Livestock Update, August 2008
Without question, the landscape of the beef business has changed. All of us are fully aware of the impact of rising feed, fuel, and fertilizer prices, and much discussion has taken place (and will continue to take place) on how energy, economic, and many other policies and factors will affect our industry. “How will this impact us in Virginia?” is a primary topic of discussion amongst all of us with a vested interest in Virginia’s beef industry. While none of us have a crystal ball, the hard facts tell us that annual production costs are up $100-150 per cow for many Virginia producers. As we work through the many external factors that will shape our industry’s future here in the Commonwealth, dealing with the realities of production costs and today’s market are most imperative. Following are a few factors to evaluate that relate to both production costs and gross income. While none are silver bullets, they represent fundamental approaches to controlling costs and optimizing value which are key in today’s beef business climate.
Maximize Forage Utilization- Our ability to grow and utilize forage has long been the strength and foundation of our cattle industry. The price of grain and supplemental feed dictate that we make prudent use of our forage resources. Evaluate your stocking rate and carrying capacity of your pastures and forage system, and make use of grazing and forage management systems that maximize the utilization of forage resources. Stockpiling for fall-winter grazing, pasture rotation, and proper soil/forage plant management are examples which have stood the test of time and proven to be effective and economically sound. From an economic perspective, running a few less cows on the available forage system may be advantageous to a larger herd size that requires more purchased supplemental feed. Simply put- forage is our cheapest and best resource, maximize the use of it.
Make Winter Feed Plans Now- Compared to a year ago, most areas of Virginia are in much better shape regarding hay inventory. Now is the time to inventory both the quantity and quality of your hay on hand. Hay yields were high in many areas, although due to weather conditions some hay may not have been put up optimally, thereby impacting quality. Work with your local Extension agent to sample your hay to assess its quality. Quality will impact the need for more expensive supplements this winter and next spring, depending on the production stage of the cows. Proper inventory of hay quantity and quality will allow for more accurate planning of supplement purchases that will be needed to compliment the forage. Don’t forget to account for stockpiled forage that may be available in the fall-winter as well potential changes in cow herd size. Once a plan is put together, begin the process of looking for opportunities to acquire necessary supplements/grain. All indications are that the grain markets will continue to be very volatile through fall harvest. Watch these markets closely and work with suppliers to acquire what is needed at an optimum time.
Add Value to the Calf Crop- Annual feeder calf sales represent the majority of the income for most cow-calf operations. There is substantial evidence to support there are several strategies that enhance returns on these calves. Programs such as the Virginia Quality Assured program which documents and verifies a management program (vaccinations, weaning, genetics) and offers cattle in load lots, provide an opportunity to enhance value of the calf crop. While these programs do require additional input costs labor, these additional costs are offset by the additional value received for the calf. In recent years, the value difference has grown between calves sold through programs such as VQA compared to freshly weaned calves with no reputation. With the increased costs of gain and tight margins being experienced by feedyard operators, many expect the value differentiation for feeder cattle to be even stronger.
Additionally, there is speculation that feedyards will be increasingly interested in placing heavier calves. For certain, there will be a premium on cattle that will stay healthy and have a reputation.
Evaluate Cow Herd- Open cows (regardless of age) will not generate revenue through calf sales in the coming year, and consume forage that could be used to support other animals in the herd. Pregnancy checking the cow herd has always been an economically sound management practice. Given the carrying costs of cows, working with a veterinarian to identify open females will provide significant return on investment. All cows should be evaluated as to their productivity and profitability. Generally, cows with the poorest returns are those which produce less pounds of saleable calf and calve late. Since calf value is primarily determined by calf weight, cows calving late in calving season (particularly those which consistently calve late) tend to be the least profitable. With a good cow record keeping system, poor-producing cows and problem cows can be identified and culled when warranted. Old cows reaching the end of their productive life would also be candidates.
Keep Good Records- The ability to manage costs is dependent on the ability to define the source of these costs and make decisions accordingly. Similarly, identifying opportunities to add value and improve management and genetics is dependent on a good record keeping system. Now is the time to get a handle on the exact operating costs of the beef production enterprise so that measures can be taken to remain profitable in the future.
None of us know exactly how the landscape of our Virginia beef industry may change. However, it is clear that controlling costs and deriving the most value for our product need to be the focus, as they always have. Each producer’s beef enterprise is unique, and consequently strategies such as those outlined above need to be evaluated within the context of their application to an individual operation.
Virginia Cooperative Extension materials are available for public use, re-print, or citation without further permission, provided the use includes credit to the author and to Virginia Cooperative Extension, Virginia Tech, and Virginia State University.
Issued in furtherance of Cooperative Extension work, Virginia Polytechnic Institute and State University, Virginia State University, and the U.S. Department of Agriculture cooperating. Rick D. Rudd, Interim Director, Virginia Cooperative Extension, Virginia Tech, Blacksburg; Alma C. Hobbs, Administrator, 1890 Extension Program, Virginia State, Petersburg.
May 8, 2009