Who Will Survive Low Cattle Prices? Those With the Lowest Inputs

By   /  October 24, 2016  /

The cattle market is in the toilet. The future looks even worse. Calves bring only one-half of what they did a couple years back. Stocker margins are negative, feeders too. The American cattle industry is on its knees, broken and busted. Is this the end?

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Well maybe, at least for some folks. A better question might be this: who will survive this Armageddon, and how will they do it?

This spring I hosted a pasture tour for my local grazing group. Our meetings are often raucous events and the discussions are free-wheeling. The group is made up of many independent-thinking individuals and the questions are sometimes hard.

As we walked the fields looking at grass, fencing and water, I explained that my basic philosophy was to constantly work to lower both my overheads and my direct costs with the fundamental goal of achieving a zero-input ranching model: one that functions on sunshine, rain and management, with no outside inputs.

Imagine my surprise when this idea was met with skepticism, including one basic question: “Why?” As in, why, with all of the obvious production advantages offered by soil amendments, irrigation, cover cropping, protein supplements, why would I simply say “no” to inputs?

I have to admit, I was a bit taken aback. My belief in low input ranching has evolved over a long period of observation and study, and it has become so much a part of my mindset that I no longer even question whether inputs might be a good thing. I simply assume that inputs are counter-productive to my economic and ecological goals. My thinking about inputs has approached religious faith, it seems.

In response to the question of “why” regarding my belief in a low input model, I stammered around a bit, but finally came up with some thoughts about inputs and ranch economics:

First, grass grown with chemical or physical inputs must compete —economically speaking — with the grass I now produce with zero inputs. Sunshine and rain are free, which means I grow grass with zero direct costs. Zero is a pretty low cost structure, and difficult to beat.

Second, grass grown with chemical or physical inputs must also compete with the value or cost of grass I can purchase from my neighbors. In other words, if I can rent pasture for $10 or $20 per AUM, input-produced grass must be able to beat that price to be attractive. I doubt that is possible.

Finally, I occasionally find myself thinking about Armageddon. Not necessarily the Biblical event, but what if our industry or our country was faced with a severe collapse? Perhaps some economic, ecological or political upheaval where supply, transportation and marketing would become much more difficult. What sort of production system would still function in that sort of future? My conclusion: a system that functions independently of politics or policy, that mimics natural processes, that produces and markets locally. I find myself wanting to pursue and promote a model that might just work, even in the most difficult of futures, in times much worse than these.

I’m not the only one thinking about this. I recently came across an article where the author (a forward thinking rancher-philosopher) pondered a future where we would have to operate in much the same way as our grandfathers did: no chemical fertilizer, herbicides, wormers or drugs. Very little equipment or hay and very well-adapted cattle.

Maybe that’s our collective future, maybe not. In any case, today’s market trouble may not be the onset of total Armageddon, but it will certainly be difficult for many folks in the industry. Ranchers who have built an economic model based on $1,500 weaner calves will probably find it difficult to adapt to the current reality of $700 calves. And for any business that cannot or will not adapt to that new reality, a tiny little Armageddon awaits.

I’m generally optimistic. In the end, I believe calves can be profitably produced, even in the current market. Clearly, that will require a focus on tightly controlling production costs. For me, that means taking a hard stand against inputs and doing a better job of managing grass resources. I will need the right kind of cattle and the right mindset. I will need to produce pounds of beef with very, very little in the way of input costs.

And that is how I plan to survive Armageddon, or the current market, whichever is worse.

ABOUT THE AUTHOR

John Marble

John Marble grew up on a terribly conventional ranch with a large family where each kid had their own tractor. Surviving that, he now owns a small grazing and marketing operation that focuses on producing value through managed grazing. He oversees a diverse ranching operation, renting and owning cattle and grasslands while managing timber, wildlife habitat and human relationships. His multi-species approach includes meat goats, pointing dogs and barn cats. He has a life-long interest in ecology, trying to understand how plants, animals, soils and humans fit together. John spends his late-night hours working on fiction, writing about worlds much less strange than this one.

