This is a difficult question in terms of giving you a number. We would not negotiate a cost of gain figure unless all feed prices are negotiated previously and price set as well as some indication of performance. Current cost of gains vary tremendously across the industry and range from $0.50 to $0.80 per lb gained. However, this changes readily with feed prices.
A more appropriate method of finishing cattle is to pay a yardage fee and then pay for feed separately. Yardage fees are more or less a rental rate on facilities and service while cattle are finished. There are three main methods to charge for this: 1) flat yardage fee, or 2) feed markup, or 3) a combination of the two. The flat yardage fee is easiest and most transparent as well as most straightforward. Many times the other two methods are based on an acceptable yardage fee.
Average yardages today range from $0.35 to $0.40 per head per day. This includes facility charge, animal care, feeding, and all services needed (including marketing). If you negotiate on some services not being provided (just as an example, your equipment for feeding), then yardage should be reduced. With older facilities, yardage may be a bit lower; however, they are not charging for facility replacement costs in these instances. Of course, feed amounts and costs need to be tracked very closely as well as little to no markup on feed cost except for feed preparation (for example, grinding and shrink on dry hays).
You could negotiate a cost of gain figure, but we would calculate an appropriate cost of gain number based on these other costs divided by your targeted gain. We cannot answer that question without knowing what the yardage fee is, medicine costs, sickness or death loss, and all the feed costs as well as the amount you want the cattle to gain per day and number of days. If you have all of this information, then you could calculate a fair cost of gain figure and set that price accordingly. Given the variation in the industry today for cost of gain, it could be between $0.50 and $0.80 per lb of gain. Weather will affect this as well.
Therefore, our recommendation is to pay a yardage fee and cover the feed costs. If you want, you can rough out an appropriate cost of gain, but you will need to estimate these costs first.
