Beef Market Advisor

Saturday, January 15, 2005

Winter Feed Costs Deserve Attention
Heather Smith Thomas, WLR Correspondent

The largest single expense in running a cow is usually, her winter feed cost. If you put up hay, one aspect of analyzing costs is to look closely at haying methods, equipment, labor and fuel and consider all options. For many producers this is an area costs that can be reduced by letting cows harvest more of their own feed (finding ways to extend fall and winter grazing) or changing to a more efficient and economical haying system.

Another option when producing hay is to sell high value hay and replace it with lower cost feed. Many producers don't consider market value of their high quality forages and only look at costs of production. In years when good alfalfa hay can be sold for $80 to $100 per ton, many ranchers come out farther ahead to sell that hay- (or part of it - keeping only enough for young animals in the herd that need the extra protein) and use a lower quality roughage for the main cow herd.

You can save on feed costs while still providing adequate nutrition if you feed wisely. Many herds could reduce feed costs 25 to 50% while improving nutrition at the same time. An 8-year summary of the Iowa State U. Beef Cow Business Record System showed a spread of $121 between the high profit 1/3 of producers and the low profit 1/3 ($301.60 annual cow cost versus $423); annual feed costs accounted for $50 of that difference. Yet the high profit group who spent less on feed produced 98 more pounds of calf per cow and had a 2.8% higher calf crop. Spending more on feed doesn't necessarily mean you are providing cows with better nutrition.

Deseret Land and Cattle Company, for example, was able to reduce total feed cost per cow from $381 in 1979 to $197 by 1989. During those 10 years they accomplished this with more efficient use of available forage, focusing on a greater reliance on grazing.

They reduced dependency on harvested forage yet increased their actual beef production. Most stockmen who increase profits are ones who find ways to reduce the harvested feeds used. There are many ways to do this, including use of crop residues, utilizing cool season forages that can be grazed earlier in the spring (getting cows off hay sooner), saving certain pastures for late fall-early winter grazing, etc.

In areas where crop residues are available, it's the cheapest feed. One crop residue rarely used to full advantage is wheat straw. With proper supplementation, it can make up much of the diet, especially for dry cows before calving. And by ammoniating wheat straw, the nutrient quality can be improved to equal or exceed that of prairie hay. of hay in spring is to use cool season plants such as wheat pasture, brome or escue. Wheat ` pastures offer a lot of potential because of their early growth and high productivity. In range areas, plantings of crested wheat can allow early spring grazing well ahead of the native range plants.

FEED NUTRIENTS ASNEEDED: When buying feeds, compare prices not' by volume or weight alone, but also by nutrient content. The money spent to test a hay sample is often a good investment, enabling you to match feed sources to cattle needs, and avoid' serious shortfalls in nutrition or wasting expensive nutrients on cows that don't need them. Test feeds for protein levels. You can't minimize costs on protein supplements (while still meeting-needs of cows)
without knowing the level of protein in your hay or pasture. If you know the protein levels, you can figure out how much or how little additional protein you need to provide.

If using winter pastures, alfalfa hay can be a reasonable protein supplement, compared to supplements like cottonseed or soybean meal. Most years, alfalfa is cheaper ments. Even good grass hay will provide adequate protein for dry cows on marginal winter pastures. The important thing is to use the resources you have at hand. If the equipment and labor are available and hay is nearby at a reasonable price, it may be the cheapest alternative. But when hay has to be hauled a long way, increasing its cost, another type of supplement may be cheaper.

Energy is the most expensive and most important part of diet. Protein, minerals and vitamins are wasted unless the cow's energy requirements are met first. Roughage is always the most economical source of energy, especially if you let cows do as much of the harvesting as possible (pastures, cornstalks, etc.).

To get the most from pastures, rotate grazing, divide the herd into groups according to their needs, saving the best pastures for those that need it most-yearlings or first calvers. You can also use supplemental protein (alfalfa hay or other sources) on rough feeds or poor pastures to increase digestibility and intake. But protein supplementation can drastically increase winter feed costs if not managed properly. Dry pregnant cows don't need it unless they are on very low quality forage.
You must consider the needs of cows. Energy and protein requirements vary greatly, depending on stage of pregnancy and lactation. A cow in late gestation needs about 1.5 pounds of crude protein whereas a lactating cow needs at least 2.25 pounds. The important thing to remember when reducing costs is to not reduce the overall productivity of your operation; do not shortchange cows on basic nutrition. The two most critical periods in the calendar year are the 30 to 50 days just before she calves and the 80 to 100 days after calving (until she' is rebred).

The best time to cut feed costs is after weaning, when she has the lowest requirements and can utilize poorer-quality roughages, crop residues and by-products; you can find numerous ways to reduce her feed bill.

Cows should not be left on marginal fall or winter pastures while still nursing calves, or they lose too much body condition. One extension research project showed that cows on unsupplemented pasture that continued nursing calves until December lost about 150 pounds and 1.5 points in body condition score by the next calving.

If calves are left on cows this late, pasture must be supplemented with adequate energy and protein to keep cows from losing weight. But this costs money and is counterproductive. Keeping calves on cows until late may look advantageous for weaning weights, but when cows are pulled down to calve at a body condition score of 4 or less had a lower calf crop percentage next year (more weak or sick calves) and replacement costs increase since more cows come up open the next year.

REDUCE WASTE: Often feed costs can be reduced by minimizing waste. In some situations cows can be fed once a day. or every other day, but in many instances they waste hay by bedding on it or tromping it into the mud. Feeding smaller amounts more often not only wastes less hay but enables younger cattle or slower eaters to get more chance at their share.