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A Great Place To Raise A Family

April 27, 2016

I occasionally lead workshops I call Hard Work and Harmony: Effective Relationships In Family Businesses. In it I like to ask participants to explain to the person next to them why they ranch.  Some say they love being their own boss, or love working outdoors and with livestock. Almost all of them say something about loving the lifestyle. Near the top of most people’s lists is, “It’s a great place to raise a family.”

I agree. I grew up on a small place. The biology lessons I learned from tending livestock were more influential than any I ever had in a classroom.  I learned other lessons too. I learned how to work hard and how to be resourceful. But it wasn’t just about work. Our place was a great setting for any adventure my imagination could conjure up. My mom sold it when I was in college and it just about broke my heart.

A ranch can be a great place to raise a family, but it isn’t always. I worked with a rancher shortly after my son, Jack, was born.  When we broke for lunch he asked about my new baby. I told him that when they placed Jack in Kathy’s arms for the first time, I could hardly see him for the tears of joy streaming down my face.  Tears welled up in his eyes too, but they weren’t tears of joy. Trying to hold back a flood of emotion, he told me how he had worked sun up to sun down to build a place “for the generations to come.”  He said that he hadn’t been as involved in his children’s lives as he should have been. As we sat on the hill, he told me that now he rarely hears from his adult children, who want no part of the ranch. A ranch can be a great place to raise a family, but it is not a substitute for our active involvement in family life.

Many ranchers are addicted to work. I’ll bet you’ve even heard some of your colleagues brag about how long and hard they work, proudly proclaiming things like, “I haven’t taken a vacation in 20 years.” They say it as though it is something to be proud of.  When I hear things like that I shake my head wondering, “Are things that bad?” You can’t run a sustainable business on unsustainable effort.

Intentional or not, work can become an excuse to avoid working through the issues every healthy family faces at one point or another.  When work consistently takes precedence over family needs, we set ourselves and our families up for trouble. Engaging in what may be uncomfortable conversations when issues first come up can keep them from growing into big problems.

In the last few months I’ve met a number of people who are learning that lesson the hard way. After decades of avoiding uncomfortable family issues they are facing extremely difficult challenges regarding succession.  Now, without any experience working with one another to resolve small issues, they are hoping to work through the most difficult challenges many of us will ever face. The conversations are made even more difficult because of the hurts that have gone untended and the resentments that have grown from not taking care of the family in the family business.   It’s a tough way to learn that success has more to do with healthy relationships than with conception rates and balance sheets.

I don’t mean to suggest that the physically demanding work that ranches require can be ignored, but it doesn’t have to be all consuming. Many Ranching For Profit School alumni have discovered that the ranch was all consuming only because they allowed it to be that way. After the school they restructured the business to increase profit and liberate their time to put more life in their work/life balance. They still work as hard as anyone, just not as long. Their ranches are great places to raise their families, andthey actually take the time and make the effort to be directly involved in raising them.

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Better heifer breeding

John Barnhart knows time is money in today’s cattle business. That’s why the Vienna, Mo., cattleman values breeding technology like fixed-time artificial insemination (FTAI).

“Fixed-time AI gives us the opportunity to get in there and breed a lot of females in a hurry,” Barnhart says. “And, the labor savings is tremendous. It’s one of those things where we can go in and literally be done [breeding] in about two days.”

An AI program without estrus synchronization could take 20-25 days. “It certainly eliminates a lot of headaches,” Barnhart says, “and, really gives us an option to increase the genetic base for our cattle herd. Plus, it improves the quality of our cow herd. It’s just been a tremendous difference in our whole operation.”

Barnhart works closely with University of Missouri Extension beef specialist Professor Dave Patterson, as well as Genex Cooperative, in establishing the right fixed-time AI protocol for his operation.

