The Definition of Insanity
By : John F. Grimes, OSU Extension Beef Coordinator
At some point in time, you have probably seen in print or heard in conversations the title I am using in my article this issue. The phrase typically goes something like this: “The definition of insanity is doing the same thing over and over again and expecting a different result.” While you may not find this definition of insanity in a Webster’s dictionary, I have found this “real-world” definition of insanity to be very accurate. Unfortunately, I’m afraid that the “real-world” definition can be easily found in today’s beef industry.
The beef industry has experienced a significant amount of economic volatility throughout the current decade. Much of this volatility is the result of large weather pattern swings ranging from extreme drought to excessive moisture levels. These starkly different weather trends have resulted in wild swings in grain and forage supplies and prices. As a result, the nation’s beef cowherd has seen significant change. In a period of less than five years, the herd will grow from a historic low of 29 million cows to an expected 32 million cows by the beginning of 2018.
It appears that the bulk of herd expansion has already occurred and numbers will stabilize somewhat for the short to intermediate term. However, the fact remains that the nation’s larger cowherd is going to produce a larger calf crop. We are seeing the time-tested laws of supply and demand kick in as prices of all classes of cattle have moderated. While we all will fondly remember the historic high beef market prices of 2014 and 2015, I’m afraid we are not going to see those prices in the foreseeable future.
What can the cow-calf producer do to combat the reality of downward price trends that we will likely experience? Are you going to be willing to change your business model or will you continue to do things the way you always have and hope for a positive result? I am confident that a failure to adapt to the beef industry’s economic outlook is a recipe for disappointing results.
Producers need to be willing to implement practices that can add value to their calf crop. The market is currently sending a clear message that buyers are demanding more for their purchasing dollars. There will be price discounts for those not willing to meet these demands. One of the most highly debated subjects in the industry relates to weaning management of calves. Do you sell your calves straight off the cow or do you implement some type of weaning and preconditioning program?
The common excuses given for not weaning prior to sale include a lack of facilities, a lack of time, or the belief that the seller does not get paid for the extra expense of weaning and preconditioning programs. While these reasons may have had some validity in the past, buyers today are less willing to take the risk of buying higher stress cattle with little or no health and management history. They may be willing to buy a “bawling” calf at the weekly auction but it will be at a discounted price.
Consider utilizing one of the VAC-45 type programs where calves are weaned for at least 45 days, bunk broke, and follow a recommended vaccination program. These calves should be identified with a traceable ear tag for source and age verification programs. Also don’t overlook the basic management practices of castration, dehorning, and parasite control. The producer that is willing to implement these various management strategies will be on their way to becoming a source of “reputation” feeder cattle.
Another way to improve income levels from the beef herd is through improved cull cow marketing strategies. Females are culled from the herd for a variety of reasons including age, injury, bad feet or udders, poor disposition, or not being pregnant. Surveys have shown that cull animals can contribute up to 20-25% of a herd’s gross income. Slaughter cow prices tend to be the highest and relatively steady from February to August with the lows coming in October through December. Timely identification of candidates for culling and feed resources will determine the best time to market these animals.
Cutting expenses is an obvious strategy to help improve the bottom line. However, this does not necessarily mean that you will be spending less. Expenses can be justified if the producer is increasing efficiency or improving quality. Consider some of the following options.
Harvested feeds are the single largest expense in an annual cow budget. Look for ways to increase production per acre through increased fertility and improved varieties. Harvest the forage at the appropriate maturity to improve the nutritional value. Store the forage under roof or with some type of protective cover to minimize storage losses. Always remember that forage costs are less when harvested by an animal rather than by a machine.
Work hard at improving reproductive efficiency. Use highly proven genetics through artificial insemination or natural service sires that have passed a Breeding Soundness Exam from a reputation breeder. Keep the breeding/calving season to a maximum length of 90 days with 45-60 days being the preferred goal. Rather than retain a small number of heifer calves as replacements, purchase bred heifers or young cows as replacement females for the herd.
The producer needs to be very strategic when purchasing inputs for the operation. Take advantage of seasonal price breaks for goods such as fertilizer outside of the growing season or grain and hay supplies at harvest. Work with family members, neighbors, or other like-minded producers to in an attempt to increase buying power through volume purchases at discounted prices. Purchase in volume when budgets and storage capacity allows.
Cow-calf producers are facing new economic realities in the immediate future. The producers that will be successful in the long-term must be willing to change their management practices as dictated by the current economy. Those unwilling to do so face an uphill battle to stay viable in the beef industry.