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The Cattle Business -- Tough Times Still Offer Opportunities

Livestock Update, September 1999

Bill McKinnon, Extension Animal Scientist, Marketing, Virginia Tech

The drought continues to pressure cattle producers in Virginia. Forage supplies are short across the state and nearly nonexistent in some areas of Virginia. Many producers have or are making plans to cull cowherds to the bone. Hay prices in some areas have reached exorbitant levels given the current prices of alternative feeds.

At first it may seem unlikely, but for those producers willing to consider the possibilities the next 6 to 12 months may offer some distinct profit opportunities. Operators who shop around will find some energy alternatives significantly cheaper than scarce hay. Once a cost effective feed supply is secured, cattle operators can take advantage of the situation and not simply throw up their hands in dispair.

Sound beef cows will be relatively assets during the next couple of years. The industry is entering a period of modestly higher feeder cattle prices that will put a floor under female values. It appears as though Virginia will lose a substantial number of beef cows as a result of the year-long drought conditions. Some estimates put the reduction of beef cows at 50,000 to as many as 70,000 head from June 1999 to June 2000. Many cows will be sold as a result of short hay supplies. Other cows will be culled this fall and next spring as the result of failing to rebreed due to poor feed conditions during the last twelve months.

For those operators who have considered producing quality, bred heifers for sale, the 1999-2000 period may offer some significant financial incentives. The temporary, forced cowherd reduction coupled with stronger calf prices should signal strong female prices in the year 2000. There should be ample demand for both fall and spring calving females once we work past the winter of 1999-2000. Producers who locate cost effective alternative feeds will be able to add value to their heifers while marketing their labor and management ability.

One can but think ahead about the scarcity of stocker weight grass cattle next spring. Some of the traditional yearling cattle grazing areas of Virginia are also suffering the shortest hay supplies. Several of these stocker cattle operators will not be able winter calves for next year's grazing as they traditional have done. Light-weight calves can make the most cost effective use of some of the alternative feeds available. The current price outlook would suggest that wintering these lightweight calves should result in a positive price margin on the pounds purchased.

Some order buyers have also wondered where some of their out-of-state customers will find backgrounded yearlings next spring. Though light weight calves may look high priced compared to recent autumns; relatively cheaper grain and byproduct feed prices may offer the opportunity to add value to those cattle by next spring. Many calves around the state appear to be carrying less flesh than in normal years, so backgrounders might expect better than normal gains and even some compensatory gains

The Virginia cattle industry has built a tradition on abundant and high quality forage. In times when the mainstay of our winter feed is short we do not have to shut down the factory. We simply need to shop around for alternative fuel supplies. The cattle nutrient in shortest supply in Virginia is energy. There are several sources of energy that are much cheaper than chasing after dwindling supplies of hay. Thank goodness the area finds itself in a drought during a period of cheap grain prices. Where there is at least a minimum amount of forage (hay or silage) it can be stretched with grains and byproduct feeds to meet cattle's energy requirements.

Some lighter classes of cattle may need additional protein along with the supplied energy. Feeds such as corn gluten feed and broiler litter can inexpensively bring protein into the diet along the supplemented energy. Sharp operators will earn their pay by carefully building cost effective rations with the limited home grown forage supplies.

The table below lists some commonly available feed alternatives to Virginians. The price per unit of feed may vary depending upon local availability, quantity purchased, whether bagged or bulk, dry matter and hauling costs. The cost per unit of energy may also vary slightly for each feed as a result of relative feed quality differences.

Feedstuff Cost of feed Cost per Pound of Energy (TDN)
Hay $60 - $100/ton $.06 - $.11
Corn silage $20 - $35/ton $.04 - $.07
Corn grain $80 - $110/ton $.05 - $.07
Barley $1.50 - $2.00/bu. $.04 - $.06
Corn gluten feed $100 - $140/ton $.07 - $.09
Soyhulls $80 - $100/ton $.05 - $.09
Broiler litter $20 - $60/ton $.02 - $.06

The economic environment in the cattle industry during the next six to twelve months would seems to offer some significant opportunities. To take advantage of the situation some producers will have to shop around for nutritional alternatives to have the fuel to drive the factory.

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