Fixed-time AI protocols allow all cows in a herd to be bred in one day. Proven AI sires add quality, while timed breeding adds uniformity to the calf crop.

Cows and heifers call for different synchronization protocols. Traditionally, heifers cause more management problems by way of reduced fertility, increased dystocia, greater nutrient needs and longer post-partum intervals. However, a new 14-day protocol involving split-time AI works best for most heifers.

Research conducted by Patterson and MU graduate assistant Jordan Thomas examined the timing of gonadotropin releasing hormone (GnRH) administration with split-time AI (STAI) following controlled internal drug release (CIDR)-based protocols to synchronize estrus and ovulation in beef heifers and cows.

According to Patterson, postponing AI and GnRH administration for heifers that fail to show heat by 66 hours allows more time for ovulation before insemination and might also minimize fertility differences between bulls. The technique allows more heifers and cows to exhibit estrus before insemination, as determined by activation of an Estrotect heat detection aid, applied at prostaglandin.

Patterson says GnRH administered at AI is not necessary for heifers that express estrus prior to 66 hours.

GnRH administration can be done concurrently with AI at 90 hours for heifers that fail to express estrus. Patterson says it is likely that improvements in pregnancy rates are due primarily to expression of estrus during the 24-hour delay period.

“If you use STAI, it can essentially maximize the proportion of the females that show estrus prior to being inseminated, and you end up getting pregnancy rates that are very similar to estrus detection protocols,” Patterson says.

Compared to FTAI protocols, Patterson says pregnancy rates are about 5% higher with the STAI approach. “You also have the confidence of knowing what your estrus response actually is at the time of breeding,” he says.

And with no GnRH being administered to heifers that express estrus by breeding, the STAI approach actually offers a cost savings to producers.

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Burke Teichert: How to manage your way out of a hard-calving cowherd

Over 25 years ago, I moved to Nebraska as the general manager of the Rex Ranch. I had a lot of experience calvinglarge groups of first-calf heifers, so until the ranch became bigger and had several units, it was only natural for me to work with one other person to calve, feed and care for the heifers and their calves.

Even though we were calving groups as large as 500 head, my co-worker did most of the feeding and cattle care. I helped with sorting heavies into the calving pasture, pairing out and periodic checking for calving problems. We split the night checking in the middle of the night so that we could overlap each other in the daytime for the few jobs that required two people

The first year, we didn’t have many heifers, so the calving difficulty didn’t seem so oppressive. However, the percentage of assisted births was far too high—though that was too long ago for me to remember the exact numbers. We were trying to grow rapidly so the next year we calved a lot of heifers. This time we didn’t have to check the numbers to recognize that we were pulling too many calves. 

I don’t remember if I helped calve for a third year, but about that time, we started having some senior veterinary students come to the ranch for obstetrical rotations during our heifer calving. I stayed close to the heifer calving for a number of years.

Many of the calves born before due date, and well over half were, came with no problem. However, calves continued to be born, from the same sire, for another 7-10 days. Guess what? The picture changed. Each successive day we pulled a higher percentage of the calves born that day. We used the same sire on enough large groups to be sure of the pattern.

With this much experience and information, we started to ask some questions:

  • How can calves from the same bull have so much difference in gestation length?
  • Were our heifers too small at calving? You know I favor minimal development ofreplacement heifers.
  • Can we find a better calving ease bull with perhaps less variation in gestation length? What are the genetics for that?
  • What happens when you use a calving ease bull on first-calf heifers, but the cowherd has been bred to bulls for growth with much less, if any, attention paid to calving ease or birth weight? So what if the heifer you are now assisting was born to a cow that was born to a cow and so on— do you see the pattern? If a heifer was born to a cow with no calving ease genetics, can we expect any bull to be a complete calving ease bull when the heifer provides half of the calf’s genetic makeup and the entire prenatal environment?

