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OSU Extension - Fairfield County

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OSU Extension BEEF Team

BEEF Cattle questions may be directed to the OSU Extension BEEF Team through Stephen Boyles or Stan Smith, Editor

You may subscribe to the weekly Ohio BEEF Cattle letter by sending an e-mail to smith.263@osu.edu

Previous issues of the BEEF Cattle letter

Issue # 762

December 7, 2011

Ohio Beef Schools Explore "New Normal" - Stan Smith, PA, Fairfield County OSU Extension

"It's a great time to be in agriculture."

"We have more people to feed and a growing global economy. I don't know of a better industry to be involved with than agriculture because the underlying fundamentals are strong."

"If you're in the cow-calf business you've got what everybody else wants. Prices will continue to move higher next year."

Those words came from Randy Blach, president of Cattle-Fax, at the recent Kansas Livestock Association annual convention. More specifically he said 2012 and 2013 should provide excellent profit opportunities because declining inventories of stocker and feeder cattle will continue to support prices and keep cow-calf producers in the driver's seat. In fact, Cattle-Fax projects average national prices for 550-pound calves to average $1.75 per hundredweight next year, and 750 to 800-pound yearlings to average $1.50 per hundredweight.

From a feeder's perspective, consider Blach's thoughts on marketing high quality fed cattle. "We've seen the Choice-Select spread widen to $18 or $19, and it could easily be $10 to $15 over the next 12 to 18 months. You need to consider that and possibly make some adjustments to your production. The spread will trump weight."

For those of us who have forages which need to be converted to meat, it appears we are, indeed, in the drivers seat! But are we positioned correctly today to fully capture the benefits over the coming years of the scenario that Blach describes? Preparation to take full advantage of this "new normal" is the approach being taken as the speakers and agenda for the 2012 Ohio Beef Cattle School series have been assembled. Hold these dates and make plans to participate during the first session beginning on January 26, 2012, and continuing on the Thursdays of February 9 and 16, and March 1. Each session will be broadcast locally by many of Ohio's Extension offices via an internet link, and will focus on optimizing efficient beef production in a rapidly changing business and consumer environment. Nothing is sacred as we explore trends in reproduction, genetics, feeds and feeding, targeted marketing, and the opportunities afforded by backgrounding calves versus finishing them in Ohio feedlots.

More specifically topics and speakers include these industry respected individuals from across the Midwest.

* January 26: Kevin Dhuyvetter, Extension Specialist, Farm Management, Kansas State University, speaking on Economic Considerations in Beef Cattle Production

* February 9: Dave O'Diam, Certified Angus Beef; Don Knore, Pineland Farms Natural Beef; and Logan Edenfield, United Producers; speaking on Targeted markets and marketing alternatives

* February 16: Dr. Les Anderson, University of Kentucky Beef Extension Specialist and John Grimes, OSU Beef Programs Coordinator on Genetics, reproduction efficiencies, calving season alternatives, etc

* March 1: Nevil Speer, PHD, MBA, Western Kentucky University, focusing on Meat industry perspective looking to the future including 'outlook', Choice/Select spreads, etc.

If interested in attending, contact your local or a near-by Ohio State University Extension office to ask if their winter programming plans include hosting the Ohio Beef Cattle Schools. To date, the following County Extension offices have been confirmed as hosts: Adams or Highland, Athens, Belmont, Butler (on only February 9th), Crawford, Fairfield, Hocking, Holmes, Jefferson, Knox, Licking, Morgan, Morrow, Muskingum, Perry Portage, Union, Wayne and Williams.

Corn Price and Feeder Cattle Price Relationship - Dillon M. Feuz, Ph.D., Professor Department of Applied Economics, Utah State University

As both corn and feeder cattle are the two major inputs to the production of fed cattle, there has always been an inverse relationship to the price of these two commodities. Generally, as the price of corn has increased, the price of feeder cattle has decreased. In making this statement, I am assuming that the price of fed cattle remained constant and that there were no other major changes to the cost of feeding cattle. This assumption often holds in the short term as corn and feeder cattle prices vary on a daily basis and the expected fed cattle price 4-7 months in the future may not change as often. However, over the longer run, feeder cattle numbers change, feedlot capacity changes, the corn market may structurally change (ethanol mandates) and other feeding period costs may also change. So, the question I want to pose in this newsletter and then hopefully provide an answer is: has the price relationship between corn and feeder cattle changed in recent years?

