Beef Market Advisor

Wednesday, July 26, 2006

Creep Feeding Economics


Questions about creep feeding calves tend to pop up during times of high prices and also during times of drought.
Creep feeding of calves can be of economic value during times of drought and reduced forages for the cows. Indications are that calves do substitute some creep feed for the grass they consume and also the creep fed calves may not draw down the milking cows as much.

Creep feeding because of high calf prices is generally not recommend -- at least with expensive commercial creep feeds. The problem is that with high market prices of calves comes large price slides. For example, a 550 Ib. feeder calf at weaning 2006 is projected to sell for $132 per cwt. A 650 Ib. feeder calf is projected to sell for $124 for a price slide of $7.49. This means that all 650 lbs will sell for the reduced $124 per cwt. This calculates out, then, to a gross margin of $0.84 per Ib. gained from creeping.

If the creep feed cost less than $0.84 per lb, then creeping economics is favorable. If the creep feed costs more than $0.84 per lb, then the economics of creep feeding is not economical.
The rancher situation that triggered this creep feed analysis, said the commercial creep feed would cost $180 per ton and said that it would take 5 lbs per day and the average daily gain (ADG) was projected at 1.0 lbs per day.

After buying $7000 creep feeder to service 160 calves, the projected profit from creep feeding is a positive $0.24 per Ib. of gain from creeping. The detailed economic analysis for this creep feeding in presented in the table.

Given these numbers, I cautiously recommend that this rancher try creep feeding of his calves this year. The challenge in all of this will be to get the 5:1 feed conversion that was suggested by the feed salesman.

Harlan Hughes
Western Edge Consulting
701-238-9607
Harlan.hughes@gte.net

posted by Dr. Harlan Hughes 8:48 PM [edit]

Drought & Infertility - Find The Fertile Cattle & Sell the Rest



Several weeks ago, as bulls were going out to pasture, an absolute requirement was fertility. Bulls incapable of settling cows are useless and with the current feed shortage, compromise the system.

Likewise, cows that fail to settle are similar. Open cows' greatest value is salvage because they eat well, compete better and produce fat, which is not the desired product of a profitable and customer-orientated beef system.

Bulls that don't settle cows cost money. So do cows that are not bred to calve early. Feed is short; there is no use living in denial. There is no room in the pasture for infertile cattle.

Early detection of open or later-calving cows can be a potential group of cattle to cull. Cow Herd Appraisal Performance System (CHAPS) benchmarks indicate that 6.6 percent of the cow herd is typically open and 5.4 percent of the cows typically calve very late, which is defined as 63 days after the start of the calving season.

These two groups of cows account for 12 percent of the herd and would make a very logical cut today as pastures and feed start to look scarce. Another 8.2 percent of the cows calve between the 42nd and 63rd day of the calving season. This group of cows also could make a trip to town, with someone else's calving pasture the destination.

Heifers are another area to review. CHAPS data indicates that only 71 percent calve within 21 days and 85 percent calve within 42 days of the start of calving. This could be an area to review.

The bottom line is simple. Call your veterinarian and get that ultrasound date booked so you have an idea of your calving spread and can cull as feed supplies and performance dictate. Open and late-calving cows impact the bottom line the same as infertile bulls.’

Recently, a producer inquired where I came up with the $40 daily bull charge for each day a bull is infertile. The $40 value, calculated with a little cowboy arithmetic, is the CHAPS benchmark (Chaps2000.com, click on benchmarks) for calf average daily gain on pasture of 2.38 pounds per day times the percentage of cows cycling on any given day (assuming all the cows have an equal opportunity to cycle and breed) times 21 days (reflecting the days before another opportunity to breed if the opportunity is missed).

On any given day, 4.76 percent (1 day divided by 21 days) of the cows should be cycling. Therefore, if a bull is not fertile on that day, the opportunity to conceive the calf is lost. If a bull is in a pasture with 30 cows, 1.43 cows should be cycling each day. If the infertile bull misses the opportunity to sire 1.43 calves and loses 21 days of gain at 2.38 pounds per day, 71.47 pounds of calf is lost.

Going back to the CHAPS benchmarks, in reality, only 62.4 percent of the cows are cycling in the first 21 days. Given some rounding, roughly 70 pounds of calf is lost on 60 percent of the cows. At $1 per pound of calf over the long haul, the end number appears to be just more than $40 per day per infertile bull. Obviously, high market prices will inflate the number and the weight or timing of marketing also will impact the number, but that is where the cowboy math comes in.