I’d like to tell you that we found quick answers to each of these questions and fixed the problem quickly. We didn’t–it was slow. In my 18 years there, we reduced dystocia in heifers by more than 50%. I wanted it to be faster, but we were not using Wagyu or Corriente bulls to get easy calving. We wanted a level of performance, along with calving ease, using the breeds that were in our composite. My successors have cut dystocia in half again, and now pasture calve some heifers day and night without a night check.

There are a few answers:
  • You can breed to Wagyu or Corriente bulls if you have a good market for the calves and you wish to let the heifers calve with little or no checking.
  • You can continue to “minimally” develop your heifers and get calving ease.
  • We moved the calving season from late February and March to April. My successors have moved it to May. They seem to calve easier in a later calving season.
  • We also shortened the heifer breeding season to 30 days. When the gestational due date arrived for the last day of the breeding season, we induced all remaining heifers to get heifer calving season over and to let the calf do its growing on the outside of the cow.
  • We began to cull every cow that had a calving problem and any heifer that required anything more than a little assist—no calf puller.
  • We raised your own bulls. A bull for heifers had to be born unassisted to a first calf heifer and come from a sire with appropriate calving EPDs. We also had an upper limit for that bull calf’s birthweight.
  • When buying bulls, don’t look at the individual birth weight. An EPD is far more predictive of the performance of offspring than individual weights. You can also ignore or pay little attention to the birth weight EPD. While birth weight EPDs are closely correlated with calving ease, it is calving ease that you want; so look closely at the “calving ease direct” and “calving ease maternal” EPDs and keep them in balance if you are raising your own replacement heifers. You want calves that can be born unassisted and heifers that can calve unassisted.
  • There may be some antagonism between “calving ease direct” and “calving ease maternal,” so you will want to ensure that you don’t focus on just one of those traits. Also, remember that your cows are the mothers of your replacement heifers. Therefore, you want to ensure a reasonable level of calving ease in the sires used in your mature cowherd so that heifers can calve unassisted.

When I was younger, I would tell people I was calving or we would hear the question, “Are you calving?” For far too long, we did way too much of the calving.  I’m surely glad that I finally learned that we are not supposed to calve; the heifers are.

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1971 Ford F250

1971 Ford F250 Ranger XLT 360 cubic Inch w/4sp Manual Transmission $8,500 65,942 Original easy miles Tires – 99% tread AC – Equipped Interior – Red cloth bench seats (Original) Ex…

Source: 1971 Ford F250

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5 Tips for Actually Enjoying Business With Family and Friends

By Jake Johnson

If you’ve worked with loved ones, you know that there are many pluses: a strong sense of camaraderie, a high level of trust and a long relational history that makes having discussions with candor easier to name a few.

But there are lots of minuses too. Because a family business is both “head” and “heart,” as a PWC 2014 Family Business Survey calls it. Focusing on both building the business and keeping peace with a loved one can be hard.

I’ve worked with family and friends for nearly half of my professional career. My first real job out of university was working at my uncle’s commercial real estate firm. Later, when I was a freelance writer and editor, he was my client as well (talk about dicey!). I also founded a successful creative agency with three close friends. Along the way, I learned a few lessons about how to work—and not work—with family and friends.

  1. Find Space for Objectivity

One of the hardest parts of working with close friends and family is creating objective spaces in the business. A smart business owner knows how to divine what conversations and decisions he or she should handle personally versus delegating to another person in the business.

As a fresh college graduate, when I asked my uncle if he had any positions at his company, he was excited at the prospect of me joining his firm. But he left the interview process and hiring decisions to another manager on his team, who had a clear directive to NOT show favoritism.

Other conversations that require this level of objectivity include discussions on compensation, promotions and even disciplinary actions.

Don’t have a team member who can be the objective counterpart? Consider involving a third-party mediator who can lay initial ground rules and call somebody out if those rules are impinged.

