A well-known university agricultural economist is telling cattle producers to take stock of their business status and look forward to 2020.
Derrell Peel, from Oklahoma State University, said in a letter to Extension Agents that whether 2019 was good, just okay or disappointing, there is value in taking some time to analyze the reasons for the outcome. What factors contributed to profitability or the lack thereof?
Focusing on cow-calf operations Peel considered a few questions in three broad categories: production, inputs and marketing. Each deserves separate consideration while recognizing they ultimately are interrelated.
How many calves were weaned relative to the number of cows and heifers exposed to bulls last year? Peel asked. How does this weaning percentage break down between pregnancy percentage, calving percentage and calf mortality?
Are there reproductive problems that suggest changes in herd health management or nutrition? Does calf morbidity and mortality imply that calf health management should be re-evaluated? Were weaning weights as expected and if not, why not?
It is important to determine appropriate benchmarks to evaluate all aspects of the business, he said. For example, a 100% weaning rate probably is not achievable, but what is the economically optimal level?
Is the goal to maximize weaning weights or optimize them by balancing the value of extra pounds against the cost of producing those pounds and what is that optimal level?
Input management is mostly cost management, Peel said. What is the annual cost per cow? A Kansas State University publication shows annual cow costs vary by $260 from high profit to low profit operations.
Across individual operations, cow costs likely vary by $300-$400 per head or more, Peel said. Feed and pasture costs typically account for 65% to 70% of total variable costs.
Grazed forage is a far cheaper source of nutrition for cows compared with harvested forage and purchased supplemental feed, he said. Are there ways to improve grazing management to reduce the need for expensive hay and supplement?
It starts with pasture management to improve the quantity and quality of grazeable forage followed by grazing management to best utilize it, Peel said. Is it possible to reduce cow cost by $25, $50 or $100 per cow per year without affecting production?
There may be more strategic, long-term marketing questions to consider: producing the type of cattle demanded by the market and marketing them to their highest value.
Added value includes preconditioning then marketing calves to capture that value, he said.
Maybe there a need for a more proactive marketing program to manage risk and better capture market value.
Management is an active process to control and direct resource use, to produce a valuable product and capture the market value of that production, Peel said. Decisions should be based on a purposeful objective and not habit or tradition.
All this depends on having information, which means keeping records and using them to drive decisions.
CATTLE, BEEF RECAP
Cash cattle trading took place last week at mostly $122 per cwt on a live basis, up $1 to $2 from the previous week. Dressed-basis trade happened at $195 to $196 per cwt, up $3 to $4.
The USDA choice cutout Thursday was down $1.17 per cwt at $208.25, while select was up $0.51 at $202.63. The choice/select spread narrowed to $5.62 from $7.30 with 88 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday was $142.48 per cwt, up $0.67 from the previous day. This compares with Thursday’s Jan contract settlement of $144.65, down $0.67.