Hay can be fed on well sodded pasture without much waste, but if ground is muddy you need to use feeders, especially when feeding alfalfa, so cattle can clean up all the hay instead of tromping it into the ground. Since about 75% of the nutrients in alfalfa is in the leaves, much of the value of alfalfa is lost when feeding on the ground.

posted by Dr. Harlan Hughes 7:41 PM [edit]

Friday, January 14, 2005

How Many Canadian Cattle Might Be Exported in 2005?


Ann Dunford

Canada's CanFax

The topic of the infamous "wall of cattle" in Canada once again hits the news south of the border; spurred on by USDA's economic analysis in the Rule suggesting 2 million head (worst case scenario - but that gets lost in the media interpretation) could move in 2005 after the border opens to under thirty month cattle. Canfax numbers don't suggest anything quite that large.

For 20 months now, Canfax has attempted to keep members abreast of the backlog or delayed marketings with regular updates in this Weekly report. We've described in detail how marketings are projected (steer and heifer marketings calculated as a percent of cow numbers based on historic relationships). Actual slaughter data (both in Federal and Provincial plants) is deducted from the projected marketings leaving the carry-over at the end of each quarter or year. We carried the 2003 carry-over forward into 2004's numbers and we've done the same leaving 2004 and heading into 2005.

Slaughter rates are obviously one of the key components in attempting to forecast carry-over supplies. In 2004, slaughter (from all operations) was 3.89 million head, up 22% from 2003 and up 11% from 2002. Although rates didn't quite hit the 4 million mark Canfax was expecting, it was an increase of nearly 700,000 head over 2003 and 360,000 more than 2002. Asfor carry-over or delayed marketings into 2005, it means 300,000-330,000 young cattle and about 350,000 cows and bulls are brought forward.

As we've explained on numerous occasions this doesn't necessarily mean cattle waiting for slaughter. The narrowest basis in 20 months, the narrowest fed to wholesale price spread in 20 months, and lighter carcass weights all help to suggest the front-end fed cattle market is relatively current. Slaughter rates in 2005 are expected to range between 4.2 and 4.6 million head depending on the utilization rate plants operate at.

In last week's Canfax report (page 3 - Feeder Report) we outlined how price arbitrage might occur in feeder markets leading up to and after the border opens. Granted, we're expecting some feeder cattle to be exported but once domestic prices reach US equivalent (less basis and export costs) the desire for US buyers to continue to purchase Canadian cattle (along with all the restrictions) will be lessened. Feeders can only move to feedlots, not to grass. Feeder prices from pre Christmas to Jan 10 gained almost $10/cwt. in anticipation of border opening in March. Alberta feedlot costs of gain have been below US costs since July 2003 and continue to remain competitive today. Feed grain supplies are plentiful across the Prairies. Not exactly the situation of 2002 when 100+ year drought sent
barley prices sky-rocketing and record feeder cattle exports to the US.

Recent exports of live cattle under thirty months (5 year average 1998-2002) are far from 2 million head annually (and that's in the days before extra rules, restrictions and costs to export). Fed cattle exports have averaged 641,838 head while feeder cattle have averaged 229,307 head (142,906 if you remove the 2002 record drought movement) for a total average of 871,145 over a 12-month period.

Based on the delayed marketings data and slaughter estimates Canfax suggests that between 600,000-700,000 head of fed cattle could be expected to be exported in 005 and between 200,000-300,000 head of feeder cattle. Total for the two classes of cattle could see 900,000 head (ranging from 800,000 to one million).

posted by Dr. Harlan Hughes 7:33 PM [edit]

Monday, January 10, 2005

Knowledge is the route to better profits

A CBC editorial by Scott VanEngen:

The other day I heard an ad for a GPS system boasting about how cheap this money-saving
technology has become.

Because GPS Virtually eliminates overlap while seeding, spraying or harvesting, the technology
lowers fuel and input costs, and pays for itself Very quickly. As soon as the system is paid for,
you might pocket an extra thousand bucks, or more, each year.

That's great, but if there's more money to be saved, why stop there? GPS allows you to do much
more than drive your tractor and combine in a straight line. But you can't take full advantage of
its capabilities unless you have a financial management system that tells you the most profitable
way to apply the technology.

For example, by mapping their fields with GPS and using yield monitors, some farmers have
moved to Variable fertilizer and seeding rates and are saving a lot more than one or two
thousand dollars. That's because they know their per-acre costs for crops they produce and can
determine the optimal seeding and fertilization rates in order to produce the biggest profit. In
other words, they employ a good financial management system based on accrual accounting.

Now consider those farmers operating on a cash basis who went out last month and pre-purchased
inputs in order to lower their tax bill for 2004. Saving on taxes is great too, but was that the best use
of their money?

Many of those producers are now going to be tight on cash until next harvest. Some may look at
GPS and say, "No. Can't afford it." Can't afford to save money? Is that really the best way to
manage and run your farm business?

It's not just new technology that raises these questions. If you're a livestock producer, what's
your cost-of-production when it comes to feed? And at what point does it become cheaper to buy
feed than produce it yourself?

If I had started this commentary talking about accounting, I would have lost a lot of people
before the end of the first paragraph. It's not a sexy topic. It's just a critical one.

If you don't have an accounting system that tells you where you stand financially, then you need
to get one. And the first step is to learn how a good financial management system works and
what it can do for you. There are a lot of short courses and seminars on basic financial
management and you don't need a GPS system to find them.

posted by Dr. Harlan Hughes 1:27 PM [edit]

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