  1. Create Clear Areas of Ownership

Clearly defining areas of ownership in the business is as important as articulating the ground rules of that ownership.

I know the importance of this firsthand. When I started my agency with three close friends as partners, we didn’t clearly articulate who owned what areas of the business. This resulted in unnecessary conflict and frustration.

The lack of ownership and ground rules resulted in no clear way to rectify and bring closure to disagreements. So they often simmered in a stew of misunderstanding and assumption. Yuck!

Ultimately, this lack of clear ownership resulted in the dissolution of the partnership in an effort to preserve friendship. In hindsight, we would have been wise to do the hard work of defining roles and rules ahead of time.

  1. Utilize Indirect Management

I worked for my uncle for more than five years. Until the last year, I was managed by other leaders in the business. Not surprisingly, the last year was the most challenging.

Being managed by others allowed for mitigation both of accusations of favoritism and for drawing clear lines between business and family. It was only as I worked closer and closer with my uncle that comments like “heir apparent” started casually floating around. The personal difficulty in knowing how to relate to my uncle as both family and my boss grew immensely.

The closer one works with family members, the more opportunity there is for uncomfortable situations to arise. Creating indirect management avenues within the business allows for some distance between family and friends and greatly helps to mitigate these cases.

  1. Leave Shop Talk at the Office

This one is hard. When you spend so much time and energy building a business with loved ones, conversations outside the office naturally slide into shop talk. While it’s occasionally okay to dabble in business conversations outside the office, it’s important to intentionally limit them—especially during large family gatherings and the holidays. No one wants to hear you talk shop over Thanksgiving dinner!

Two important benefits come from this.

First, it recognizes that the relationship is richer than just a business one. The strength of family and friendship is a true bond created over a lifetime of shared interests, successes, struggles and joys. Continually talking about work quickly sucks the joy out of a relationship.

Second, it gives your other family members a break. Believe it or not, your spouse, your children and others close to you don’t care about your business like you do, and they don’t care to hear about it all the time. Both in friendship and family, your bonds extend beyond yourself. Respecting others in your circle includes limiting your business conversations outside the office. Everyone, including you, will be happier for it.

  1. Make Purpose the Boss

One friend of mine, who works in a family business, laments that his more-traditional father often stymies his fresh ideas for marketing and growing the business. With ideas continually shot down, he’s resorted to “waiting it out” until the business finally passes to him in order to run it the way he wants to.

These types of conflict are a direct result of not having a clearly articulated purpose for the business. In a purpose vacuum, those with the most authority often feel threatened by new ideas that diminish their impact and authority. But when those in power exercise that power in service of a shared purpose, every idea is evaluated on whether it furthers the purpose or not. This is the essence of making purpose the boss, to borrow a phrase from my friends at the executive coaching firm Conversant.

By making purpose the boss, you create an environment in which different ideas can flourish no matter who brings them to the table. You are appealing to how they could impact the purpose rather than to subjective opinions on the ideas themselves.

 

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Just How Bad Did the Replacement Heifer Market Crash?

As America’s cow herd dropped to 60-year lows two years ago, ranchers saw an economic incentive to save and breed replacement heifers. Demand for the young females spiked, creating a profitable niche market which now appears to have flamed out.

Heifer prices were strong throughout 2013 and 2014 as the U.S. cowherd rebuilt and prices rose. Profits were high for those who capitalized on developing breeding heifers during the market rally. Now, developing heifers isn’t as attractive to those who bought high-priced heifer calves in the spring with hopes of selling higher-priced bred cattle in the fall.

The past year saw bred and open heifer markets go through a downward spiral. It followed similar beef market trends witnessed throughout 2015 heading into 2016, as fat cattle and calf prices retreated to prices last seen in 2013.

Video Volatility

Video auctions provided an example of the volatility of  selling replacements. In October 2013, for instance, Superior Livestock Auction held its first replacement female sale. Bred heifers topped out at $2,125 for the inaugural sale where 9,000 head of breeding stock were offered, including cows, pairs and open heifers.

