Economics of finishing Tanzania Shorthorn Zebu cattle in feedlot and optimum finishing period

L Asimwe, A E Kimambo, G H Laswai, L A Mtenga, M R Weisbjerg¹ and J Madsen²

Department of Animal Science and Production, Sokoine University of Agriculture, P O Box 3004, Morogoro, Tanzania
lovinceasimwe@yahoo.com
¹ Department of Animal Science, AU Foulum, Aarhus University, BlichersAlle 20, 8830 Tjele, Denmark.
² Department of Larger Animal Sciences, University of Copenhagen, Frederiksberg, Denmark.

Abstract

Economic potential of finishing Tanzania Shorthorn Zebu (TSZ) cattle in feedlot was analysed using data obtained from two feedlot experiments carried out at Kongwa ranch in Tanzania. The experiments were performed to evaluate the effects of feeding agro-processing by products and length of feedlot finishing for TSZ cattle. The biological data collected from the two experiments were used as basis for deriving the economic scenarios. The range of days steers were kept in feedlot was set at 0, 25, 50, 75 and 100 days. The dietary metabolisable energy intake (MEI) levels used in the study were 55 MJ/day (Low) and 85 MJ/day (High). The amount of extra meat (34.4 kg) produced from high MEI was more than twice the amount produced from low (15.7 kg) MEI for the feedlot period of 100 days. Feed cost per kg of extra meat (6,100 TSh.) was higher for low MEI than for high MEI (3,923 TSh.) for 100 days in feedlot. Non-feed costs per kg extra meat were higher for short stays (4,500 TSh.) than long stays (2,630 TSh.) If meat prices were independent on finishing period length, high MEI was profitable with increment of (81%) profit per kg extra meat for an increase from 50 to 75 days in feedlot. Assuming a 10% increase in meat price due to feedlot finishing regardless of finishing length, profit per animal carcass increased with increasing days in feedlot for high MEI from 71,800 TSh. in 25 days to 143,000 TSh. in 100 days in feedlot. Assuming meat price increased by 5% with each increase in feedlot finishing length of 25 days, higher profit per animal carcass was realized with long stays (100 days, 238,000 TSh.) than short stays (25 days, 37,600 TSh.). It was concluded that the high feeding level is the most profitable irrespective of meat price and finishing length. The optimum finishing length is between 50 and 75 days when price does not change with feedlot finishing and 100 days when price changes with feedlot finishing length.

Keywords: cost, days in feedlot, energy intake, profit

Introduction

Tanzania shorthorn zebu (TSZ) is the dominant breed accounting for 95% of the total cattle population in Tanzania and therefore the main source of beef in the country. The TSZ cattle are known for their ability to survive and produce under harsh environment, poor feeding and high disease challenges (MLDF 2011). Despite their small size, resulting in small carcasses, these animals are suitable for beef production in feedlot and they respond well to finishing diets by producing acceptable carcasses (Zakaria 2010; Mwilawa 2012). Finishing beef cattle in feedlots can be economically attractive if low cost feed resources are available as well as animals to finish. Cattle finishing simply refers to the preparation of cattle for slaughtering which require cattle to gain weight at their maximum potential rate. This involves getting them quickly into a high-energy diet to produce marketable beef in shortest time possible. Providing feed to animals is a major cost in most beef production enterprises (Archer and Bergh 2000; Kelsey et al 2010) and therefore efficient nutrition is a key component of a successful production. Finishing TSZ cattle in feedlot using maize or molasses with rice and maize by-products based diet improved growth performance, carcass characteristics and meat quality, mainly tenderness (Asimwe et al 2015a & b), however evaluation of its profitability on different periods of stay in feedlot has not been documented.

Finishing period is a period where animals are fed supplemental feed for weight gain and improvements of meat quality. Increasing number of days on supplementation will increase marbling, yield grade, carcass weight, carcass size and external fat cover (Van Koevering et al 1995; Shirima et al 2012) as well as meat quality characteristics such as tenderness. Prolonged number of days in feedlot will increase the use of supplemental feeds and thereby normally increase production cost (Owens and Gardner 2000). It may be possible to reduce cost and maximize profit of feedlot by feeding balanced rations from less expensive feed ingredients for a short period. Attempts have been done to promote feedlot production in Tanzania by assessing quality, quantity and price trends of beef animals and feed resources available (Nandonde 2008), but inadequate information is available showing optimum length of feedlot finishing for TSZ cattle to produce high quality meat and maximize profit under different price conditions. The aim of this paper was to study the economics of finishing TSZ cattle on agro-processing by-product diets under different periods of stay in feedlot using biological data and different assumed finishing scenarios.

