Small improvements are often the big difference.
It’s Thanksgiving. We often reflect around Christmas and New Years on the past year; its good times and tough times. I think Thanksgiving is also a time to reflect, and reflect on all the positive things we have in our homes, businesses, and country. I for one, am thankful to be working, living and raising a family in the livestock industry and the feed business that supports it. We in the feed and supplement business, are in the cattle business too. Our success is dependent on our customers’ success. So, for this, I’m thankful for my customer’s success.
In 2016 we’ve watched the cattle market be whittled down to values not seen for a few years. More pressure has been put on margins and break-evens in all sectors of the cattle market. Most all of us have been here before and we’ve survived, we’ve learned and we’ve only become better, it’s part of this business.
I was at a ranch in Eastern Montana earlier this fall while the 2016 calf crop was being weighed-up and shipped off to market; destination, a Nebraska feedlot. The cattle buyer present that day asked me how our CRYSTALYX® business was this year, implying we were having a tough go of it because of the market. I told him that yes, sales are down some but I kicked the lush green grass under my feet, something you don’t normally see in Eastern Montana in October, making the point to him that mother nature was a bigger reason vs a soft calf market. I told him that our focus, and that of many customers was for better performance. He could relate as he’s a cattle buyer, always looking for those better performing calves. We also talked about cow carrying costs at the ranch and he told me that the big variable for most producers he deals with is their cost of grass. Very true, and that resource is highly variable depending on where you have cows and the competition for grass.
Many of our blog topics this year have been centered around better performance with better nutrition, and how better performance has been the difference maker in breakeven or profit in years like this. There are a lot of examples in both the real world and research community to back this up. One of our colleagues has built a useful spreadsheet that helps determine cash carrying cost for a cow-calf operation. It’s been helpful in showing how little changes such as slight improvements in conception rate, weaning weight or less veterinary cost can make large impacts on break evens. We’ve often heard about the war on cost in cow-calf operations but one great way to control costs is to enhance performance. This is called efficiency. If we cut nutritional costs by eliminating nutritional programs that provide a return (I.e., a mineral program), we will reduce performance.
The table below was derived from the spreadsheet I mentioned earlier based off two scenarios using cost assumptions for a Midwestern cow herd. Again, these are assumptions as the range of cost will be variable amongst cattle producers. At first glance the two scenarios don’t look a lot different but as you study the table, the lower cost herd is the highest producing herd and is the one with more supplemental input. The scenarios even consider a higher per/cwt selling calf that weans only 18 lbs. less. It does not make any assumptions for possible differences in health cost or interest, but does account for differences in replacement costs. Note as well that there are more total revenues in Herd 2, only because it sells more cull cows.
The moral of the story is the same as we’ve been stressing all fall. Take care of the cows and they’ll take care of you in the end. Performance does pay and cutting back also means cutting your return. The better cost saving exercise is to value your herds performance and efficiency. In the scenarios above cutting supplement inputs by 1/3 saved less than $10 per cow annually and wound up sacrificing more than $15 per cow.
Like the cattle buyer I visited with in Montana, quality is value and it’s worth more. When we discussed my business, I told him that our higher valued products as a percentage of our total volume was higher this year than last.
So again, I want to give thanks again to all our customers who see the value CRYSTALYX® programs can bring to your cattle. Have a happy and safe Thanksgiving and remember the positive things about this past year!