Historically, feeders often talked about a general rule of thumb of a dime increase in the price of corn per bushel would lead to a drop in feeder cattle prices of $1 per hundredweight. I did a quick analysis several years ago of looking at how feeder cattle prices responded to fed cattle prices and corn prices and found that this rule of thumb was quite accurate for feeders in the 600-800 pound weight ranges. Heavier feeder cattle prices were less impacted by the price of corn and lighter feeder cattle were more impacted by the price of corn. However, in more recent years corn prices have increased substantially and variability is no longer talked about in dime changes per bushel but in dollar changes per bushel. The feeding industry has changed in response higher corn prices and there are far more corn ethanol co-products being fed as a partial substitute for corn in a ration. Does the rule of thumb still hold?

I looked at monthly feeder cattle prices from Kansas, Montana and Nebraska from 2002 through 2011 and broke the data into two, five-year periods: 2002-2006 and 2007-2011. I used the current nearby corn futures for each month and used the live cattle futures 4-8 months out as the expected fed cattle price, depending on feeder cattle weight. Here are my findings:

A $1/bu. increase in corn leads to the following decrease in the price of feeder steers in $/cwt.

Clearly the old rule no longer applies; a dime increase in the price of corn now only results in about a $.35/cwt decrease in heavier feeder cattle prices and even has less of an impact on 5-weight feeders. I don't know if this is all due to higher and more volatile corn prices or if it is due to the relatively short supply of feeder cattle relative to feedlot capacity. What I do know is that the relationship has changed.

Feeder Market Ignites on Improved Wheat Pasture - Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist

Wheat is an amazing crop . . . which is why we grow it in Oklahoma. Given the slightest opportunity, wheat responds very well under adverse conditions. In late October, the prospects for wheat pasture seemed all but lost with most wheat planted late and dry. It was noted, however, that with timely rains, a decent wheat crop could still develop. November turned out to offer almost ideal temperatures and a series of rains that were for the most part, exactly when and where needed. As a result, wheat has established, not only a good stand from a grain crop perspective but has grown rapidly and will provide some grazing in December across a wide swath of central Oklahoma.

The results were obvious immediately after Thanksgiving with an $8 to $12/cwt. jump in stocker cattle prices. This market strength is the result of unexpectedly strong demand combined with limited numbers of available lightweight cattle. Last week's federally reported feeder cattle auction total was down 25 percent from the same week last year. The year to date auction total for feeder cattle is equal to year ago levels but since November 1 has been down nearly 9 percent from last year.The drought resulted in marketings of feeder cattle earlier than usual in the fall.

This latest market jump has pushed up lightweight feeder pries relative to heavy weight feeders, which changes the stocker potential somewhat. There is a higher roll-back in prices up to about 600 pounds (for steers), with a much flatter price line for heavy weight feeders. This means that the potential value of gain depends on what weight you begin with and how much total gain before the animals are sold. For example, using last week's auction average prices, a 423 pound steer has a value of gain of $0.81/pound for 200 pounds of gain. This increases to $0.94/ pound of gain if the 423 pound steer is sold at 832 pounds. This means that the value of gain is higher for the second two hundred pounds compared to the first two hundred pounds of gain. Indeed, a 623 pound steer has a value of gain of $1.06/pound for 200 pounds of gain.

This suggests different stocker strategies depending on available production alternatives. Late-started winter stockers will have a limited grazing season for dual-purpose wheat systems. The winter grazing season may be limited to 65-75 days which could limit stocker gains to around 150 pounds. In this situation a heavy stocker, say 625 pounds, may offer a significantly higher value of gain than a more traditional light stocker. Based on last week's prices, the value of gain for a 623 pound steer is 50 percent better at $1.12/pound of gain than a 423 pound steer at $0.74/pound. Conversely, if stockers will move into grazeout wheat or utlize other forages after early March and can be retained to heavier weights, the light beginning weight may be preferable.

Risk management should not be overlooked. Feeder futures offer an opportunity to lock in good value of gain and reduce market risk. Although the market fundamentals suggest relatively little downside risk, one must remember that the drought is not over and dry conditions next spring could impact feeder markets in the region. In most cases, the futures market offers a better value of gain than suggested by the current cash market. The 423 pound steer, with an average March basis of $18/cwt, implies a price of $165/cwt. for steers at 575 pounds (March Feeder futures are currently about $147/cwt.). This implies a value of gain of $1.02/pound, even for a short winter grazing season. In a market with more upside potential than downside risk, minimum price strategies are preferable to fixed price strategies. If fixed prices with a hedge or forward contract are the best or only alternative available, producers should evaluate the overall risk and consider if less than 100 percent of animals should be covered with a fixed price, thus leaving some percentage open to capture expected market upside.

