Economics of Preconditioning Beef Cattle

Abstract

Calf morbidity and mortality due to Bovine Respiratory Disease (BRD) is highest in the first two weeks after arrival at the feedlot. Feedlots use antimicrobial drugs (AMDs) to maintain calf health, which contributes to general antimicrobial resistance (AMR). AMR causes externality costs to human health care. Preconditioning is a practice designed to prepare calves for the transition to a feedlot and reduce antimicrobial use (AMU). Despite a large literature on the improved health of preconditioned (PC) calves at the feedlot, preconditioning has not been widely adopted in Canada. I hypothesize that this is mainly due to the presence of uncompensated externalities leading to a market failure for PC calves. Data from a University of Calgary study was used to examine three economic aspects of preconditioning: (1) the impact of PC calves on AMU and the AMR externality costs to human health, (2) feedlot cost differences for PC and non-PC calves, and (3) an updated profitability analysis of preconditioning for cow-calf operations. The results showed that the expected number of AMD treatments for BRD was 37-53% lower for PC calves, which would reduce the negative externality of AMR in Alberta and Saskatchewan by up to $450,000 for each annual fall feedlot intake. PC calves showed a reduction in feedlot health costs of $8.57-$13.86 per head compared to non-PC calves, and were not adversely impacted by commingling with non-PC calves. However there was no difference in the net return from PC calves compared to non-PC calves. Cost-return analysis for preconditioning at the cow-calf level showed a small loss of $38.57/head, suggesting that there is no financial incentive for cow-calf producers to precondition calves prior to selling in the absence of additional premiums.