Methods

Biological background

The biological background for economic scenarios was mainly based on feedlot experiments carried out at Kongwa ranch, Dodoma, Tanzania. The first study evaluated the effects of feeding different agro-processing by products to TSZ cattle for 90 days in feedlot and the second evaluated the different periods of stay in feedlot on production and carcass quality of TSZ cattle. In the first experiment, a total of 45 TSZ steers of 2.5-3 years of age and 200 + 5 (SEM) kg initial body weight were randomly allotted into five dietary treatments. The dietary treatments were the diets based on concentrate compounded from different agro-processing by products, hominy feed with molasses (HFMO, 86 MJ/day MEI), rice polishing with molasses (RPMO, 77 MJ/day MEI), hominy feed with maize meal (HFMM, 73 MJ/day MEI), rice polishing with maize meal (RPMM, 69MJ/day MEI) and maize meal with molasses (MMMO, 74 MJ/day MEI) as detailed by Asimwe et al (2015a). In the second experiment, fifty (50) TSZ steers aged 3.0 years with 183+4 kg initial body weight were allocated for five treatments defined as period length in feedlot. The length of stay in feedlot were P₀ (zero days), P₂₅ (25 days), P₅₀ (50 days), P₇₅ (75 days) and P₁₀₀ (100 days) as detailed by Asimwe et al. (2015b). Animals in the second experiment were fed on HFMO, which performed the best in the first study. At the end of each feeding trial, animals were slaughtered and carcasses were sold at the prevailing market price for normal meat.

Scenarios assumed

Different scenarios were assumed from the experience gained in the two experiments carried out at Kongwa ranch on TSZ cattle as detailed by Asimwe et al (2015a, b). The reasonable range of days for such animals to stay in feedlot was assumed to be 0, 25, 50, 75 and 100 days. Such range of days was considered to give room for the two extreme conditions in feedlots to be considered that is, if they are not finished at all or if they are finished for the short time (few number of days) they will have carcasses with low final weights and with low fat content, and if they are finished for many days they will produce heavy carcass with higher final weights but possibly with too high fat content. Daily metabolisable energy intake (MEI) was assumed based on the actual range of daily MEI observed for TSZ cattle finished in feedlots using different agro-processing by-product based rations and which had stayed in feedlots for different periods (Asimwe et al 2015a, b). Low (55MJ MEI per day) and high (85 MJ MEI per day) levels were chosen to simulate situations with low and high energy intake, respectively. Daily feed intake was taken as the average intake observed for steers fed rations with similar energy concentrations in the two experiments. Initial weight was obtained by taking the average initial weights in the two experiments. Average daily gain was derived from the equation on linear relationship between growth rate and MEI for TSZ cattle fed different rations formulated from different agro processing by products found in the first experiment. The equation is y =14.9x – 388, where y is the daily gain (g/day) and x is the respective daily MEI in MJ (Fig. 1). The dressing percentage (DP) was derived from the range of DP values observed for TSZ steers in the two experiments.

The marginal meat production and energy intake were derived mainly from biological values in Table 1. The ME concentration in the total ration was taken from a range of ratios of ME intake to total feed intake for TSZ cattle in the two experiments which was found to be realistic for the two classes of MEI in the current study. The cost for 1 MJ of feed was calculated based on the feed cost obtained from the second experiment where hominy feed mixed with molasses (HFMO) was the concentrate mixture used. The feed prices for concentrates in practice differ but not more than energy concentration for feeds like hominy feed and rice polishing, therefore a constant price per MJ seems reasonable according to the present market situation in Tanzania.

Figure 1. Relationship between growth rate and ME intake; MMMO, maize meal with molasses; HFMO, hominy feed with molasses; RPMO, rice polishing with molasses; HFMM, hominy feed with maize meal and RPMM, rice polishing with maize meal

