Category Archives: Costs

Costs of Replacement Heifers

Roadblocks to Ranch Profitability

Here Are Eight Biggest Roadblocks to Ranch Profitability

The Grazier’s Art

Step one is to open your mind to change and add new ideas.

Published on: June 19, 2014
BY:

By Jim Elizondo

I took part in a discussion the other day on the biggest roadblocks to improving ranch profitability. Experience and logic tells me there are eight common problems.

Here’s my list:

1. Lack of interest in learning correct grazing management. This can increase profits by two to three times.

2. Lack of interest in learning marketing knowledge. This can be another way to greatly increase profits.

3. Lack of interest in learning low-stress stockmanship. This is a proven way to reduce medicine costs and have higher performance.

4. Lack of interest in protein supplementation when it’s needed or cost effective. Well-applied supplementation in certain environments can eliminate hay feeding and thus save around $100 per cow per year, particularly for people using low octane/high fiber stockpiled forages.

5. An incorrect mineral program leads to inefficiency in forage utilization in places where there are mineral imbalances and forages with poor mineral content.

6. Unadapted genetics: The more challenging the environment the more important it is to have adapted genetics.

7. High-octane genetics in low-octane forage environments is always a mistake. High-octane forages are those with moderate growth which hold quality well. Low-octane environments are characteristically high-growth environments with much lignification of the forages.

8. Use of outdated or unprofitable traditions. Usually it’s characterized by a phrase like, “We have always done it like this.” A closed mind is like a closed parachute, it won’t work until you open it.”

Solving these issues is the crux of the Regenerative Grazing schools taught by Johann Zietsman and me. You can learn more about these upcoming schools on my website.

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Heifers at any Cost

Trey Patterson tries to be logical about the costs and returns of cow herd management. For example, as a Padlock Ranch manager, he knows developing heifers can be among an outfit’s most expensive enterprises.

Conventional wisdom is that because it’s relatively expensive to develop heifers into productive members of the herd, ranchers can reduce costs by maximizing heifer pregnancy rates. Patterson, Dayton, WY, doesn’t necessarily buy into that logic.

“We’ve heard time and again about the importance of getting heifers bred at high rates,” Patterson says. The former South Dakota State University Extension beef specialist believes this practice can lead ranchers into a cycle of adding more and more costs to further boost pregnancy rates.

In fact, Patterson says a production-driven approach to developing heifers may negatively impact ranch profitability.

It’s generally recommended heifers be developed to 60-65% of mature weight by the start of breeding season. But, Patterson says, many producers develop heifers to an average 70% of mature weight to ensure as many as possible reach the target range.

Patterson recognizes heifers developed to lower weights can have longer postpartum intervals. Research also shows a clear relationship between dietary energy levels during development and heifer pregnancy rates.

“Our point at Padlock Ranch is that the degree and timing of inputs into heifer development systems can have a big effect on net returns,” says CEO Wayne Fahsholtz, Ranchester, WY. “We think it’s critical that heifer development be approached from an economic standpoint, not simply a production-based perspective.”

Show ’em the data

Armed with recent and ongoing research data showing heifer-development systems should be based on economic decisions, not just production-based outcomes, Patterson and Fahsholtz are combining two major concepts:

  • Developing heifers to a lower percentage of body weight.
  • Developing heifers on range.

“If heifers will breed at 50% of mature weight,” Patterson says, “we believe we can take advantage of available native range to develop heifers.”

First, they examined Rick Funston’s data from Nebraska challenging the 65% of mature weight recommendations. In each of three years, 80 crossbred heifers were developed on meadow hay, wheat midds, cracked corn and a supplement pellet. Corn was adjusted so each group would reach the desired target of either 53% or 58% of mature body weight (low and high gain, respectively).

Heifer-pregnancy rates were not statistically different between treatments (92% and 88% for the low and high gain, respectively). In addition, there were no differences between treatments in pregnancy rates of these heifers with their second (average of 91%), third (93%) or fourth calves (96%).

Heifer-pregnancy rates weren’t statistically different between treatments (92% and 88% for the low and high gain, respectively). There were no differences in heifer-pregnancy rates (87% and 90% for low and high gain, respectively). There were also no differences in pregnancy rates of these heifers with the second calf (average 91%).

