain
Feed Conversion
1.7
-1.3
-0.4
-0.2
0.1
-0.1
-1.75 -1.5 -1.25 -1 -0.75 -0.5 -0.25 1 0.25 0.5 0.75 1 1.25 1.5 1.75
Standardized Beta Coefficients
Figure 2. Yearlings (all phases) profit variation caused by prices and performance, 1996-20071.
1Solid bars represent statistically significant coefficients whereas striped bars are associated with coef-
ficients that are not statistically different than zero.
Fed Cattle
Sales Price
Feeder Cattle
Purchase Price
Corn Stalk and
Pasture Rent
Corn Prices
Interest Rates
Average Daily Gain
Feed Conversion
1.3
-0.9
-0.2
-0.5
0.0
0.3
0.0
 -1.75 -1.5 -1.25 -1 -0.75 -0.5 -0.25 1 0.25 0.5 0.75 1 1.25 1.5 1.75
Standardized Beta Coefficients
er cattle purchase price in the model. 
Thus, the feeder cattle purchase price 
measured overall input price levels, 
and the feeder cattle price margin 
quantified the price spread. 
Standardized beta coefficients were 
used to rank the relative influence 
of profit determinants on profit risk. 
This method of analysis involved nor-
malizing profit and the explanatory 
variables, resulting in a unit-less mea-
sure that allowed comparison of the 
influence of the explanatory variables 
on profits regardless of differing units 
of measure used to define each vari-
able (e.g., dollars per bushel for corn 
price and dollars per hundredweight 
for feeder cattle price). Standardized 
beta coefficients have a special inter-
pretation. Suppose that the explana-
tory variable fed cattle sales price has a 
standardized beta coefficient of 1.25. 
This means that for a one standard 
deviation change in fed cattle sales 
price, profit changes from its mean by 
1.25 standard deviations. Thus, the 
greater the standardized beta coef-
ficient for a given variable, the greater 
the influence that variable has on 
profit variation. 
Results
Figure 1 indicates the magnitude 
of the standardized beta coefficients 
of the variables that affected profits 
in calf-fed systems. The variables rep-
resented by bars on the right side of 
the graph have a positive relationship 
with profits (i.e., profits increase with 
increases in the given variable). The 
variables represented by bars on the 
left side of zero have a negative rela-
tionship with profits. Solid bars rep-
resent variables with coefficients that 
were statistically different than zero, 
whereas striped bars indicate that the 
variable’s coefficient was not statisti-
cally significant. As shown in Figure 
1, fed cattle sales price had the largest 
impact on profit variation, followed 
by feeder cattle purchase price. Corn 
price, interest rates, F:G, and ADG 
were the next most influential profit 
determinants.
These results are similar to those 
discussed in previous research and 
indicate the majority of the year-to-
year profit risk from finishing calf-
feds was due to cattle and corn prices. 
Even though animal performance was 
important in determining whether 
or not a profit resulted, ADG and F:G 
did not tend to explain a large propor-
tion of the variation in profits across 
years (although they were statistically 
significant determinants of profit 
variability). In a relative sense, the 
variability of cattle performance was 
much smaller across the years of the 
study than the variability of cattle and 
corn prices, leading to the result that 
the more variable determinants like 
cattle and corn prices cause the most 
profit variability.
The magnitude and signs of the 
standardized beta coefficients for the 
entire yearling system are illustrated 
(Continued on next page)
Page 54 — 2010 Nebraska Beef Report  © The Board of Regents of the University of Nebraska.  All rights reserved.
Feeder Cattle
Price Margin
Feeder Cattle
Purchase Price
Corn Stalk Rent
Wet Corn
Gluten Feed Price
Interest Rate
Average Daily 
Gain
-0.2
-0.2
-0.3
-0.1
0.0
1.2
 -1.75 -1.5 -1.25 -1 -0.75 -0.5 -0.25 1 0.25 0.5 0.75 1 1.25 1.5 1.75
Standardized Beta Coefficients
Figure 3. Yearlings (winter phase) profit variation caused by prices and performance, 1996-20071.