The following cost elements were used to compute profitability of finishing TSZ cattle in feedlot for different finishing periods. The cost of production was obtained by summing up all variable cost and fixed cost of producing 1 kg of extra meat. The variable costs included the feed cost and non-feed costs as labour, medication and abattoir. Medication cost included the cost for vaccination against Foot and Mouth Disease (FMD), routine control of internal parasites by de-worming and external parasites by hand spraying using Vectocid^Rand some antibiotics such as Oxytetracycline and penstrep calculated for each period. The labour cost was taken as monthly wages for minimum salary scale used at Kongwa ranch, which was100,000 TSh. per month (10 hours per day) as per 2012 and was adjusted to the cost per animal per day by dividing the daily labour costs with the number of animals. Medication cost was taken as cost per animal. Transportation cost was taken as cost incurred for transporting an animal from feedlot to the abattoir. The fixed cost included was depreciation cost calculated from the cost of 10,000,000 TSh. for building a feedlot structure with space for 120 animals at Kongwa. Using straight line depreciation with the assumption of 20% salvage value and useful life of 7 years the annual depreciation cost of 1,142,857 TSh. was obtained, which was then adjusted per animal per day assuming 20% empty time when the feedlot facilities are not used. All costs were divided by the amount of extra meat produced for each period in order to derive the cost per extra kg meat produced.

The total profit per 1kg of extra meat produced was obtained from the difference between price of meat and the total cost of producing that meat. Profit per carcass was obtained by multiplying the profit per kg with the amount of extra meat produced while profit per feedlot space was obtained by dividing profit per animal carcass with number of days in feedlot. Different scenarios were analysed based on different assumptions to mimic the beef market situation in Tanzania. The first scenario considered market price of meat at the time of carrying out the experiment. It was assumed that when customers realizes the difference between feedlot finished beef and ordinary beef from grazing cattle, they would be willing to pay higher prices for feedlot finished beef. Therefore, the second scenario assumed the price of meat is to increase by 10% due to feedlot finishing independent of finishing length. The third scenario assumed the price of meat to increase by 5 % for each 25 days increase in feedlot finishing length, mirroring increased quality of the carcass with increased weight gain during feedlot periods.

Results and discussion

Biological values

The derived average daily gain increased with 447g/day (103%) when the chosen daily MEI increased from 55 to 85 MJ/day (Table 1). The derived daily gain was constant in different periods in feedlot but calculated total intake increased resulting into decreased efficiency with increased days in feedlot. With the aim of maximizing feed efficiency it is therefore not optimal to keep steers in feedlot for longer periods (100 days). The calculated final weight increased with the chosen MEI as well as with days in feedlot. Long stays in feedlot with high daily MEI (85 MJ/day) resulted into higher final weight (278 kg) than short stays (212 kg). Low daily MEI showed slow growth rate and lower final weights than those with high MEI regardless of the time spent in feedlot. Cattle with short stay in feedlot (25 days) with low daily MEI (55 MJ/day) gained only 11 kg compared to grazing (0 days), the value doubled (22 kg) for high daily MEI (85 MJ/day) in the same period. Furthermore, cattle on high MEI (85 MJ/day) required only 25 days to attain a slaughter weight of 212 kg, a value which required 50 days with low MEI (55 MJ/day). Thus feeding high energy diets is essential to allow higher MEI for rapid body weight gains (Fan et al 1995; Tangjitwattanachai and Sommart 2012) which will result into higher final weights or shorten the time spent in feedlot. The calculated carcass weight increased with increasing MEI and days in feedlot. Long stay in feedlot (100 days) with high MEI resulted into increased (58%) carcass weight compared to low MEI which increased only by 25% from grazing (0 days).

Marginal meat production

Extra meat produced increased with increasing days in feedlot and with increased MEI (Table 2). The amount of extra meat produced with high MEI was more than twice the amount produced with low MEI independent on length of stay in feedlot, showing the importance of energy concentration and intake of feedlot rations. The extra energy required to produce extra meat differed between the two energy levels chosen in the current study. Feeding high energy diets to feedlot animals is advantageous because more energy was needed to produce the same extra kg of meat for low MEI than high MEI. In the current study, it was calculated that extra 46, 53, 67 and 76 MJ/kg extra meat were needed for low MEI in 25, 50, 75 and 100 days of stay respectively, when compared to high MEI. The cost of one MJ of feed was assumed to be the same because in practice it was found that feeds like hominy feed and rice polishing had the same price per MJ regardless of difference on energy content of these feeds. This situation might change as feed evaluation and knowledge improves with time, and since hominy feed has higher energy content than rice polishing the price per MJ is expected to become higher for hominy feed than for rice polishing (Urassa 2012; Asimwe et al 2015a and Laswai et al 2013).

