High cattle prices on the horizon mean management decisions made now could make or break future profitability

Oct 18, 2023

Farm Talk Editor

Despite much-needed late growing-season rains last week, much of the cattle and crops country in the United States remains in drought conditions. For cattle producers especially, overcoming the challenges of long-term dry conditions could create positive returns moving into 2024.

Decreasing cattle inventory numbers in the United States driven by record slaughter numbers has placed livestock producers in a position to receive increasingly higher prices moving into 2024. While prices are promising, the condition of available forage, rising cost of production and weather-related obstacles make navigating the remainder of 2023 a dangerous game.

At a University of Missouri-led meeting in Mount Vernon dedicated to Building Resilience in the Beef Industry, MU Extension specialist Wesley Tucker broke down cattle industry cause and effects for the coming seasons.

“We’re still slaughtering cows at record paces. That’s the story you know,” Tucker said. “The story you may not know, is if I look at the cattle that’s in the feedlot, and look at how many of them are heifers versus steers. For the last four years, we’ve been running record numbers of heifers being slaughtered in the feedlot. And that’s all the way back to starting in about 2019.”

Heifer slaughter from 2019 through 2023 has two root causes. The first being drought in the western and midwest portions of the U.S. The second was the lack of economic incentive for cowherd expansion.

Those ingredients, combined with low cattle inventory and continued herd dispersals due to drought have created conditions for another perfect storm.

“How many times have you heard us economists get up and say ‘Guys, forget 2014 and 15, because we’re not likely to see those prices again in our lifetimes?’ We’re going to blow through them and we’re going to make them look low,” Tucker said.

While higher prices sound exciting, the reality is the conditions associated with carrying cattle into those promising price points — namely drought and astronomical production costs — are equally as challenging if not more so than they were in 2014 and 2015. Producers who creatively overcome those challenges have the potential to profit in the end.

“If you are already out of grass, your options and your management strategies are going to be very different than if you are sitting here and you still have grass today,” Tucker said. “If you have grass today and you just don’t have the winter feed supply because our hay crop was decimated this spring, those are two totally different scenarios.”

A diverse assortment of quality alternative feeds is readily available to livestock producers, from distillers’ grains to silage. For Tucker, the trick to getting the most bang for your buck is comparing costs on the basis of the energy those ingredients provide to the livestock, rather than rating costs pound per pound.

“Whatever ingredient you’re looking at, whether it is gin trash, whether it is silage, all you have to do is stop and calculate it per pound of energy,” Tucker said. “That is how I compare everything. Now, I realize that sounds really simple. And it’s not quite that simple for everybody.”

Tucker said limiting factors exist for every type of alternative feedstuff, from available infrastructure to the producers’ ability to handle the specific type of feed.

“You have access to all of those different and they are going to be different for each and every one,” Tucker said. “If you have the ability to feed silage, your options are very different than someone that doesn’t.”

If investing in infrastructure, a new hay barn, bulk feed storage or operating equipment, were already being discussed on an operation, the current climate might provide the best return on investment for those expenditures.

“What is your feed storage ability? Are you buying feed in the sacks? Are you buying it bulk delivered? Do you have a cake feeder versus feeding in buckets?” Tucker said. “This is the year for me to ask myself, do I pony up and buy high priced hay? Or do I invest in infrastructure to be able to take advantage of some of these alternatives?”

“One of the things I did last year was I really spent quite a bit of money to upgrade my hay feeders,” Tucker said. “If you are getting 15 to 20% waste in a poorly designed feeder, then this is the year to pay a little bit more to buy a better design so that you don’t get as much waste. If hay is $40, a bale and I go from 15% waste to 7% waste, that saves me a little bit. When hay is $100 a bale going from 15% waste to 7% waste pays for those feeders very quickly.”

Stocking rates are often determined by the available forage during peak production, rather than the available forage during grass dormancy. Tucker said rather than over-stocking and providing supplementation during low forage, producers could consider selling up to one third of their cowherd.

“I would challenge you to think about would my operation be more profitable? If I had less mama cows that I kept year round, but I get something else to help with that spring bump whenever I have lots of extra grass,” Tucker said. “We can do that with stockers or I can background my calves.”

Incorporating animals that can move into and off of a property quickly, as well as be sold to improve cash flow, could be a wise decision, Tucker said.

“I have long been a pusher of what I call the two thirds, one third model. And that means that two thirds of our grazing platforms should be our mama cows and one third of our grazing platforms should be disposable animals,” Tucker said. “I even know some producers that instead of running 100 cows, they run 70. And they bring in some custom grazing cows in the spring. Think about how much more flexibility I would have in my operation if my grazing platform was two thirds my core herd, and one third of it was disposable animals.”

Value of on-farm gain has the potential to increase in the current price climate. Early weaning calves and choosing to prioritize their growth over sustaining a high-requirements lactating cow with calf at side could provide substantial cost savings.

“One of the things I did with all my spring calving herd, I got those calves off really early, and I put them on feed so that I could get some of that high value gain myself,” Tucker said. “I can feed the calves way more efficiently than I could feed the cows.”

Tucker said based on nutritional requirements, feeding young calves is more efficient than feeding cows with calves at side.

“From an economic standpoint, it makes much more sense for me to put that feed into that calf, than to keep putting it into the cow when she’s costing me 40% more energy use just by lactating,” Tucker said.

With over 200 days until mid-April and the spring flush, producers have a tight timeline on which to evaluate their farms and plan for maximum profitability through the difficulties of drought.

“I need you to evaluate your options, all those different alternatives that you have before you and calculate what your cost is going to be to get from today to April 10,” Tucker said. “What I also need you to do is to make some budgets to think about ‘What is my costs going to be beyond this winter? How much equipment do I need, how much diesel how much fertilizer, how much labor?’ Because I promise you unless the sky falls, cattle prices will be better next year than they are this year. What I don’t want you to do is get into a scenario where you’re just trading dollars.”

High prices and high costs can create a wash for producers who aren’t keeping a careful eye on expenditures versus potential gains.

“I think every one of us has to say, ‘Am I a low cost producer, an average cost producer or a high cost producer?’ after we get through this winter. And if I have to admit that I’m very dependent on equipment, fertilizer, and fuel and labor, then unfortunately, I’m probably going to tell you to cull a little bit more aggressively today,” Tucker said. “If you come back and say ‘I’m a low cost producer, and I don’t need much of those inputs going forward,’ I’m probably going to recommend that you pony up a little bit more to get through this winter, because you’re setting yourself up to be pretty profitable going forward.”

Farm Talk Editor

Sorry, there are no recent results for popular videos.

Sorry, there are no recent results for popular commented articles.