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Issue # 616

December 24, 2008

Identifying Management Priorities in the Commercial Cow-Calf Business (Executive Summary) - Tom Field, PhD, Colorado State University and the National Cattleman's Beef Association

The Problem: For many cow-calf producers, the information age has spawned a massive flow of data and technical communications that borders on the unmanageable. Earlier generations could not have imagined the volume or ease of access to information we enjoy. The challenge in this warp speed world of information overload is distilling a high-volume of facts, ideas and possibilities into a cohesive management plan. We also know that such a plan must allocate time and resources according to economic priorities.

Cow-calf operators must manage a broad range of daily activities in an environment replete with risk and uncertainty. Concurrently, industry specialists who support the cow-calf sector are challenged to provide information and technical services in alignment with the real world needs of producers. Specialists must not only generate new discoveries, but they also have the responsibility to assimilate, filter, and integrate vast amounts of information into a format that can be beneficially used by the industry.

Producers and specialists alike are confronted with mountains of information that is often presented as stand-alone facts and principles. This information needs to be integrated and applied according to economic priorities within the cow-calf enterprise. Prioritizing management activities and aligning the industry's information resources with these priorities is, thus, an important step toward improving producer profitability. But we must first understand which aspects of the operation need the greatest emphasis. In other words, we need to know what to prioritize in the first place. That is the purpose of this study: Identify management priorities in the commercial cow-calf business.

The Survey: Cow-calf managers function in a complex and risky business environment where it is impossible to control many factors that profoundly affect the bottom line of their business. The risk introduced by weather, markets, equipment breakdowns, and numerous other factors adds difficulty and uncertainty to decision making. However, managers can remain in control, so long as they focus continually on the areas of greatest economic importance.

To help address these issues, a management priorities survey was developed to determine which management areas are most economically important in the cow-calf business. Input and perspectives were solicited from both industry-leading producers and specialists who actively work in the beef cow sector. In total, 217 surveys were collected from 130 producers and 87 specialists. Producer respondents represent professional cow-calf operators with varying herd sizes from across the U.S. Participating specialists work with producers across a wide-range of disciplines (e.g., veterinary medicine, nutrition, economics/marketing, reproduction, pasture management) in various geographies throughout the nation. Producers and specialists were in general agreement as they gave their views on management priorities. The correlation between their mean priority scores was 0.90 (highly correlated) among the survey's 15 main management categories.

Key Messages: Summary of Top 10 Overall Rankings

1. Herd nutrition - respondents were in strong agreement making nutrition the number one ranked management priority.

2. Pasture and range management - respondents emphasized grazing as the preferred route to insuring adequate nutrition for the cowherd (harvested forages and supplemental feeds ranked 10th in the survey).

3. Herd health - results underscore to the importance of this area of the operation, with primary emphasis on disease prevention.

4. Financial - this management area was considered 'foundational to profitability' by two-thirds of respondents.

5. Marketing - respondents rounded out their top five with an emphasis on marketing, especially marketing of the calf crop through the most appropriate channel.

6. Production - this aspect of the cow-calf business remains important to profitability, with primary emphasis on (1) calving and breeding; (2) weaning protocols and replacement female selection; and (3) culling decisions and herd bull management.

7. Genetics - ranked higher among producers than specialists, and higher still among producers who retain ownership of their calf crop through the feedlot.

8. Labor - this category ranked in the middle of the pack, but received higher marks from producers managing larger herds.

9. Information management - subtopics ranking high in this category included herd reproduction data and cattle inventory information with overall cattle performance records, health data and weaning information rounding out the list.

10. Harvested forages - completed the top 10 but with specialists ranking this topic higher than did producers. Respondents were keen on maintaining lower than industry average costs in this category.

Identification, natural resource management, biosecurity, facilities and equipment and technical support were ranked 11th through 15^th, respectively. As a group, these five topics were viewed as well down the priority list, though beneficial and in a supporting role to cow-calf profitability.

