A Publication of:

OSU Extension - Fairfield County

831 College Ave., Suite D, Lancaster, OH 43130

and the

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 # 645

July 15, 2009

Giving Up, Hanging on or Moving Forward (part 1 of 2) - Rory Lewnadowski, OSU Extension Educator, Athens County

The "Managing for Dynamic Change" beef school that was held this past February presented a lot of information about the beef cattle industry from cow/calf up to the feedlot and packer segments. Speakers covered historical trends, current trends, future projections, production factors, consumer attitudes, markets, marketing options and global implications. There were some common themes among the presentations. Over the next couple of issues of this newsletter, I will review my notes and offer some of my perceptions of the various presentations as I attempt to summarize the flood of information that was received.

During the first two weeks of the school, participants heard from Duane Lenz of Cattle Fax, and from Tom Field, the executive director for producer education from the National Cattlemen's Beef Association (NCBA). Cattle Fax is considered to be a world leader in terms of analysis, information and research related to the beef industry, particularly as it relates to marketing. I'll take a closer look at their presentations in this article.

The U.S. cattle inventory is declining. The January 30, 2009 USDA report indicated an inventory level of 94.5 million head. The U.S. cattle herd is now at its lowest level since 1959. Beef cows make up a large segment of that total cattle inventory and beef cow numbers are declining. Tom Field from NCBA said that the year-to-date beef cow slaughter is 12% greater than last year, nearly 20% greater than 2 years ago and 40% larger than in 2005. The beef cow inventory is down 3.4 million head since 1996. Duane Lenz put up a chart that showed the beef cow inventory had declined from a high of about 39 million head in 1982 down to just slightly more than 32 million head projected for 2009. Heifers as a percent of total feedlot placements have been increasing since 2006. In 2008, heifers made up 36% of total feedlot placements. Duane Lenz listed reasons for the contraction of the U.S. beef herd as: Weather, Land Values, Ethanol, Alternative Land Uses, Urban Sprawl, Government Policy, Producer Age, and Profits/Losses.

The sustainability of any operation is dependent upon making a profit. Duane Lenz showed a slide on the cost to raise and finish a steer. That cost, from calf through the feedlot increased $405 per head from 2005 to 2008. Approximately 62% of that increase was in the feedlot phase of production. The cash calf cost during that period increased about 20%. Put another way, that $405 per head increase pencils out to an increase of $32/cwt live weight, an increase of $50/cwt on a carcass basis, or an increase of $0.72/lb at the retail level.

Duane used charts to illustrate how profitability is being impacted in various segments of the cattle industry. From a low in 1996, cow calf returns have been generally uphill until 2007, about a 10-year period. During that period high return producers stayed above breakeven costs, peaking at around +$250/head in 2005. In contrast, the low return producers were above breakeven costs for only 6 of those 10 years. Low return producers, like the high return producers, had their best return in 2005, averaging about +$125/head. What could account for these differences? In his presentation, Tom Fields from the NCBA had a slide entitled "Economic Realities". Production, number of head, number of pounds sold, determines the income side of a profit equation, but costs of production make the most impact upon profitability. According to Tom, 20% of the variability in profitability is due to production while 80% is due to production costs. Among the various costs of production, feed costs account for 60% of the variation in profitability between herds. What is the smallest change you can make that will have the largest impact upon profitability? If you read my comments in the introduction to this newsletter then you know that I believe it is pasture management. Make more effective use of this forage resource to reduce stored feed costs.

The packer has also been hard hit by the state of our economy. Apparently a lot of the profit margin at the packer level comes from hide and offal values, something I had not realized until I heard it at this school. One of the slides that Duane Lenz used showed that hide and offal prices added $58/head in value from April of 2006 to July of 2008. From July 18 of 2008 to December 22 of 2008, hide and offal prices went from $12.27/cwt to $5.99/cwt. This price decline resulted in an $80/head loss in income for the packer. The point here is that all segments of the beef industry are being impacted in a negative manner by the current economy.