1Solid bars represent statistically significant coefficients whereas striped bars are associated with coef-
ficients that are not statistically different than zero.
Feeder Cattle
Price Margin
Feeder Cattle
Purchase Price
Pasture Rent
Interest Rate
Average Daily 
Gain
1.0
-0.2
-0.1
0.0
0.0
 -1.75 -1.5 -1.25 -1 -0.75 -0.5 -0.25 1 0.25 0.5 0.75 1 1.25 1.5 1.75
Standardized Beta Coefficients
Figure 4. Yearlings (summer phase) profit variation caused by prices and performance, 1996-
20071.
1Solid bars represent statistically significant coefficients whereas striped bars are associated with coef-
ficients that are not statistically different than zero.
in Figure 2. Comparison of the bars 
in Figure 2 with those in Figure 1 
demonstrates that the relative rank 
of a variable’s importance in deter-
mining profits was somewhat dif-
ferent for yearlings (all phases) than 
for calf-feds. Similar to the profit 
determinants evaluated in the calf-fed 
system, fed cattle sale price, feeder 
cattle purchase price, and corn price 
had the largest influence on profits. 
Conversely, ADG was the next most 
important variable explaining profit 
variation for the yearling system, fol-
lowed by the average cornstalk and 
pasture rental rates. Also note that the 
standardized beta coefficients for the 
sales price and purchase price were 
smaller in terms of absolute values for 
yearlings than for calf-feds. The total 
purchase price of the lighter steer at 
the beginning of the yearling system 
comprised less of the total cost of pro-
ducing a finished steer, compared to 
the total purchase price of the heavier 
steer in the calf-fed system. Thus, it 
would be expected that the standard-
ized beta coefficient associated with 
the feeder cattle purchase price for 
calf-feds would be greater than that of 
the yearling system. 
It might also be assumed that corn 
prices for a yearling system would 
have a smaller impact on profit varia-
tion relative to a calf-fed system, since 
yearlings consumed corn for less 
time than calf-feds. However, year-
lings were less efficient with the corn 
consumed (Griffin, 2007 Nebraska 
Beef Report, pp.58-60), which may 
be the cause of the larger standard-
ized beta coefficient for corn in the 
yearling model than in the calf-fed 
model. Moreover, corn price was 
used to calculate the cost of WCGF, 
which also was fed to yearlings during 
the feedlot phase and supplemented 
during the winter cornstalk grazing 
phase. Therefore, the impact of corn 
price on profit variation may be par-
tially attributed to the cost of WCGF 
if its impact was being captured by 
the corn price variable in the yearling 
system’s model. 
The model used to calculate stan-
dardized beta coefficients for the 
winter cornstalk grazing phase had 
all variables with their expected signs 
(positive for profit-increasing vari-
ables, like fed cattle price and cattle 
performance, and negative for costs 
that lower profits, like cornstalk graz-
ing, interest, and feeder cattle pur-
chase price) except winter phase ADG, 
which also was not statistically sig-
nificant (Figure 3). The feeder cattle 
price margin (difference in the total 
price [$ per head] of the calf going on 
to cornstalks and the total price [$ 
per head] of the calf coming off corn-
stalks) was the greatest influencer of 
profit variation in the yearling winter 
phase relative to the other variables. 
The next most important determinant 
was WCGF price, followed by corn-
stalk rental rate, purchase price of 
the feeder steer, and interest rates (see 
© The Board of Regents of the University of Nebraska.  All rights reserved. 2010 Nebraska Beef Report  — Page 55 
for summer phase profits.
In the yearling’s feedlot phase 
model, purchase price of the feeder 
steer entering the feedlot was the most 
influential profit determinant (see 
Figure 5). Figure 5 also shows that fed 
cattle sales price was the next most 
important variable in influencing 
profit variation. Although they did 
not have as large an impact on profit 
variation, corn price, feedlot ADG, 
and F:G were important profit deter-
minants as well. 
