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The Cow-Calf Manager
Livestock Update, August 2005
John B. Hall, Extension Animal Scientist, Beef, Virginia Tech
Planning for the Next Part of the Cattle Cycle
The last few years have been great times in the cattle business. A majority of cow-calf operations have been profitable over the last four years. However, cow-calf producers need to strategize in order to maximize sustainability and profitability over the long haul.
There will be many fluctuations in calf prices and profitability over the next few years (just as there has always been in the cattle industry). The US beef cow herd is expanding which means a short-term increase in feeder calf prices followed by an increase in calf and beef supply resulting in falling prices. However, facts about cow-calf operations and certain strategies remain constant across various parts of the cycle. Let's review some of the best strategies.
Who's Profitable - What's Profitable
At the recent Beef Improvement Federation (BIF) Meetings in Montana, we had the opportunity to hear Randy Bloch from Cattle Fax. He summarized some of the differences between high (top 1/3) and low profit (lowest 1/3) cow-calf operations from Cattle Fax data.
- Over the last 30 years, there was a $110 to $140 difference in annual cow costs between high and low profit producers.
- During the period from 2000-2004, high profit cow-calf operations produced feeder calves for $53/cwt while low profit operations produced calves for $86/cwt. Also, cow costs were $100 less for high profit compared to low profit operations.
- Backgrounding of calves was profitable in most years.
- For heavy weight calves it was profitable 20 out of the last 23 years; adding $35/head value to feeder calves
- For light weight calves it was profitable 18 out of the last 23 years; adding $32/ head value to feeder calves.
- Keeping cull cows for 90 days after weaning and having them gain 1.5 lbs/day was profitable 23 out of 23 years; adding $64/head value to the cull cow.
Strategies for Cow-Calf Operations in the Near Future
- Know and analyze your production costs. Particularly focus on pounds of calf sold per cow exposed and cost per pound of calf marketed. Decide on an obtainable goal for cost of production per pound of calf sold. Publications or analysis packages such as Virginia Cow Herd Performance Check-Up (http://www.ext.vt.edu/pubs/beef/400-791/400-791.pdf ) or SPA programs are a good start.
- Keep detailed production records. Source, age, and process verified calves will command a high price. Records such as the IRM Redbook or other calving and health records will be essential.
- Become Beef Quality Assured (BQA) certified. BQA certification is nationally recognized as a marker of good management practices. In addition, several marketing options require BQA certification.
- Background your calves. Whether you do it yourself or have calves custom backgrounded, feeders are already paying premiums for tractor-trailer load lots of weaned, vaccinated, and backgrounded calves.
- Manage and market cull animals effectively. Adding weight to cull cows and marketing them at an optimum time during the year (Jan., Feb, or July) or selling them Ňon the railÓ increases profits.
- Make decisions on herd genetics with carcass merit and end product in mind. It is estimated that in the near future 70% of cattle will be marketed on a formula or grid system. This will be driven by branded programs which strive to consistently deliver consumer satisfaction through carcass specifications. Consequently, pricing differentiation will continue to increase based on end product traits.
- Use AI, crossbreeding and planned breeding systems effectively. Cow herds that are reproductively efficient and highly adapted to the environment are most able to remain profitable. Basic fundamentals such as crossbreeding and AI, used in a well planned breeding system, are simple tools which help balance antagonisms between the cow herd and carcass.
- Embrace premise and national animal ID. Major food suppliers (i.e. Walmart, McDonalds, Kroger etc) already are moving toward traceability of meat products as consumers want more assurance on food safety. Producers should obtain a premise ID for their operation and keep abreast of the national animal ID program and targets.
- Align your operation with others to maximize marketing opportunities. Programs like VQA and other vaccination and marketing program can give you a marketing edge. Branding beef programs are becoming more prevalent. Producers need to identify opportunities to become part of branded programs and understand if and where their cattle fit.
- Consider retained ownership as an option. Retained ownership provides the best means to reap the financial rewards of truly superior genetics, management, and health. Cattle Fax data shows that retained ownership has been profitable for the cow-calf producer 16-18 of the last 22 years, depending on the specific management scheme.
- Pay attention to the basics. Solid nutrition, forage management, health, reproduction, genetics and management programs are still the key to sustainable and profitable beef production.
The beef industry has enjoyed record profitability in recent times, despite being confronted with major issues such as BSE. While the enjoyable ride is expected to continue in the short term, as heifer retention increases and cow herd numbers increase history shows the cattle cycle will turn and prices will soften. Now is the time to gear up for the long-term, and take the necessary steps for future profitability and sustainability. The industry has witnessed remarkable change in a short period of time, and it is likely that change will continue. As this happens, the gap will widen between the most and least profitable. Being a low-cost producer has always been important, and cost control will always be a defining component of a successful beef enterprise. However, practices which can be documented, add value, and have favorable consumer impact provide the most opportunity to increase returns and stay in business.
Virginia Cooperative Extension