Up to this point the current economic trends don't seem to offer much hope to the beef producer. Yet, even in these current times there are pockets of encouragement, some strategies to increase income and reduce expenses. I have already mentioned reducing stored feed costs by making better use of pasture forage. Another area to look at is cull cow marketing. Some of the slides Duane Lenz used dealt with seasonal cow slaughter and slaughter cow prices from 1998-2008. Historically, slaughter levels are at their lowest points June-August. Conversely, the highest slaughter cow prices are June-August. Changing your market plan for cull cows might represent an opportunity for some increased income. Other strategies revolve around marketing and I will cover those in more detail in the next issue of this newsletter.

In the long run there should be opportunities for profitability and sustainability within the cattle industry. This is a conclusion based on the fact that people have to eat and there are more people to feed every year. Duane Lenz devoted a section of his presentation to global trends and implications for the beef industry. He stated that the world population is growing by 78 million people annually. Over the next 10 years an additional 1 billion meat consumers will be added from developing countries. Analysts expect the demand for animal protein to double in the next 20 years and most of this meat supply will need to come from developing countries. Currently the U.S. is the largest meat producer, but we will need to have growth and be willing to change and adapt production and marketing methods to retain our market share.

I titled this article "Giving Up, Hanging On or Moving Forward" because it seems to me that those are the choices facing a beef producer as they encounter these tough economic conditions. Certainly the shrinking U.S. cowherd, along with the increasing average age of the beef producer speaks to those who are giving up and getting out of the business. Yet another segment is just trying to hang on and get through these tough times, counting on better economic conditions in the future and the fact that historically, good times follow bad times. Finally, there is a small segment of producers that are embracing these times, adapting and moving forward with a new way of doing business. I'll continue on this theme of moving forward in the next issue of this newsletter as I review presentations from the February Managing for Dynamic Change beef school.

What's Happening to the Cow Herd? - Dr. Roy Burris, Beef Extension Specialist, University of Kentucky

If you've been in this business for a while, you've seen how the nation's cow herd is always changing. History can sometimes be a good teacher so it is probably good to consider where we are now and to reflect on where we have been.

You can't help but notice that most of our cow herds are black hided. That's not necessarily a bad thing but it does raise some questions - (1) are commercial cattlemen ignoring the benefits of crossbreeding or (2) are we practicing single trait selection on things like coat color and marbling while ignoring some of the more functional traits?

Let's take a look back at our history. In the fifties, we selected for small-framed, blocky, compact animals until genetic defects like dwarfism started showing up. We don't see much dwarfism anymore but now we are getting concerned about things like Arthrogryposis Multiplex (Curly Calf Syndrome), Neuropathic Hydrocephalus and Fawn Calf Syndrome. Maybe that is what happens when we focus on a few traits which cause us to draw from a very narrow gene pool. For example, a lot of Angus cattle which we have been using have one bull (Precision 1680) which appears several times in their pedigrees. I'm no geneticist, but that seems to increase the odds of recessive genes "pairing up". That is kind of like "putting all of your eggs in one basket."

I ran across some old on-farm performance testing records for Kentucky which show how much the cow herd has changed after the small, compact cattle of the fifties.

The on-farm data likely reflected what was going on in the state and country. It became obvious that continental breeds like Charolais would dramatically improve weaning weight. Until that time, we had mostly British breeds of cattle but with the influx of the continental breeds (Charolais, Limousin, Simmental, Chianini, Main Anjou, etc.) the "chase" was on again. Selection for growth and frame size with many ignoring functional traits like reproduction occurred. Meanwhile, Hereford cattle numbers began to decline. Single trait selection for the polled trait or looking to increase frame probably didn't do the breed any favors.

In the eighties, the other (more maternal) breeds followed suit as they got bigger and bigger. But it would soon be time to shift directions again. As the American Angus Association began to emphasize Certified Angus Beef (CAB), which has been widely successful, the cow herd suddenly became black-hided. Let's be clear about one thing - I believe that CAB has been good for the beef industry and good for the Angus breed.

I certainly don't have any problem with black-hided cattle (that's about all we have at the West Kentucky station) but there are a few things that we should now consider:

1. What about crossbreeding? Hybrid vigor has been described as the closest thing there is to a freemeal. When I was at Mississippi State, our work indicated that, when compared to straight bred cattle, two-breed cross calves weighed about 30 lb more at weaning. Results were even better for 3-breed cross cattle. Calves averaged about 80 lb heavier at weaning when they were out of a twobreed cross cow and a third breed of bull. That's a lot of extra weight to give up. Maybe it's time to rediscover crossbreeding. They can still be black-hided.