All of the results showed that fed 
cattle sales price, feeder cattle price 
margins, feeder cattle purchase price, 
and corn price had the largest impact 
on profit variation for calf-feds and 
yearlings. In conclusion, to effectively 
manage profit risk associated with 
these two cattle production systems, 
it is important to manage cattle and 
corn price risk.
1Rebecca M. Small, former graduate 
student, Darrell R. Mark, associate professor, 
Agricultural Economics; Terry J. Klopfenstein, 
professor, Animal Science, University of 
Nebraska, Lincoln, Neb.
Figure 5.  Yearlings (feedlot phase) profit variation caused by prices and performance, 1996-20071.
1Solid bars represent statistically significant coefficients whereas striped bars are associated with coef-
ficients that are not statistically different than zero.
Fed Cattle Price
Feeder Cattle
Purchase Price
Corn Price
Interest Rate
Average Daily Gain
Feed Conversion
1.5
-1.5
-0.2
0.0
0.2
-0.1
 -1.75 -1.5 -1.25 -1 -0.75 -0.5 -0.25 1 0.25 0.5 0.75 1 1.25 1.5 1.75
Standardized Beta Coefficients
Figure 3). 
For the summer grazing profit 
variation analysis, all revenue-
improving variables had positive signs 
and cost-related variables had negative 
signs. Similar to the yearling system’s 
winter phase, the feeder cattle price 
margin had the greatest impact on 
profit variation of all the variables 
(see Figure 4). The purchase price or 
value of the steer entering the summer 
pasture grazing phase had the second 
largest impact on profit variation. Pas-
ture rental rates also had an impact on 
profit variation. Neither interest rates 
nor ADG were statistically significant 


Determinants of Profit Variability in Calf-Fed and Yearling Production Systems

DigitalCommons@University of Nebraska

University of Nebraska - Lincoln DigitalCommons@University of Nebraska - Lincoln Nebraska Beef Cattle Reports Animal Science Department 2010 Determinants of Profit Variability in Calf-Fed and Yearling Production Systems Rebecca M. Small University of Nebraska-Lincoln, small_becky@hotmail.com Darrell R. Mark University of Nebraska-Lincoln, dmark2@unl.edu Terry J. Klopfenstein Klopfenstein University of Nebraska-Lincoln, tklopfenstein1@unl.edu Follow this and additional works at: https://digitalcommons.unl.edu/animalscinbcr  Part of the Animal Sciences Commons Small, Rebecca M.; Mark, Darrell R.; and Klopfenstein, Terry J. Klopfenstein, "Determinants of Profit Variability in Calf-Fed and Yearling Production Systems" (2010). Nebraska Beef Cattle Reports. 592. https://digitalcommons.unl.edu/animalscinbcr/592 This Article is brought to you for free and open access by the Animal Science Department at DigitalCommons@University of Nebraska - Lincoln. It has been accepted for inclusion in Nebraska Beef Cattle Reports by an authorized administrator of DigitalCommons@University of Nebraska - Lincoln. Page 52 — 2010 Nebraska Beef Report  © The Board of Regents of the University of Nebraska.  All rights reserved.Determinants of Profit Variability in Calf-Fed and Yearling Production Systems Rebecca M. SmallDarrell R. MarkTerry J. Klopfenstein1SummaryFactors that were determinants of profit variability in calf-fed and yearling beef production systems were identified and ranked. The analysis indicated cat-tle prices have the greatest influence on profit variation for both systems and on all backgrounding and finishing phases of the yearling system. Prices of feed-stuffs (i.e., corn prices, wet corn gluten feed prices, and pasture and cornstalk rental rates) were the next most impor-tant factors explaining profit risk. Cattle performance variables and interest rates had the smallest impact on profit varia-tion.IntroductionAn understanding of the relative impact of profit determinants can help producers identify which vari-ables of production and financial risk to focus on managing. Based on cattle feeding budgets that use actual histor-ical cash prices of inputs and outputs, as well as variation in cattle feeding performance based on research tri-als described by Griffen et al. (2007 Nebraska Beef Report, pp. 58-60), this research identifies the magnitude of year-to-year variability in profits in calf-fed and yearling production sys-tems. A large amount of research has evaluated the difference in cattle feed-ing profit variability based on profit determinants in calf-fed and yearling finishing systems. However, less re-search has been done to consider the impact of the backgrounding phases on the yearling system’s total profit-ability and profit variation, driven by determinants unique to each particu-lar backgrounding