For cattle producers, value of gain is the net value after the price slide of light to heavy cattle has been calculated. To calculate the value of gain, the total price of the purchased animal is subtracted from the total price of the sold animal. This price is then divided by the pounds of gain to determine the value of gain per pound. See example 1.
From the table, you will note that the value of the calf per hundredweight is more than the value of the gain per hundredweight for each of the weight ranges. Also, value of gain varies from weight class to weight class making it very important to calculate the value of gain for your cattle.
Why is this important to cattle producers? Because the value of gain needs to be greater than the cost of gain for the producer to make money. For the cow-calf producer, each area of retained ownership would need to be analyzed to determine if the value of the additional pounds will be greater than the cost of gain. The stocker and feedyard operators would need to calculate whether the value of gain from the purchase price to the projected sale price would exceed the cost of gain for their operation.
Let us know if you have any questions about calculating your specific value of gain. You can also find a value of gain calculator on the Noble Research Institute Web site at www.noble.org/Tools/ValueOfGain.html. In this time of high grain prices, with cattle held longer on pasture, it is especially important to know the value of your gain.