2. Don't select for marbling to the detriment of other functional traits. You don't want to end up with a bunch of fine-boned, thin-muscled feeder calves even if they are black. It seems that we are seeing more of these in our graded calf sales now.

3. Seedstock producers should remember that the commercial cattleman is their customer. Produce bulls which will keep them in business in the "real world". Commercial producers should build their herds with cattle that are functional and reproductively efficient, and resist change just for change's sake.

Why "trade down?" - Steve Suther, Director, Industry Information, Certified Angus Beef (reprinted with permission from the June, 2009, CAB "Black Ink" publication)

Demand for beef is down. Can you blame the recession? Not entirely, but it's a darned inconvenient coincidence.

It's hard to argue that beef quality was too low, because production of every class of premium beef has been trending up for some time.

The supply of Choice beef in particular has increased for six years, and at an increasing rate, especially in the last two years. In concert with that, supplies of Select beef declined in quantity and total value.

Beef industry observers don't understand why beef quality turned sharply higher in 2008, and because the greater supply was unexpected, our multi-billion-dollar industry could not adjust quickly enough in the short run.

With a huge share of business locked up in contracts that reflect expectations, it takes many months for the rudder to deploy, let alone turn the ship. Those reactions were slowed by economic panic, especially in the foodservice sector.

They were also muffled by deployment of other rudders.

For more than a decade, the beef industry has worked to add value to the previously underutilized chuck, the front portion of every carcass. First came the teres major and flat iron steaks; as their popularity grew, the industry followed with another round of discoveries such as the Denver steak, ranch steak and country-style ribs. More packing plants and processors began to break down the chuck to supply this demand.

As restaurateurs saw options beyond the middle meats, those strips, rib-eyes and filet mignons, chefs who never bought anything from the chuck started buying a lot of the new "value cuts," especially in premium Choice and Prime, with their inherent safety net of superior marbling.

This strategy has been a key to the upper tiers of beef quality maintaining stronger demand. A rancher might check the Choice-Select spread to monitor demand for quality, but that number - lately quite small - does not reflect the stronger demand for higher quality most of which has been sorted off to premium brand markets.

Gradually, the beef industry's campaign to build demand for the new chuck cuts have helped train meat buyers and consumers to "trade down," especially during times of financial pressure. There's evidence that shoppers may trade down to a value cut, or even ground beef, within their premium quality brand, rather than switch to a lower grade overall. Of course, others trade all the way down to chicken or pork, but the beef value cuts have helped hold the line.

The recession is still the dominant factor, and it can't last in the long run. In better times, the middle meats will regain their value and the whole beef animal will be worth a lot more.

The market just needs time to regain equilibrium.

It makes little sense to argue that we have too much high-quality beef, if we are serious about regaining that demand. Consumers' taste buds have not changed.

A new wave of retailers is moving up to allow their customers to buy beef of Choice or higher quality. Foodservice operators recovering from the recession will see no future in the inconsistency of Select beef as they welcome back old customers and try to win new ones.

Producers must look beyond the less-relevant Choice-Select spread today, and realize there is no market signal to back away from quality. The cost/price squeeze is calling for greater efficiency, and you can move ahead there in tandem with quality goals. If your cattle are too small, you can easily change that, but keep in mind that selection for efficiency tends to result in smaller cows.

Every sector of this economy features competing messages and analyses, but if you cut to the bottom line, it's always about value. Look at any selection or management changes that can add long term value with uniformity and predictability. Choose replacements from your most efficient cows and restrict their breeding season to a few weeks that best fit least-cost production.

Cull for disposition to save labor and equipment costs, and develop a herd that's easy to lead where you want to go. If you are already on track to produce high-quality beef that's still supported by the bedrock of consumer demand, why would you trade down?

'Assess for Success' at Manure Science Review July 21 or July 23

Learn the best ways to manage manure, use it on your land and know if you're doing it right at Ohio State University's 2009 Manure Science Review.