phase. The present study evaluated profit variability of both systems and the corresponding profit variability of multiple phases in the yearling system. The objective was to identify determinants of profit variability and measure each determi-nant’s relative impact on each system’s profit risk.ProcedureFor the calf-fed system, the vari-ables to explain the variation in profits included fed cattle sales price, feeder cattle purchase price, corn price, interest rate, ADG, and F:G. Fed cattle sales price was used in the model to represent revenue, while feeder cattle sales price was included as one of the main cost variables in the calf-fed system. Another main cost variable for this system was feed, measured here by corn price. Interest, or opportunity cost of money, was charged on variable costs associated with feeding cattle. All cattle prices and corn prices were market prices reported by USDA’s Agricultural Mar-keting Service, and interest rates were reported by the Kansas City Federal Reserve Bank’s Survey of Agricultural Credit Conditions. The impact of ADG and F:G on profits also was mea-sured in the econometric model from experimental trials. As discussed in Small et al. (2009 Nebraska Beef Report, pp. 40-42), the yearling production system incurs costs associated with backgrounding calves on crop residue in the winter and native grass pasture in the sum-mer and finishing in the fall in a feed-lot. Thus, explanatory variables in this study included fed cattle sales price, feeder cattle purchase price, average cornstalk and summer pasture rental rates, corn prices during feeding, average interest rates across the three phases, ADG for the three phases, and F:G in the feedyard finishing phase. Sources for these prices were the same as for the calf-finishing system, with the addition of cornstalk and pasture rental prices from Nebraska Farm Real Estate Reports (Johnson), which are included because they represent the bulk of feed costs for the two backgrounding phases. Also, to better account for all phases in the yearling system, the entire system’s ADG was calculated based on initial weight go-ing onto cornstalks, final weight at marketing, and total days owned. The yearling system’s profit rela-tionship also was divided into three production stages, and profits were calculated for each by valuing the feeder steer at the end of the winter grazing phase (start of the summer grazing phase) and the end of the summer grazing phase (start of the feedlot phase). The winter cornstalk grazing variables included feeder cattle price margin (difference in the price of the calf going onto cornstalks and the price of the calf coming off cornstalks); feeder cattle purchase price; the average cornstalk rental rate; the average price of wet corn gluten feed (WCGF) fed as a supple-ment during winter phase; interest rate; and ADG.In order to rank the relative impact of variables on the summer pasture grazing profits, the following variables were included in the econometric model: the feeder cattle price margin (difference in the price of the calf going onto pasture and the price of the calf coming off pasture); feeder cattle purchase value at the beginning of the summer; the average pasture rent; interest rate during the summer phase; and ADG during the summer phase. The yearling system finishing phase profit variation model included the same variables as the calf-fed model, but measured only during the yearling steers’ time in the feedyard.The feeder cattle price margin for the winter and summer grazing phases was used in place of the feeder cattle sales price to lessen econometric problems associated with inclusion of both feeder cattle sales price and feed-© The Board of Regents of the University of Nebraska.  All rights reserved. 2010 Nebraska Beef Report  — Page 53 Figure 1. Calf-fed profit variation caused by prices and performance, 1996-20071.1Solid bars represent statistically significant coefficients, whereas striped bars are associated with coefficients that are not statistically different than zero. Fed CattleSales PriceFeeder CattlePurchase PriceCorn PricesInterest RatesAverage Daily GainFeed Conversion1.7-1.3-0.4-0.20.1-0.1-1.75 -1.5 -1.25 -1 -0.75 -0.5 -0.25 1 0.25 0.5 0.75 1 1.25 1.5 1.75Standardized Beta CoefficientsFigure 2. Yearlings (all phases) profit variation caused by prices and performance, 1996-20071.1Solid bars represent statistically significant coefficients whereas striped bars are associated with coef-ficients that are not statistically different than zero.Fed CattleSales PriceFeeder CattlePurchase PriceCorn Stalk andPasture