Variable and fixed cost of production

Variable and fixed costs required in production of quality beef for different periods in feedlot are presented in Table 3. Medication cost per animal increased with increased time the animal spent in feedlot regardless of their MEI levels. High values were calculated for long stay in feedlot (100 days) because with increased number of days more drugs were assumed required for the control of both internal and external parasites. Labour cost similarly increased with advanced days in feedlot. Abattoir cost was the same for all periods because the abattoir charge for slaughtering an animal is the same regardless of its conditional status or its weight. Total non feed costs per animal were found to increase with increasing days in feedlot and was the same for all energy levels in a particular period of stay in feedlot. When considering total non feed cost per kg extra meat produced a difference was observed between the two energy levels (Table 3). The observed non feed cost per kg extra meat was higher for low MEI than high MEI level and was found to decrease with advanced days in feedlot. The non feed costs per kg extra meat produced were much higher (4,500 and 2,190 TSh.) for short (25 days) than for long stays (100 days) (2,630 and 1,140) for low and high MEI, respectively, attributed to the increased meat produced with advanced period in feedlot.

The feed cost for one kg extra meat for low MEI increased with advanced time in feedlot, while for high MEI the cost first increased for 50 days and then decreased as time in feedlot was further increased (75 and 100 days). This was attributed to the high amount of extra meat produced in the increased days of stay in feedlot (75 and 100 days). The difference of feed cost per kg extra meat between low and high energy levels within the same period increased with advanced days in feedlot and were 1,180, 2,200, 2,590 and 2,830 TSh. for 25, 50, 75 and 100 days, respectively. This emphasizes the use of high energy diets in feeding animals with high intake to increase weight gain and reduce cost of production. Providing feed to animals is known to be a major variable cost in any beef production project (Arthur and Herd 2008; Herd et al 2003). It was observed that feed costs were the majority of operational cost in all treatment periods, accounting for 52 – 78% of total cost. With the exclusion of cost for purchasing animals, non-feed cost accounted for 22 – 48% of the total cost. The proportion feed cost make up of total costs presented in the current study are lower than the 93% with exclusion of animals presented by Malope et al. (2007). However the two studies have been carried out at two different places and times and also different prices of items were used. Total cost per kg extra meat was observed to be high for low MEI (55 MJ/day) and increased with increased days in feedlot. For high MEI total cost per kg of extra meat decreased with advanced days in feedlot. The difference of total cost per kg extra meat between high and low MEI was found to increase with increasing period of stay in feedlot as 61, 68, 78 and 85 % for 25, 50, 75 and 100 days respectively. This implies that using high energy diets and animals with high intake for longer period in feedlots can reduce the total costs per kg extra meat by 85% compared to using diets with low energy content and animals with low intake. It has been found previously, that profit depends to a large extent on production cost (Otouzbirov 2004), thus use of high energy diets which minimizes cost can maximize profit.

Profitability analysis

Scenario 1: When meat price do not change with feedlot finishing

When meat price do not change with feedlot finishing a loss was realized per kg extra meat produced for low MEI contrary to high MEI where a profit was realized which increased with increasing days in feedlot (Table 4). For high MEI levels the increase in profit per kg extra meat was 61, 81 and 33% for an increase in days from 25 to 50, 50 to75, and 75 to 100 days respectively. When profit was analysed per animal carcass, the profit increment was 187, 177 and 79 % with increase on days from 25 to 50, 50 to 75 and 75 to 100 days respectively. The same trend was observed when profit was analysed per feedlot space, where profit increment was 43, 80 and 36 % with increase from 25-50, 50-75 and 75-100 days respectively. This implies that with high MEI the profit maximization can be achieved between 50-75 days of stay in feedlot. Extra increase in the number of days in feedlot (100 days) results into a profit increase at a decreasing rate. Thus with high energy diets, it seems the optimum period of keeping TSZ cattle in feedlot is 50-75 days.

Scenario 2: Meat price is increased by 10% with feedlot finishing regardless of finishing length

Due to high levels of consumers’ acceptance and willingness to pay for high quality beef (Nandonde et al 2013) the price of quality beef from feedlots should increase with time. When the price increase by 10 % compared to non-finished cattle without considering length of finishing, a positive profit was realized in situations analysed except for low MEI level (55 MJ/day) in 100 days of stay in feedlot (Table 5). The profit per kg meat decreased with advanced periods in feedlot, the highest value of 5,180 TSh. was obtained at the shortest period of stay (25 days) in feedlot with low MEI level (55 MJ/day). When profit per animal carcass was analysed it behaved differently in the two levels of energy intake. With high MEI the profit increased while with low MEI it decreased with advanced days in feedlot, which was contributed by the increase in carcass weight gained from high MEI. Furthermore, it is the increased value per kg of the whole carcass during feedlot finishing that offset the production cost and gives rise to the obtained profit (Weisbjerg 2007). The findings are in agreement with observations by Tatum et al (2012) that revenue depends on the amount and value of weight added during the feeding period. Wide variation of profit between the two energy levels observed in the current study emphasizes the use of high energy diet in finishing animals in feedlot for maximizing profit per animal carcass. When profit was analysed per feedlot space it decreased with increasing days in feedlot. This implies that profit per feedlot space can be maximized by keeping animals in feedlot for a shorter period, which allows quick flow of cash from the number of turns one will have compared to longer periods. This concurs with observations by Perdana (2003) that shorter time allows faster cash flow to farmers.

