Cattle Starter

Category: Cattle Economics

  • The Why’s and How’s of Culling Cows

    254If you’re interested in building a cattle herd with a focus on long term profit and sustainability, you need to be culling cows.  Without a disciplined culling strategy in place, under-performing cows will bleed profit out of an operation quick.

    Not familiar with culling?  It’s simply the practice of removing poorly performing animals from your herd.  But even though the idea is simple, the specifics of why and how to cull cows can be complex, and varies from herd to herd and year to year in the cattle business.

    How many animals you should cull each year depends on several factors.  You see, there are a few basic flaws a cow has that guarantee she’ll be a cull, but beyond those few is a multitude of reasons that may or may not be justification for culling.  It all depends on your situation.  Let’s go over the basics.

    Open Cows

    A cow that isn’t pregnant should almost always be culled from your herd.  This is the most basic culling decision, and it probably makes more sense than any other culling criteria.  That’s because an open cow won’t give you a calf, and you’ll still have to feed and keep her until the next breeding season.  A year of cow maintenance cost with no financial return is a no brainer.  Even at rock bottom prices, you just have to send her down the road.

    The only exception to culling open cows is the first-calf heifer.  A heifer that is raising her first calf and still growing herself is under an incredible amount of pressure to perform and rebreeding rates for these animals can be dismally low.  Because they are so young (with a lifetime of productivity ahead of them) and under such pressure to perform, many cattle operations give these first calvers a second chance.  This may be a financially sound decision, but remember that fertility and maintenance demands are heavily tied to genetics, and by giving the girls a second chance you may be lowering the overall genetic quality of your herd.

    Old Cows

    Just like us, cows don’t live forever.  The old ones begin to lose their teeth, eyesight and other crucial things.  That’s why many cattlemen cull old cows.  They don’t want to take the chance that they’ll have to keep a cow that just won’t get it done for one more year.  Culling (or not culling) cows for age can be risky.  When calf prices are high, it’s probably better to take the risk of keeping an old cow because if she performs, the sale of her calf in the fall is well worth it.  In times of low calf prices, the reverse is true, and it’s probably wise to cull these older cows to make room for younger, more productive ones.

    Ornery, Crazy, or Just Plain Difficult Cows

    There are a number of ways a cow can make the cattle operation difficult.  She can be the one that almost kills you each time you try to tag her calf.  She can cause problems by trying to steal other cows’ calves (happened to us).  She might be the one who lags behind during each herd move (we have one of those).  She could have gotten mastitis (us again) and won’t produce enough milk to raise a rigorous calf (we decided to take a chance and keep that cow).  She could learn to disrespect electric fence (our most recent struggle) and cause havoc in your winter hay bale grazing program.

    When deciding to cull these cows with unique difficulties, you need to weigh the financial and emotional costs they incur against the potential money they’ll make you.  Other factors such as how much available feed you have in store and the availability of good replacement cows need to be taken into account as well.

    There’s no doubt that the art of properly culling cows is critical to the long term profitability of a cattle operation.  How many you cull and how strict you are with your culling decisions depends completely on your situation and the economics of the industry at the time.  So what’s a reasonable culling rate?  A wise man once said that if about 10 percent of your herd is culled out each year, you’re probably headed toward long term genetic improvement, which should result in sustainability and economic success.  But that’s a discussion for another day.

  • How Fast Should You Grow Your Cattle Herd?

    When my wife and I decided to start a cattle farm years ago, we had a specific goal in mind.  100 head of momma cows in ten years.  I’m still not sure why exactly I went with the 100 head, but it seemed like a good lofty goal to shoot for, and at the time it made mathematical sense.  If you start with 10 heifers, retain all heifer calves as future cows and continue that practice for 10 years, you’re in the 100 head club.

    Boy, did I have a lot to learn!  For starters, I initially thought that a cow was a cow.  They were all the same.  Four legs, eats grass, pops out a calf each year.  I’d soon learn that wasn’t even close to the truth.

    We were looking for some cattle in our area, so we scouted a few places and saw some pretty badly managed critters with poor genetics.  We didn’t know that at the time, but after I had a really good vet do a farm visit on one prospective herd, I learned to trust his opinion, and he put us in touch with a top notch cattle producer who had some heifers for sale.

    We started our cattle herd with the purchase of 10 red angus yearling heifers from a top notch producer here in northern Maine.  Good cattle come at a price, and we had to take out a loan through the Farm Service Agency to make the buy.  We had those heifers bred and wintered them the first year.  After most of them calved the first year, we took out another loan and purchased a second set of 10 heifers from the same place.

    Our experience developing a cow herd from 20 purchased heifers is still ongoing, but it’s already taught us a whole lot.  The bottom line is that we’re growing our herd much slower than we’d initially planned.  Based on my experience, here are a few thoughts on how fast you should grow your cattle herd.

    1.  All cattle are NOT equal. If you keep every cow in your herd regardless of performance, you won’t have much for quality after a while.  You as a cattle owner need to decide how rigorous you will cull animals from your herd, and you probably won’t realize how you’ll make these decisions until you own and spend time with your cattle.  Over time, we realized we were tougher at culling animals than we ever would have thought.  How you cull plays a huge role in how fast your herd will grow.