RentCorn PricesInterest RatesAverage Daily GainFeed Conversion1.3-0.9-0.2-0.50.00.30.0 -1.75 -1.5 -1.25 -1 -0.75 -0.5 -0.25 1 0.25 0.5 0.75 1 1.25 1.5 1.75Standardized Beta Coefficientser cattle purchase price in the model. Thus, the feeder cattle purchase price measured overall input price levels, and the feeder cattle price margin quantified the price spread. Standardized beta coefficients were used to rank the relative influence of profit determinants on profit risk. This method of analysis involved nor-malizing profit and the explanatory variables, resulting in a unit-less mea-sure that allowed comparison of the influence of the explanatory variables on profits regardless of differing units of measure used to define each vari-able (e.g., dollars per bushel for corn price and dollars per hundredweight for feeder cattle price). Standardized beta coefficients have a special inter-pretation. Suppose that the explana-tory variable fed cattle sales price has a standardized beta coefficient of 1.25. This means that for a one standard deviation change in fed cattle sales price, profit changes from its mean by 1.25 standard deviations. Thus, the greater the standardized beta coef-ficient for a given variable, the greater the influence that variable has on profit variation. ResultsFigure 1 indicates the magnitude of the standardized beta coefficients of the variables that affected profits in calf-fed systems. The variables rep-resented by bars on the right side of the graph have a positive relationship with profits (i.e., profits increase with increases in the given variable). The variables represented by bars on the left side of zero have a negative rela-tionship with profits. Solid bars rep-resent variables with coefficients that were statistically different than zero, whereas striped bars indicate that the variable’s coefficient was not statisti-cally significant. As shown in Figure 1, fed cattle sales price had the largest impact on profit variation, followed by feeder cattle purchase price. Corn price, interest rates, F:G, and ADG were the next most influential profit determinants.These results are similar to those discussed in previous research and indicate the majority of the year-to-year profit risk from finishing calf-feds was due to cattle and corn prices. Even though animal performance was important in determining whether or not a profit resulted, ADG and F:G did not tend to explain a large propor-tion of the variation in profits across years (although they were statistically significant determinants of profit variability). In a relative sense, the variability of cattle performance was much smaller across the years of the study than the variability of cattle and corn prices, leading to the result that the more variable determinants like cattle and corn prices cause the most profit variability.The magnitude and signs of the standardized beta coefficients for the entire yearling system are illustrated (Continued on next page)Page 54 — 2010 Nebraska Beef Report  © The Board of Regents of the University of Nebraska.  All rights reserved.Feeder CattlePrice MarginFeeder CattlePurchase PriceCorn Stalk RentWet CornGluten Feed PriceInterest RateAverage Daily Gain-0.2-0.2-0.3-0.10.01.2 -1.75 -1.5 -1.25 -1 -0.75 -0.5 -0.25 1 0.25 0.5 0.75 1 1.25 1.5 1.75Standardized Beta CoefficientsFigure 3. Yearlings (winter phase) profit variation caused by prices and performance, 1996-20071.1Solid bars represent statistically significant coefficients whereas striped bars are associated with coef-ficients that are not statistically different than zero.Feeder CattlePrice MarginFeeder CattlePurchase PricePasture RentInterest RateAverage Daily Gain1.0-0.2-0.10.00.0 -1.75 -1.5 -1.25 -1 -0.75 -0.5 -0.25 1 0.25 0.5 0.75 1 1.25 1.5 1.75Standardized Beta CoefficientsFigure 4. Yearlings (summer phase) profit variation caused by prices and performance, 1996-20071.1Solid bars represent statistically significant coefficients whereas striped bars are associated with coef-ficients that are not statistically different than zero.in Figure 2. Comparison of the bars in Figure 2 with those in Figure 1 demonstrates that the relative rank of a variable’s importance in deter-mining profits was somewhat dif-ferent for yearlings (all phases) than for calf-feds. Similar to the profit determinants evaluated in the calf-fed system, fed cattle sale price, feeder cattle purchase price, and corn price had the largest influence on profits. Conversely, ADG was the next most important variable explaining profit variation for the yearling system, fol-lowed by the average cornstalk and pasture