Demand was strong and prices for bred heifers continued to rise at the Select Female Auction. The market high reached $3,250 at both the September and November sales in 2014.

At the latest female video auction on Dec. 18 bred heifers sold from $1,450 to $2,125 per head, and open replacements went on the block at $1,175 to $1,325. In 2014, the same auction had much better numbers, with the price floor being higher than 2015’s ceiling. Bred heifers sold for $2,175 to $3,000 in 2014, with replacements going for $2,050 to $2,250.

 

“I think the decline was a combination of the lower cattle prices combined with an oversupply of heifers,” says Danny Jones, president of Superior Livestock.

Jones estimates the bred heifer price would have fallen at least $200 even if the feeder calf price had maintained at the $225/cwt. level. He adds it was a good idea to develop heifers. The only problem: “everybody had the same idea.”

Andrew Griffith, economist with University of Tennessee, observed more producers in his area holding back or buying heifers which should have probably gone to the feedlot.

“I guess they thought we needed to grow the cattle herd all over night, and they threw out the window that we need high-quality heifers,” Griffith says. “Those low-quality heifers should be on your dinner plate.”

U.S. Department of Agriculture data indicates replacement heifer retention has been on the rise for at least the past two years. Both in 2011 and 2012 (no data was available from 2013) the replacement heifer herd was at 4.2 million head. Then in 2014 it jumped 400,000 head to 4.6 million. Last year retention rates improved 7 percent with 4.9 million total beef replacement heifers.

Established Sales Not Immune

In the fescue covered pastures of Kentucky, a group of like-minded cattlemen gathered their resources the last 12 years to develop replacement heifers.

Quality heifers bred to calving ease bulls and cared for with a preset vaccination program has helped build business for Central Kentucky Premier Heifer Sale (CKPHS). Even when the cattle market started to trend downward in the spring, CKPHS’s June 2015 auction averaged $2,965 for fall-calving heifers.

“It sure has been a different cycle here for us,” says David Sandusky, a Lebanon, Ky. farmer and chairman for CKPHS. “We’ve seen a huge decrease in price and demand for these heifers.”

The latest CKPHS auction in November for spring calving heifers saw prices drop more than $750 per heifer, an average of $2,201.

“We still have about 500 heifers that we don’t have a home for. Demand is very depressed,” Sandusky adds.

Another established heifer sale has seen similar price fluctuation. November’s Show-Me-Select Program hosted by University of Missouri Extension saw prices dip after reaching records in 2014. At this fall’s auction bred heifers sold for $2,477. The sale at the Joplin Regional Stockyards was down an average of $412 per head compared to 2014.

The Show-Me-Select heifer sales saw softer prices in 2015 after a record year for the various auctions across Missouri. Photo by University of Missouri Extension

Two months later Joplin Regional Stockyards (JRS) hosted their own female sale on Jan. 14 with most of the cattle originating from local farms. Approximately 500 bred heifers sold from $1,400 to $2,000, with the majority of those females slated to calve in February and March. Cattle went to neighboring states, like Oklahoma and Arkansas, which are still rebuilding from drought.

JRS co-owner Jackie Moore notes the amount of cattle walking through the ring wasn’t as high as he would expect. “I think a lot of those people have quite a bit of money tied up in those heifers.”

Moore believes many bred heifers will be calved this spring and sold as pairs.

Another popular marketing option might be to hold those females back for a second breeding. Joplin’s latest female sale saw second-alf heifers bring $2,000 to $2,400.

The participating producers of CKPHS have similar plans with the 500 head of remaining spring bred heifers. The surplus heifers will be calved out and rebred to sell next year as three-year-olds.

“There are lots of people who have bred heifers of various quality,” Sandusky says. “I think that’s part of the problem. There were a ton of heifers that were bred and they weren’t all what we would consider cow quality.”