Then they looked to University of Nebraska research led by K.W. Creighton, which compared 261 heifers under two heifer-development systems over three years. This included:

  1. Heifers developed to 50% of mature weight prior to breeding with a 60-day breeding period (low gain), or
  2. Heifers developed to 55% of mature weight with a 45-day breeding season (high gain).

The heifers were developed during the winter on meadow hay, protein supplement and whole corn. Corn was adjusted so heifers would reach desired target weights. Similar to that described above, there were no differences in heifer-pregnancy rates (87% and 90% for low and high gain, respectively). There were also no differences in pregnancy with the second calf (average 91%).

Evaluating the economics

As a follow-up to the performance data, other research evaluated the economics of these heifer-development systems. When averaged over an 11-year period, the low-gain treatment in Funston’s study resulted in $27 less cost/bred heifer than the high-gain treatment (Table 1, page 54). In the Creighton research, the average cost of developing a heifer was $23 less for the low-gain than the high-gain animals.

“The low-input systems resulted in similar performance and lower costs than the systems that developed heifers to a higher percentage of body weight,” Patterson explains.

When they arbitrarily reduced yearling-pregnancy rates in their economic analysis, the cost of developing a heifer to 53% of mature weight at first pregnancy actually went down. The inputs into that system were low enough that over an 11-year period, there was a monetary gain to selling open heifers.

Another interesting aspect was the cost of a second-calf heifer. Using Creighton’s 2004 data, the cost of developing a 2-year-old bred heifer actually went down, due to the price received for the first calf when averaged across 11 years.

“However, if pregnancy rates of the second breeding were arbitrarily reduced, then the cost of developing a second-calf heifer went up,” Patterson warns. “Therefore, pregnancy rate from the second breeding was important, as selling open 2-year-olds was not profitable.”

Other research at Colorado State University indicates the bred-heifer area may need more management attention. The data indicate that to achieve a 10% increase in 2-year-old pregnancy, a rancher could afford to pay $27/head before the first breeding (during replacement-heifer development) or $57 after she was bred (as a bred heifer).

“Do you think you would be more likely to increase 2-year-old pregnancy by spending $27 prior to first breeding, or $57 on the bred heifer?” Patterson asks. “This tells us we have more leverage to influence production, without increasing costs, with the bred heifer than the replacement.”

Back at the ranch

In October 2003, the Padlock fence-line weaned 402 heifers weighing 439 lbs. on native range. A wheat midds-based, 18% crude protein (CP) range cube was fed for 30 days at a rate of 3 lbs./day. The heifers were then fed a range block (30% CP) at a rate of 2 lbs./day for the remainder of the winter. No hay was fed all winter. Total feed costs were less than 25¢/head/day.

“There was very little sickness in the calves,” Fahsholtz says. “We doctored only 13 heifers.”

Before the Padlock could gain any pregnancy data, however, drought hit. When Fahsholtz had to sell the heifers in June 2004, they weighed about 724 lbs., putting their gain at more than 1 lb./day since weaning. About 1,200 heifers will be developed this winter using native range and hay-crop aftermath.

Having learned development costs can be reduced, Patterson and Fahsholtz believe bred heifers can be developed to return a profit to the operation sooner, or they can sell open heifers off grass for a profit in many years. Fahsholtz adds, “It’s our intent to reduce our cow costs by lengthening the grazing season for all our cows.”

By exposing their heifers for a short period of time, they’ll naturally select heifers that should be productive, low-cost cows through their lifetime.

“We know we’ll probably have a lower conception rate initially,” Fahsholtz says. “But, our membership in Country Natural Beef gives an excellent market for our open heifers.”

“We know we’ll see years when we’ll need to feed more hay when winter grass is not available,” Patterson interjects.

“There also could be situations where grass is worth enough to make it cheaper to feed the heifers than graze them,” Fahsholtz adds. “But ranchers need to make those cost calculations for themselves.”

Selling open heifers can be a paying proposition if development costs are low. “But there will be some years when open-heifer prices are low compared to feed costs, and it may not be profitable to sell opens,” Patterson notes. “Having the yearlings on grass gives some management alternatives during drought as well.”