Scenario 3: Meat price increased by increasing feedlot finishing length

When meat price was increased by 5 % according to increased duration of 25 days in each finishing period the profit per kg extra meat also increased with increased days in feedlot for all energy levels but with varying magnitudes, highest profit being observed for100 days (Table 6). As usual high MEI had higher values than low MEI in all periods of stay which might be attributed with the increased extra carcass weight produced with high energy diets (Figure 2).

Figure 2. Profit per kg extra meat produced from TSZ cattle when meat price increase by increasing feedlot finishing length

The profit per animal carcass also increased with increasing time on feedlot, with higher profit on high MEI than low MEI level. The profit difference was observed to increase further with increased time on feedlot (Figure 3). With increased price when length of stay in feedlot increased a higher profit was estimated when steers were kept in feedlot for long time (100 days). It should be noted that it is not only the extra kg gain during feedlot that maximizes profit but also the increased whole carcass value which will cover the production cost and give profit (Weisbjerg 2007).

Figure 3. Profit per animal carcass produced from TSZ cattle when meat price increase by increasing feedlot finishing length

When profit per feedlot space was considered (Figure 4) the estimated profit was higher for high energy level than low energy level. Increase in profit seemed to be higher for short stays (25 to 50 and 50 to 75) than advanced days in feedlot (75 to 100). The rate of profit increase for low MEI was 50 and 26 % for short stays and 19 % for advanced stays while for high MEI was 13 and 21 % for short stays and 15 % for advanced stays. Thus it is more beneficial to keep animals for short stays (50 to 75) in feedlot than long stays to maximize profit per feedlot space. This is because the frequency of keeping new batches of animals in feedlot will be high in short stays than in long stays.

Figure 4. Profit per feedlot space from TSZ cattle when meat price increase by increasing feedlot finishing length

In general results from the current study agree with previous observations which found that high profit can be obtained when extra price is paid for high quality meat from feedlot (Weisbjerg 2007). Furthermore studies on customer willingness to pay for high quality beef have shown that customers in Tanzania prefer high quality beef (Nandonde et al 2013). What is needed is to give more education to customers and advertise further about feedlot finished beef.

Conclusions

• Energy content and intake of feedlot finishing diets is very important in maximizing growth of finishing animals. The most economical feeding levels irrespectively of meat price and finishing length is always high feeding levels. High MEI was found to have lower production cost per kg of extra meat than low MEI, feed cost per kg of extra meat increased with low MEI while decreased for high MEI in advanced days in feedlot, thus emphasizing the use of high energy diets with high intake in feedlot to reduce cost of production. Feed cost occupies more than 50 % of total production cost and its proportion tends to increase while that of non-feed decreases with advanced days in feedlot, but the use of high energy diets with high intake for longer stays in feedlot can reduce total cost by 85 % compared to the use of low energy diets with low intake.
  
  
• When meat price do not change with feedlot finishing only high MEI is profitable, and high profit increments are on 50 to 75 days of stay in feedlot. When meat price increase by 10% due to feedlot finishing regardless of finishing length only profit per animal carcass increases with increasing days in feedlot for high MEI. When meat price increases by 5% with each increase in feedlot finishing length of 25 days, higher profit per animal carcass will be realized with long stays (100 days) than short stays (25 days).
  
  
• The optimum length of finishing is first of all depending on the consumer preferences and therefore the price they are willing to pay for the meat of different carcass composition. It is also to some extent determined by what is limiting for the production as for instance the number of animals or the feedlot capacity. If the feedlot capacity is limiting and consumers prefer less fat animals it may be economical to finish animals for 25–75 days, but for high final weights 50-75 days is the best, thus this appears to be the optimum period for keeping TSZ cattle in feedlot.

Acknowledgement

Authors are grateful to the financial support provided by DANIDA via the SUA-IGMAFU project and National Ranching Company (NARCO)-Tanzania.

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Received 15 December 2015; Accepted 19 September 2016; Published 1 November 2016

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