What Path Will You Choose?
By : John F. Grimes, OSU Extension Beef Coordinator
Based on reports from USDA and industry analysts such as Cattle Fax, it appears that the aggressive expansion of the U.S. beef cowherd will peak in 2019 and level off in the early part of the next decade. From the time the most recent herd expansion began in 2014, producers will have added over 3 million beef cows to the nation’s herd. Our primary protein competitors, pork and poultry, have also been in expansion mode recently which adds more competition for the consumer’s food dollars.
For all of my adult life, I have heard agricultural economists talk about the “cattle cycle”. The cycle is often reported in approximately 10-year increments and a wide variety of economic, environmental, and political effects can greatly influence each cycle. Current and future cattle cycles will face increasingly varied and complex factors that affect the economic health of the beef industry. The next cattle cycle will be impacted by factors such as drought, trade policies, domestic and foreign economies, competition from pork and poultry, sustainability concerns, and the development of meat substitutes.
What does all of this mean for you as a cattleman? I believe there is no time like the present to position yourself for success during the next cattle cycle. Maybe you are satisfied with the economic performance of your cattle enterprise and do not expect to make any changes to your operation. However, doing the same thing repeatedly and expecting a different result does not seem to be a sound strategy. The path you chose to follow with your cattle enterprise will determine how successful it will be during the next cattle cycle.
Quite possibly your operation is at or near its maximum capacity for herd size for your available resources. Are you operating at maximum reproductive efficiency? Females that do not become pregnant during a targeted breeding season should be culled and replaced with a bred female. Attempting to rebreed the open female will result in the accumulation of another approximately 18 months of expenses before she can provide a feeder calf available for sale to generate income for the herd. A relatively small investment in pregnancy diagnosis methods such as palpation, ultrasound, or blood testing can help you identify the females that need to be removed from the feed bill.
If you are looking to add replacement females to your herd to maintain or expand its current size, consider the purchase of bred heifers or young bred cows as opposed to raising your own replacements. The typical cowherd in Ohio typically numbers less than 20 cows. Industry surveys show that the typical annual replacement rate is 15-20%. This would result in the typical Ohio producer keeping back 3-4 heifers annually as replacements. It is my observation that these heifers can be difficult to manage for the average producer due to the lack of extra facilities or space to manage them separately from the mature cows. The purchase of bred heifers removes nearly one year’s worth of management considerations in the production process for the typical herd.
The market is currently sending a clear message that buyers are demanding more for their feeder calf purchasing dollars. Significant discounts are occurring in the market place for feeder calves that are not weaned 45-60 days, castrated & healed, dehorned, and given two rounds of a modified live vaccine for the shipping fever complex. Historically, producers have felt that they were not financially rewarded for the extra management practices. However, the attitudes of feeder calf buyers are changing. Stocker and feedlot operators are becoming more reluctant to take greater financial risks with calves without extra health protection. This reluctance may be expressed in some cases as premiums or other times as discounts.
Ohio is blessed with many acres of grasslands and typically adequate amounts of rainfall. Cow-calf enterprises commonly consume the vast majority of these grassland acres. However, other enterprises offer significant potential uses for grasslands. Backgrounding or stockering feeder calves to put on extra weight prior to entering the finishing phase can be an effective use of forages. High quality forages can be utilized to finish beef for grass-fed beef programs. There are opportunities for producers to raise replacement heifers and make them available to cow-calf producers throughout the region. Each of these enterprises can generate additional income but will require extra marketing skill by the producer to maximize the profit potential.
It is my opinion that the “rules of engagement” to be involved in the beef cattle business are rapidly changing. Regardless if you are a part-time producer that works off the farm, a producer where cattle are a part of a larger, diversified farming operation, or the owner of a full-time beef enterprise, the continuation of your current business model should be re-evaluated. While history can teach us some valuable economic lessons, we must recognize that the beef industry will be impacted in the future by unique economic and social changes. Will you choose a path that increases your chances for success?