You'll find detailed sessions on management practices, application rates, nutrients levels and ways to keep accurate track of them.

It's offered twice: in Strasburg in northeast Ohio on Tuesday, July 21; and in St. Marys in western Ohio on Thursday, July 23.

Ohio State and Ohio Department of Agriculture (ODA) experts will be among the speakers. "Assess for Success" is the theme.

"Assessment is an attempt to get producers/farmers to take a closer look at how they are managing their operation relative to maintaining water and air quality resources," said Jon Rausch, program director of Ohio State University Extension's Environmental Management Program and one of the event's speakers and organizers.

"We'll be looking at primarily management practices which are water quality-related, but within an economic context," he said. "For example, managing water on the farm will minimize the quantity of water that needs to be hauled with manure and also minimizes the quantity of polluted water moving off the farm."

Hours are 9 a.m.- 4 p.m. at both locations.

The morning joint session (9 a.m.-noon), a hands-on workshop called "Nutrient Management I," will use a workbook to determine crop nutrient needs, manure application rates and crop nutrient balance.

The afternoon session (1-4 p.m.) offers two concurrent workshops:

* "Nutrient Management II," building on the morning workshop with an in-depth look at nutrient management issues, including an on-site assessment of application best management practices, or BMPs.

* "Inventory and Evaluation": on-farm assessment focused on specific areas of concern and identification of mitigation options for manure handling.

"Our goal is to help producers understand why it is important to think about potential off-site impacts their operation may be having and how to minimize or eliminate these impacts," Rausch said. "The best way to do that is to experience firsthand how some of the more typical problems have practical solutions developed by other farmers."

Register by July 16 and the cost is $10 for the morning workshop, $10 for the afternoon workshop and $10 for lunch.

Register after July 16 and it's $15 for the morning, $15 for the afternoon and $15 for lunch.

You can sign up for the whole day's program or for either of the workshops alone. Download a registration form at http://www.oardc.ohio-state.edu/ocamm/MSR09_brochure.pdf. Or send your name, address, e-mail address, choice of date, workshop choices, whether you want to buy lunch, and payment to Mary Wicks, OARDC/OSU, Ag Engineering Building, 1680 Madison Ave., Wooster, OH 44691. Make checks payable to OARDC/OSU. Call 330-202-3533 or e-mail wicks.14@osu.edu for more information.

Forage Focus: Fall seeding grasses - Dr. Dan Undersander, Forage Agronomist, University of Wisconsin Extension

Late-summer/fall establishment of grass is often desired in the Midwest. Most farmers do not realize how much fall seeding date affects the yield of the grasses the next year. We seeded six forage grasses at several late summer dates at three sites in Wisconsin (River Falls, Arlington, and Lancaster) over three years. Seeding dates were spaced approximately every 2 to 3 weeks from late about August 1 to late November 1. Species included orchardgrass, smooth bromegrass, timothy, reed canarygrass, perennial ryegrass, and tall fescue.

All of the grasses seeded by mid- to late-September produced stands with visible plants by killing frost most years and that usually survived the winter. Later seedings did not produce visible plants until spring, if at all. Slow establishing species, particularly reed canarygrass, produced better stands when seeded by early September. Timothy tended to be the most variable with regard to seeding date and next year yield. In only one trial out of nine did a November seeding, where the seed lay dormant over winter, produce a stand the next spring.

The most important finding is that earlier seeding dates (early through mid August) usually had more tillers per square foot, more tillers per plant, and higher dry matter yield the following season. As shown, in the figure, average first cutting yields of grasses the spring after late summer seeding, when harvested at the boot stage, ranged from 1.5 t/a for some grasses down to less than 0.5 t/a on first cutting depending on when they were sown the previous fall. By later cuttings the stands had recovered and all yielded well. However, delaying late summer seeding from mid August to mid September generally resulted in 1 ton/acre less yield the next year.

This study clearly shows that delaying grass seeding in the late summer or early fall not only increases the risk of establishment failure but reduces yield of the stand the next year. Therefore we recommend seeding grasses as early as possible during the month of August.

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

Fairfield County Agriculture and Natural Resources