Forage Focus: Ohio Forage Performance Trials

The 2011 Ohio Forage Performance Trials Report is now online, at http://oardc.osu.edu/forage2011 This report is a summary of performance data collected from forage variety trials in Ohio during 2011, including commercial varieties of alfalfa, red clover, white clover tall fescue and annual ryegrass in tests planted in 2008 to 2011 across three sites in Ohio: South Charleston, Wooster, and North Baltimore.

For more details on forage species and management, see the Ohio Agronomy Guide, Ohio State University Extension Bulletin 472, (available online at http://ohioline.osu.edu/b472/0008.html).

Grazing Bites, December 2011 - Victor Shelton, NRCS Grazing Specialist

This calendar year sure flew by fast to me, wasn't it just spring just a month or so back? If not, it will be here again before we know it. I hope that some are still grazing corn stalks, planted annuals, or stockpiled forages still but if you are not, you are not alone.

The droughty late summer and early fall months certainly reduced regrowth in many areas which reduced what could be harvested by grazing livestock or cut for hay. Hay can be found, but is not as readily available as it has been in the past. Reduced acres of hay acres due to more acres planted to corn and soybeans the past two years and the increasing demand for hay by the severely drought stricken south-west has had an impact.

Most producers do feed hay for at least part of the winter. How long they do so is certainly influenced by the amount of grazing acres, available forage or other grazable residues or forages available, and the number of animals that are present. More animals, means more dry matter, i.e. feed, is required. Ruminants, those creatures naturally consuming forages, will consume roughly about three percent of their body weight in dry matter per day. This is somewhat directly influenced by environmental conditions that might increase their requirements. Walking in extremely muddy conditions, cold wind with no protection and just being wet all increase required energy levels which will influence intake . . . makes me hungry just thinking about it.

It might be wise to do a little pencil pushing and make sure that you have enough hay on hand for the winter ahead and it is good enough quality. Figure your average per animal need, then total daily need from the total animals kept overwinter, and then estimate how many days you will need to be feeding hay. Let's say 40 cows, 1200 pound average at 3% intake; that is 1440 pounds of dry matter per day, roughly a good large bale depending on the baler. The average producer feeds hay 90 to 120 days, some more some less. Using the 90 days; that is 129,600 pounds of dry matter needed . . . or about 87 good large bales (actually slightly more if you figure in that most hay is about 85% dry matter). Now that though is with no loss . . . they don't always clean their plate very well. Hay loss in storage and feeding will average 20% to 50% depending on how it is stored, fed and certainly quality. If it won't beat snowballs . . . then don't expect them to clean it all up . . . just won't happen.

Creating a little bit of competition between the animals never hurts. If a huge banquet is put out in front of you, you are more likely to leave something you don't like as well on your plate. Putting out several days' worth of hay at a time is the same thing. If we figure on the low end of wastage, 20%, then that 87 bales has now increased to 104 . . . we won't even touch that higher percentage.

It is advisable to test fed feeds to make sure they will meet the nutritional requirements of the animals consuming it. With a battery powered drill, a forage probe and then testing, you will know what you have to work with and how to supplement; worth the time and money. Test different cuttings so that the nutritional plane is known for each group. Spring calving cows for example will have an increasing quality requirement and ideally should be fed lower quality first and the best last. Even the cow temperament will be better if she is moving toward better quality rather than the opposite. Feed me the broccoli first and then I get the ice cream for dessert.

Now, in an ideal situation, that hay would be best fed back on the field from which it was removed returning nutrients and organic matter to from where it came. That is not always possible but at least should be considered. Feeding areas that are used year after year would certainly benefit from having a rocked pad present. The leftover hay, waste, and manure piled up once spring or early summer conditions allowed, compost it some, and then spread back from whence it came or needed.

With all of that said, I really do hope that you are still grazing. I say that but with warning, if there is nothing left to harvest, don't sacrifice body condition or next years' pasture - start feeding hay. One thing that I cannot ever stress too much is, "keep the ground covered" and keep it covered well. You really don't want to see any soil at all. Bare soil over winter means potential soil loss, colder soil temperatures, deeper freezing, more runoff, a huge potential for increased weed pressure the following year and slower new growth come spring.

As always, keep on grazing, but only if you really can.

Visit the OSU Beef Team calendar of meetings and upcoming events

BEEF Cattle is a weekly publication of Ohio State University Extension in Fairfield County and the OSU Beef Team. Contributors include members of the Beef Team and other beef cattle specialists and economists from across the U.S.

All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status. Keith L. Smith, Associate Vice President for Ag. Admin. and Director, OSU Extension. TDD No. 800-589-8292 (Ohio only) or 614-292-1868

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