EDITOR's NOTE: The complete 32 page report of this article may be found in PDF at: http://www.angus.org/pubs/PrioritiesFirstFinal.pdf The author, Dr. Tom Field, will be a featured presenter during session 2 of the February series, Managing Dynamic Change in the Beef Cattle Industry. Find details, and registration information in the November 12, issue #610, of the Ohio BEEF Cattle letter.

Forage Focus: Reducing Feeding Losses for Large Round Bales - Clif Little, OSU Extension Educator, Guernsey County

Large round bales are the most popular source of hay when winter feeding beef cattle. Unfortunately, these bales are subject to a variety of losses, including feeding loss.

Research published in the Journal of Animal Science (2003, 81:109-115) has shown feeding losses can be influenced by bale feeder design. The feeders investigated in this research trial were ring, cone, trailer, and cradle type feeders. The percentage of hay loss ranged from 3.5 to 14.6%. Cone and ring type feeders respectively exhibited the least amount of loss, while the trailer and cradle feeders exhibited four times the waste per animal compared to the cone design. This trial documented changes in animal behavior influenced by feeder design.

We know feeding hay in small amounts frequently minimizes waste. However, this method increases labor cost and is not always practical for all producers. How can we minimize hay feeding loss in a grazing system?

Move the hay feeding area frequently. By minimizing the time livestock feed in a particular area we reduce mud. This can be done by providing enough hay for three days.

Feed hay in a well drained area. For example, a heavy-use pad can minimize feeding loss.

Consider the example below from the MU Forage Systems Research Center. In this system they utilized low labor, large round bale rings. Hay was placed in the winter feeding area, spaced on 20-foot centers. The number of bales per paddock was based on bale size, number of animals, and length of stay.

The bales were grouped on 20-foot centers in a corner of the pasture. Temporary electric fencing was used to protect the bales to be fed later, while allowing access to enough bales for three days feeding in the rings.

When the three day supply is eaten, the temporary fence is moved back and the next group of bales are covered with the bale rings. This is just one method to minimize waste and mud; and it may not require a tractor once the hay is in place.

In summary, for winter feeding rotate the feeding area, minimize the use of heavy equipment, and set out enough forage for a two or three day feeding period. Utilizing cone and/or ring type feeders can further reduce hay loss. For more information contact your local Extension Office.

OCA Accepting Bull Consignments for Seedstock Improvement Sales

The Ohio Cattlemen's Association is currently accepting bull consignments to the two Seedstock Improvement Sales held in April of 2009. The sales, held on Friday, April 3 at 7:00 p.m. at Muskingum Livestock in Zanesville and Saturday, April 18 at 12:00 noon at Union Stock Yards Company in Hillsboro, offer an affordable way to market bulls from multiple breeds in one location and on one day. Buyers have the assurance of buying bulls with known genetics, a completed vaccination regiment, and a breeding soundness exam.

The Seedstock Improvement Sales are open to consignments from all breeds of bulls. Consignors must be a current member of the Ohio Cattlemen's Association to participate. Bulls are required to be registered and to have expected progeny differences (EPDs). The bulls will be placed in sale order based on a within breed evaluation star system using EPDs for birth weight, weaning weight, yearling weight, and milk. Bulls consigned to the sales can be from one to five years of age. History of the sale shows that bulls 18 months of age and older command a higher price.

For more information on the sales, visit www.ohiocattle.org and look under the Beef Improvement section or contact the OCA office at 614-873-6736 or through email at beef@ohiobeef.org. Consignment deadline for both sales is January 31, 2009.

The Cattle Market: What I Think I Know (November, 08) - Dillon Feuz, Utah State University

I have known for some time that I would need to write an article, but I didn't know what to write. I have had numerous cattle producers ask me what they should do with their calves this fall. I don't know what to tell them. As an agricultural economist, I have been trained to look at fundamental forces that shape supply and demand conditions and then be able to make an intelligent statement about the direction the market should move in the next few weeks or months. I am having a very difficult time using fundamental analysis to explain what I am observing in the market place. Since I don't know what the future holds, let me review the past and then try to explain the future based on that recent past.