On the other hand, $40 may by a month's worth of hay for a pregnant cow. There seems to be some regret in repeating notes, but infertility simply needs to be steered out of beef cattle management systems. During a drought is a good time to make the point. Hope this helps and gives producers some food for thought in tough times.

Source: Kris Ringwall, Beef Specialist NDSU Extension Service

posted by Dr. Harlan Hughes 1:35 PM [edit]

Monday, July 24, 2006

JULY 1 CATTLE INVENTORY SLIGHTLY ABOVE 2005's

On Friday, July 21s, , USDA-NASS released quite a few key reports, one of the most anticipated being the July 1 Cattle report. The report confirmed that drought conditions across much of the U.S. prompted a slowdown in the rate of increase of the cowherd. The total number of beef and dairy cows was very modestly above 2005's.

According to USDA, as of July 1St, all cattle and calves in the U.S. totaled 105.7 million head, 1.2 million head (or 1.1 percent) above a year ago and 2.2 percent over 2004's. The number of beef cows was reported at 33.9 million head, up less than half a percent from last year while the number of dairy cows at 9.2 million head was 1.1 percent larger. Of importance was the number of heifers 500 pounds and over held for beef replacements which totaled 5 million head, unchanged from the prior year and lower than the average industry expectation. However, dairy heifer replacements were nearly 3 percent higher than 2005's at 3.8 million head and 200 thousand head above 2004's. USDA reported the number of steers 500 pounds and heavier was 3.5 percent larger than a year ago.

The USDA estimated the 2006 U.S. calf crop at slightly above 2005's, however the year-to-year increase was smaller than expected given the larger cowherd on January 1 of this year. USDA reported the calf crop at 3.79 million head, 0.3 percent or 120 thousand head more than 2005's.

Source: LIvestock Monitor, Livestock Market Information Center, Denver, Co 24 July 06.

posted by Dr. Harlan Hughes 7:59 PM [edit]

Cattle Industry Faces Vulnerable Period

Cattle producers are continuing a slow expansion of brood cow numbers, but rapid movement of calves into feedlots due to depleted pastures means lower finished cattle prices are likely. Late 2006 and early 2007 remains a vulnerable period for the cattle industry as higher beef supplies are interfacing with delays in restoring beef exports to Asia. Slowing U.S. economic growth in the face of rising energy costs may also reduce beef expenditures.

The cattle expansion remains slow. In the mid-year Cattle report, USDA indicates that the total inventory was 105.7 million head, just 1 percent greater than last year at this time. The calf crop for 2006 is estimated at 37.9 million, fractionally higher than last year. The beef industry is in the second year of a brood cow expansion, but so far the growth is very moderate. Beef cow numbers reached a cycle low level in July 2004 at 33.4 million head. This summer’s inventory of 33.8 million head is just slightly over a 1 percent expansion in the past two years. So clearly, there is no rush to grow brood cow numbers. In addition, producers report they do not intend to increase cow numbers in the near future as they are retaining the same number of beef replacement heifers as last year. This means they are replacing cull cows, but are not likely to expand in the coming year.

So far this year, beef supplies have been up almost 7 percent on 4 percent higher slaughter numbers and 3 percent higher weights. Choice steer prices have averaged about $84.50, roughly $2.50 lower than during the same period in 2005. Overall, demand has held well this year with supplies 7 percent higher and prices only down 3 percent. Finished cattle prices will likely trade lower, into the higher $70s, for the end of the summer. Prices are expected to recover into the lower-to-mid-$80s by fall, with prices somewhat above the mid-$80s by the end of the year. For 2007, beef production is expected to be up 1 to 3 percent. While this year’s calf crop is estimated as only fractionally larger, weights will likely be up some next year, but not as much as this year due to higher feed costs and higher interest rates.

Feeder cattle and calf prices may feel some downward price pressure this fall and in 2007 as well. Calf prices this year have been only about $1 per hundredweight lower compared to the same period last year. Lower calf prices are expected to result from lower finished cattle prices, higher feed costs over the next year, and higher interest rates. Given an environment of slowing U.S. economic growth with high energy prices, this makes the rest of 2006 and early 2007 a vulnerable period for cattle finishers and adds new importance to getting “back on-track” with the Japanese.

Source: Chris Hurt, Extension Economist, Purdue University

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posted by Dr. Harlan Hughes 4:48 PM [edit]