    2.  You can’t have more cattle than your land can support.  We originally thought land was one of those things that wouldn’t limit us, but soon realized that just because you’re surrounded by an abundance of unused land doesn’t mean it’s ready to be grazed.  Factors like different landowners, distance from your farm, fencing needs, availability of water and electricity and other details can definitely slow the otherwise fast growth of a cattle herd.  Can’t pay for the land without the cattle, can’t pay for the cattle without the land.

    3.  Debt can be good and bad.  They say debt is a good master.  It keeps folks on their feet, working to make sure they make loan payments.  If it weren’t for the FSA, we wouldn’t have the cow herd we have now.  It’s been an incredible opportunity.  That said, I’m naturally averse to debt.  The constant reporting of income and assets, frequent paperwork and the underlying stress of knowing you have payments to make just drives me crazy.  I’d rather own things than borrow them.  There’s a freedom associatioed with that, and it really appeals to me.  The growth of our cattle herd has slowed because we’ve made it a priority (at the moment) to pay down debt and regain the freedom associated with ownership.

    4.  The cattle market can get in the way.  If you follow the wise folks who understand the cattle market, you’ll want to be growing your herd during a downturn in the cattle cycle and liquidating during the high times.  Keeping to those rules, it doesn’t make much sense to employ a strategy of maximum growth regardless of prices and market conditions.

    So there you have it.  It’s not always ideal to grow a cattle herd as fast as biologically possible.  I hope you’ll consider these lessons we’ve learned to gain a better understanding of how fast you should grow your cattle herd.  Being new in the cattle business is exciting.  There are so many great opportunities out there, but if we make poor decisions we won’t be the ones still in the business ten, twenty or thirty years from now.  Let’s be smart and play the long game.  It’ll work out!

  • Why Are Lighter Calves Worth More Per Pound?

    If you keep an eye on cattle prices, you’ll notice the large disparity in prices paid for calves of different weights. For instance, 700-800 lb steers in Nebraska are currently selling for around $1.60/lb, but in the same market, 300-400 lb steers are up around $2.20/lb. Now that’s a huge difference! So what’s the deal?

    To better understand the disparity in prices of different sized cattle, you need to think in terms of incremental cost of gain. Simply put, it costs much more to get a calf to 400 pounds than it does to get it from 400 to 800.

    Let’s take a step back and think about the production chain from calf to fed steer (remember the cattle industry is split into three main sectors). One of the wisest men I know in the cattle industry is Allan Nation, editor of the Stockman Grass Farmer magazine. Nation understands cattle markets better than most, and he advises to think in terms of the fat steer price. According to him and other experts, cattle prices across all segments of the market eventually correlate to the price of a fed steer. So if you look at the fed steer price and factor in the different costs to get a calf to that end product, you can better understand why light calves sell for so much.

    Today the slaughter steer price is hovering around $1.30/lb. So a 1200 lb steer should command about $1550 at the slaughter plant.  A typical feedlot will purchase feeder cattle at, say, 750 lbs and grow them to that 1200 or so lb target.  They have a $1550 selling target, so that feedlot must purchase feeders and put 450 lbs on them for a total of less than $1550 to make a profit.  Keep in mind that the nature of the free market results in those feedlots continuing to bid up the price of feeder cattle as long as any profit remains on the table.

    Our 750 lb steer in Nebraska at $1.60/lb is a $1200 animal.  That means the feedlot must put those 450 lbs on at a total cost of $350 just to break even.  It’s no wonder feedlots are losing money right now!

    Regardless, the main reason feedlots can bid so much for calves is the extremely low current price of corn, and other feeds that follow the corn price.  Low corn means cheap gain, and cheap gain steepens the per-pound price hike as calves get lighter.

    So what about those 350 lb calves selling for $2.20/lb?  Those calves are selling for $770, meaning the backgrounder can theoretically profit from putting 400 lbs on them for less than the breakeven of $430.

    In summary, low feed costs are allowing backgrounders and feedlots to bid up the price of calves, and a limited supply of calves with higher demand means a higher price per pound for light calves. Only a certain number of calves are born each year, and a farmer or rancher typically has a minimum of several hundred dollars invested in a calf before it even hits the ground.  So the light calf is worth a lot of money right now, and the low cost of gain means that calf will be worth incrementally less the heavier it gets.

    It hasn’t always been this way.  When the fed steer price drops and corn prices skyrocket, the incentive for feeders to bid up light calf prices disappears.  At that point, the price-per-pound disparity, often called price rollback, gets much lower, and sometimes even goes away.  In fact, there have been times when fat cattle have been worth more per pound than feeders!  That’s when it is prime time for a cattle owner to hang on to their calves to heavier weights, because each pound of gain becomes that much more profitable.

    Current conditions in the cattle market do not provide much incentive for the cattle owner to hang onto their calves for very long, especially in areas of the country with lots of feedlots bidding up cheap calves.  Similarly, there’s little incentive to buy light calves, put them out on grass and sell them heavy.  But when corn prices go back up and the price-per-pound disparity tightens, it’ll be prime time to put calves out on grass for big profits.