Let me start with a review of the corn market. Dec. corn on the CBT has declined from $7.75 per bushel in mid June, to $5.50 by mid September, to just over $4 in early November, to a present price on Nov 19th of $3.79 per bushel. The cost of gain for calves in a feedlot based on those expected corn prices, declined from over $100 per cwt. of gain to near $65 per cwt. of gain. If I new nothing else, I would say that should have made for a fairly strong calf market this fall. At one time, we lived by the rule that a dime decrease in the price of corn was worth a $1 increase in the per cwt price for calves. That would imply calf prices should have increased by $40 per cwt.

Calf prices are also based on expected fed cattle prices when they will be slaughtered. The Apr. Live Cattle futures on the CME were at $116 in mid June, a price that was probably not justified by the market fundamentals. By mid September, the Apr. board had declined to $106, perhaps a fundamentally justified price. In early November, the Apr. Live Cattle contract had declined to $96, a price that given present supply and demand fundamentals was probably a little under the market. On November 19th the Apr. Live Cattle contract closed at $86 per cwt. That is a loss of over $450 per head in the expected value of a slaughter steer in April.

Based on those corn and fed cattle expected prices, I would have expected a 550 lb steer in Nebraska to sell for $138 per cwt. in the fall based on the June expectations, and then to decline to $130 per cwt. based on the September and early November expected prices. The November 19th price would be about $115 per cwt for a break-even. However, 550 lb steers in Nebraska auctions in October and November only averaged about $110 per cwt.

I think I can explain that price difference. Feedlots have lost on average about $90 per head this year. Over the last two years they have lost on average about $55 per head. In October and November of this year they were losing about $150 per head on every lot sold. Feedlots needed to regain some equity if they were going to continue to operate. They had been burned badly the last two years as corn prices increased and fed cattle prices decreased throughout the feeding period. This fall, they were attempting to buy the calves with about $100 per head profit in them. If present future prices hold into April, they will likely lose $30 per head or more on those calves they just purchased.

Ok, I am feeling a little better about my abilities to explain the markets. Calf prices appear to still be based on fed cattle prices, corn prices and feedlot profitability, just like in the past. But why have the live cattle futures declined $10 per cwt in the last few weeks of trading? Cattle on feed numbers are below a year ago, and placements have been below year ago levels for the last few months. So, on the supply side of the market, this sell off is not justified. Our year over year exports of beef have increased and are expected to increase next year. That should also support higher prices. Restaurant demand for beef has declined and retail sales may decrease as well, but that was likely the market adjustment in dropping fed cattle into the upper $90 per cwt. range earlier this fall.

Wait, what is that sucking sound I am hearing. It is the #$%$#@% stock market. The Dow Jones Industrial Average just dropped to its lowest level in the last 5 years. I thought we bailed that out last month. Yet it seems as though trader fortunes and business equity is headed South quicker than a North Dakota wheat farmer following the first fall blizzard. Not only is the stock market sucking all the equity out of everybody's 401K retirement accounts, it is sucking all the long hedge funds out of the commodity markets. It is also sucking the will out of the U.S. consumer to spend money on anything, at least that is what traders believe. Therefore, Live Cattle futures are dropping in expectations of a prolonged recession and drastically reduced domestic beef demand.

I am not that pessimistic, but I am convinced that we will not see any significant rally in the commodity markets until the stock market stabilizes and starts the gradual climb out of the abyss into which it has fallen. When a credible voice can assure me that stock market has hit bottom and that 400-500 point swings in a day on the Dow are done, then will I venture to forecast fed cattle and corn prices and therefore feeder cattle prices. Perhaps I will also give you some advice on what to do with those calves you have not yet sold.

Lastly, may I suggest that you forget about the markets for a week, and enjoy your family and friends over the Holiday? Be grateful for all the bounties we do enjoy in this great land.

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.

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