Other considerations

There are considerations to weigh in developing heifers to less than 60% of mature weight at breeding. There’s likely more risk of lower pregnancy rates with decreasing levels of development.

“That may not be a big problem if you have enough heifers to keep replacements,” Patterson explains. In other words, if selling open heifers doesn’t cost you money, your risk is in generating enough replacements to keep your herd at the desired size. This can be managed by keeping more heifers than you need for replacements.

Fahsholtz notes the Padlock Ranch has a contingency plan if heifers don’t gain as expected. “We’re monitoring the performance of these heifers and will adjust the program if necessary,” he says.

A second concern is calving difficulty in lighter heifers. Some research shows heifers developed to a lower percentage of mature weight experience more dystocia than heifers developed to 65% of mature weight.

“If birth weights are not too high, and proper bulls are selected for breeding heifers, you likely can manage this,” Patterson notes. Padlock heifers are bred to Wagyu bulls, which gives them a special market for the calves while minimizing calving problems.

Another consideration is heterosis.

“Crossbred heifers can reach puberty and breed if developed at 55% of mature weight at breeding, but it isn’t clear if purebred heifers would respond the same way,” Patterson adds.

Developing heifers lighter at breeding may also result in cows smaller at maturity. But Patterson says this could be positive in reducing cow maintenance requirements.

“Range development systems may offer a low-cost way to develop heifers for some operators,” he advises. “There’s significant management leverage in the young cow.”

 

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Repeatability of calving difficulty

July 08, 2014 12:20 pm • By Glenn Selk, Extension Animal Scientist Emeritus, Oklahoma State University(0) Comments
Many producers are looking back through their calving books to re-examine the most recent calving season and determine if improvements can be made between now and next spring. At a recent Oklahoma Extension event, a cow/calf producer asked the time-honored question: “If a heifer has calving difficulty this year, what is the likelihood that she will have trouble again next year?”

A look back through the scientific literature sheds some light on this subject. Research conducted by Colorado State University and published in 1973 looked at parturition records of 2733 Hereford calves sired by 123 bulls and born to 778 cows/heifers. (Source: Brinks, et al. Journal of Animal Science 1973 Vol. 36 pp 11-17). A repeatability estimate was obtained from heifers calving both as 2- and 3-year-olds. The estimate was 4.5 percent. Of 195 heifers which had no difficulty in calving at two years of age, 7.2 percent had difficulty as 3-year-olds. Of the 77 two-year old heifers which experienced calving difficulty, 11.7 percent had difficulty again as 3-year-olds.

Heifers that experienced calving difficulty as 2-year-olds weaned 59 percent of calves born, whereas, those having no difficulty weaned 70 percent of calves born. Calving difficulty as 2-year-olds affected the number of calves weaned when 3 years of age and also the weaning weight of those calves. Heifers having calving difficulty as 2-year-olds weaned a 63 percent calf crop as 3-year-olds. Heifers having no difficulty as 2 years-olds weaned a 77 percent calf crop as three-year-olds.

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Controlling input cost in developing heifers

 By Trey Patterson COO Padlock Ranch

But, you would also be very aware of the cost to build that factory. Why?

If your investment in infrastructure is too high, it will reduce your profitability or at least extend the period of time after you build before you see profits. What if you had to rebuild that factory every six years?

In many beef cattle operations, the replacement rate is around 15 percent, meaning you will turn your entire herd over in six to seven years. This brings up two very important questions for beef producers to consider:

  • What is it costing you to put a replacement female in the herd?
  • At what age do these females fall out of production?

THIS DISCUSSION is especially relevant at a time when we believe herd expansion is on the horizon.

The opportunity looks good for the cow-calf producer in the near future, but long-term profitability may be highly related to how good a job we do at controlling costs while rebuilding.

First, you must consider whether you should be raising or purchasing females.

Next, you need be tracking your costs of replacement females over time relative to prices received on cattle.

If your cost of development is rising at a faster rate than the value of cattle you are selling, you are heading for decreased profitability. Knowing your cost then is obviously very important.