rental rates. Also note that the standardized beta coefficients for the sales price and purchase price were smaller in terms of absolute values for yearlings than for calf-feds. The total purchase price of the lighter steer at the beginning of the yearling system comprised less of the total cost of pro-ducing a finished steer, compared to the total purchase price of the heavier steer in the calf-fed system. Thus, it would be expected that the standard-ized beta coefficient associated with the feeder cattle purchase price for calf-feds would be greater than that of the yearling system. It might also be assumed that corn prices for a yearling system would have a smaller impact on profit varia-tion relative to a calf-fed system, since yearlings consumed corn for less time than calf-feds. However, year-lings were less efficient with the corn consumed (Griffin, 2007 Nebraska Beef Report, pp.58-60), which may be the cause of the larger standard-ized beta coefficient for corn in the yearling model than in the calf-fed model. Moreover, corn price was used to calculate the cost of WCGF, which also was fed to yearlings during the feedlot phase and supplemented during the winter cornstalk grazing phase. Therefore, the impact of corn price on profit variation may be par-tially attributed to the cost of WCGF if its impact was being captured by the corn price variable in the yearling system’s model. The model used to calculate stan-dardized beta coefficients for the winter cornstalk grazing phase had all variables with their expected signs (positive for profit-increasing vari-ables, like fed cattle price and cattle performance, and negative for costs that lower profits, like cornstalk graz-ing, interest, and feeder cattle pur-chase price) except winter phase ADG, which also was not statistically sig-nificant (Figure 3). The feeder cattle price margin (difference in the total price [$ per head] of the calf going on to cornstalks and the total price [$ per head] of the calf coming off corn-stalks) was the greatest influencer of profit variation in the yearling winter phase relative to the other variables. The next most important determinant was WCGF price, followed by corn-stalk rental rate, purchase price of the feeder steer, and interest rates (see © The Board of Regents of the University of Nebraska.  All rights reserved. 2010 Nebraska Beef Report  — Page 55 for summer phase profits.In the yearling’s feedlot phase model, purchase price of the feeder steer entering the feedlot was the most influential profit determinant (see Figure 5). Figure 5 also shows that fed cattle sales price was the next most important variable in influencing profit variation. Although they did not have as large an impact on profit variation, corn price, feedlot ADG, and F:G were important profit deter-minants as well. All of the results showed that fed cattle sales price, feeder cattle price margins, feeder cattle purchase price, and corn price had the largest impact on profit variation for calf-feds and yearlings. In conclusion, to effectively manage profit risk associated with these two cattle production systems, it is important to manage cattle and corn price risk.1Rebecca M. Small, former graduate student, Darrell R. Mark, associate professor, Agricultural Economics; Terry J. Klopfenstein, professor, Animal Science, University of Nebraska, Lincoln, Neb.Figure 5.  Yearlings (feedlot phase) profit variation caused by prices and performance, 1996-20071.1Solid bars represent statistically significant coefficients whereas striped bars are associated with coef-ficients that are not statistically different than zero.Fed Cattle PriceFeeder CattlePurchase PriceCorn PriceInterest RateAverage Daily GainFeed Conversion1.5-1.5-0.20.00.2-0.1 -1.75 -1.5 -1.25 -1 -0.75 -0.5 -0.25 1 0.25 0.5 0.75 1 1.25 1.5 1.75Standardized Beta CoefficientsFigure 3). For the summer grazing profit variation analysis, all revenue-improving variables had positive signs and cost-related variables had negative signs. Similar to the yearling system’s winter phase, the feeder cattle price margin had the greatest impact on profit variation of all the variables (see Figure 4). The purchase price or value of the steer entering the summer pasture grazing phase had the second largest impact on profit variation. Pas-ture rental rates also had an impact on profit variation. Neither interest rates nor ADG were statistically significant 

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Determinants of Profit Variability in Calf-Fed and Yearling Production Systems

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