Long-term, Sandusky believes the market drop will remove some of the one-time people out of the bred heifer market who jumped in to make a quick profit.

“We hope that reputation gets out there that we’re not one-time players. We’re not a flash in the pan. We’re here for the long haul,” Sandusky says of the 12-year program.

Recycled Cattle Cycle

The influx of cheap replacement heifers has created a buyers’ market. Creating an opportunity to buy bred heifers at a reduced rate to expand or start a cow herd. It is also a case of the markets working in a cyclical nature.

“Periodically, the market reminds you that what goes up must go down,” says Stephen Koontz, economist with Colorado State University Extension.

Superior Livestock’s recent December sale was down 21.6% for market-high heifers compared to the April auction. CKPHS had an even more dramatic drop of 25.8% in five months between sales.

“The folks that were buying open heifers and selling them as bred heifers a few months later made really good money when that market was rallying. Now that it’s turned the corner it won’t be the case,” Koontz says. “I think that strategy is out the window for the next couple of years.”

Producers are seeing a traditional cattle cycle, says Lance Zimmerman, an analyst with CattleFax.

The highs for the cycle were reached in late 2014 or early 2015. Prices for calves dropped $550 per head from the fall 2014 to fall 2015.

This bred heifer went through the Central Kentucky Premier Heifer Sales program and would have sold when demand for females was at an all time high.Photo by Wyatt Bechtel

“A good rule-of-thumb as an industry is your bred female cost during expansion era peak is likely to be 1.5 to 1.7 times the value of your calves,” Zimmerman says. “Producers are just bidding appropriately now with that price depreciation into the value they’re willing to pay for bred females.”

Profitability for those producers developing heifers primarily depended on the price cattle were bought at prior to breeding.

“The buy side is so incredibly important to the cost of that bred female because that is the biggest cost you’re likely going to have in developing that heifer,” Zimmerman says.

Prices for a 550 lb. weaned calf at the end of 2015 were around $180/cwt. The cow would then be worth $1,500 to $1,650.

At end of 2014 prices were near $280/cwt. for weaned calves. A bred cow was worth $2,300 to $2,500.

“You’re talking about a market that basically gave up $900 per head based on what we’re implying with calf values,” Zimmerman says.

Despite those losses, Zimmerman expects to see cow herd expansion continue into 2018.

“We’re likely to return this beef cow herd back to 31-32 million head as we get to the peak of the expansion,” Zimmerman says.

2015 (and Maybe 2016) Better Than 2013

Beef producers don’t have to look too far in the rearview mirror to witness a lower market year in 2013.

USDA calculates choice steers averaged $148.12/cwt. in 2015. This year prices are projected to drop to $132.14/cwt. For 2013, the final fat cattle average price was only $125.89/cwt.

“We’ve gone from this period of record prices for 18 months to a pretty sharp drop in prices in the fourth quarter of 2015. We’re kind of getting back to where things used to be,” says John Nalivka, president of Sterling Marketing, Inc., Vale, Ore.

Heifer prices two years ago for the Show-Me-Select sale at Joplin were $350 behind 2015, averaging $2,127 in 2013.

When this bred heifer sold through the Central Kentucky Premier Heifer Sales program prices had dropped 25.8% in five months. Photo by Wyatt Bechtel

“It looks to me that we’re going to stay above 2013, but 2014 and 2015 are behind us and we’re not going back (to those prices),” Nalivka adds.

Cow-calf profitably as calculated by Sterling Marketing was $243.05 per cow in 2013. Profits for 2015 were $429 per cow, $97 less than the year prior. Cow-calf margins are projected to drop in 2016 to $237 per cow.

“The thing I think we can count on is herd expansion will bring more calves this year, increased production and lower prices. It has been a while since we’ve had that, but that is what’s coming,” Koontz says.

Koontz believes that downward trend will continue for quite some time until calf prices discourage producers from holding back more replacement heifers.

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