“Gotta cut back! This cattle market is in decline!” This seems to be a platitude we hear when economics become tight and margins in agriculture get thin. Net dollars returned on calves have been drastically reduced in the past 8-10 months. Some early summer video sales results are showing that the net difference on a 550 lb. feeder calf for October delivery is about $700 less than in 2015. It wasn’t that long ago when a calf’s total value was $700. Then again, some folks sold calves for twice what they did a year earlier back in 2013 and or 2014.
One way to combat tighter beef production economics is to have higher production efficiency; it’s the best way to improve margins when times are tougher. This is true not only in production agriculture, but in just about any business. Often times conventional wisdom tells us to spend less but it’s not always mathematically correct or logical. Take crop production for example. Yield means just about everything and in no way would a corn farmer cut inputs so drastically as to effect yield negatively. $4.00 corn at 200-bushel yield per acre returns about $200 more per acre than being satisfied at 150-bushel yields with say $100 per acre less input? Bankers would agree.
Even though cattle prices are lower, it still pays to sell pounds. If you look at the slide between a 550 lb. and 750 lb. calf right now, its nearly half as narrow as it was a year ago, hence a heavier calf is “less penalized” right now and cost of gain is very reasonable. So, programs such as creep feeding, good mineral programs, fly control, etc. still pay. In fact, they may be the difference between a profit or loss.
Kansas State University Extension (See table below) had an article published last December on the difference between high, medium and low return cow-calf producers. The data could not pinpoint one specific indicator however, the highest return producers generally had higher weaning weights and rates per cow, better investments in breeding and genetics, less labor, less equipment cost, and lower feed cost. Keep in mind, low feed cost is not necessarily little or no supplement cost. Supplements often times are used to negate the amount of purchased feeds needed and attribute positively to many of the items highlighted above. A very successful cattleman in the Nebraska Sandhills once told me that he wasn’t so concerned about the cost of a nutritional supplement program as he was with its effectiveness. This was refreshing to hear and oh so true!
Source: Kansas State Univ. AgEcon-DP-YK-KH. 2015.
Good supplement programs pay handsomely in good economic times and are necessary in tough economics. If you are a cow calf producer, the cow is your production facility and you can’t afford it to be non-producing. I recall some friends of mine that were in the hay hauling business when I was young telling me that a certain level of profit was always reinvested in their equipment and maintenance facilities because it’s those things that produce revenue. Again, same goes for a healthy productive cow herd. It will produce revenue versus one that is managed haphazardly.
With CRYSTALYX®, we have a wide range of supplement offerings ranging from just the basics in supplementation to premium based products that are designed for better cow and calf performance or in dealing with nutritional taxing situations (weaning, breeding, calving). Our base or “Economy” products provide a level of supplementation that in many times will suffice, but the better fortified products have produced much better results at only a small increase in overall cost of a nutritional program, hence the return on investment is much better with a higher quality program.
So, with less revenue on a per pound basis this year, it’s important to get as much as we can with adequate, yet high-quality inputs in management and nutrition. These price swings are painful to watch, especially when the pendulum swings the wrong way. Stay optimistic and keep your herd strong.