In our operation, we prefer to look at actual costs of developing a female. We start with the average cost to produce a calf at weaning and then track costs post-weaning until she is determined to be a bred heifer.

A bred heifer is then capitalized and depreciated over a five-year period to a salvage value.  When she is sold, the salvage value comes back into the income statement to offset the price received for the open/cull cow.

We always have the ability to look at the opportunity of selling a heifer calf and purchasing a replacement; we then can compare the cost of raising versus purchasing the females we need.

For those who are raising heifers, you do have some control over the costs of production.

Rick Funston and colleagues have done research at the University of Nebraska that shows cross-bred heifers can be developed to lighter weights at breeding (around 50 percent of mature weight compared to standard 65 percent) without negatively affecting reproduction.

At the Padlock Ranch, we have been developing some of our heifers on native range (with modest supplementation) and some in a feedlot scenario. We breed later in the summer, so spring and early summer offer an opportunity for cattle grown on native range during the winter to increase their plane of nutrition and compensate for some of the weight difference between them and their feedlot-developed counterparts.

WE HAD one year (harsher winter and dry summer) where the first-service conception rate to A.I. was about 10 percent lower for the range-developed heifers versus the feedlot-developed heifers (heifers about 100 pounds lighter at breeding if developed on range). There was no difference in overall pregnancy rate, and the cost per bred heifer was lower for the range-developed heifers.

In other years, we have seen no difference in first-service conception rate. It really comes down to the cost to get the animal bred relative to the market for the opens.

Nebraska economist Dick Clark did the economics on that issue using some of the University of Nebraska’s work on lower-input heifer development.

Feed costs and cattle prices were estimated over an 11-year period using actual data. Since there was no difference in reproduction between cattle developed to lower percent of mature weight at breeding compared to those developed to a higher level, it was not surprising those heifers given fewer inputs cost about $25 per head less than those with higher inputs (the difference would be greater in today’s market scenario).

However, the question is what if reproduction were lower in my system if I cut back on the inputs to replacement heifers?

Clark addressed this by a sensitivity analysis where the outcome of a 50 percent pregnancy rate was modeled. What he found was over the series of prices and costs analyzed, a lower pregnancy rate resulted in a cheaper cost per bred heifer in the lower input system.

In other words, it was a paying proposition to sell open heifers on average if the costs of development were low. In a high cost system, lower reproduction resulted in higher costs to develop a bred heifer. This is an important relationship to understand, especially since there is a certain degree of infertility in first-calf heifers.

The next step of the analysis was to look at the cost to second pregnancy. On average, it went down compared to the cost of development to the first pregnancy. This was affected by production costs, value of the first calf and the value of open two-year-olds (another important relationship to understand).

The important point was if two-year-old pregnancy went down, then the cost of development to the second pregnancy went up. What this means is perhaps more of our management attention should be on the two-and three-year-old cow rather than on the replacement heifer.

YOU SHOULD not get the idea reproduction in yearlings is not important.

If your cost of development is high, it is important. If your cost of development is low enough the opens are profitable, like a stocker yearling, then you may have more leverage on profitability by spending money to keep your bred cows bred than on building the replacement.

Using the previous analogy, maybe you should consider spending less on building the factory and reinvest some of that savings in keeping the factory running efficiently.

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The year of the heifer

Gene Johnston 01/28/2014

It’s going to happen in 2014, say the market specialists at CattleFax.

Over the last 8-10 years, while there have been plenty of cattle price signals to expand the beef herd, two things have conspired against it: long-term drought, and high feed costs. Both are finally starting to work in favor of cattlemen.

“Costs of gain in feedlots have gone from over $1 a pound to under 80¢ in some cases,” says Lance Zimmerman of CattleFax. That’s because corn prices have dropped from $7 a bushel a year ago to about $4 now. That alone reduces the cost to finish a steer by about $200, Zimmerman says.

It means feedlots can bid higher for feeder cattle, a signal that gets passed back to cow-calf producers to save heifers and expand the herd.

The long-term drought in the Plains region is also showing signs of abating, meaning lusher grasslands for the expanding herds. “We hope for a day when we can talk about the cattle markets without first talking about the drought monitor index,” says Zimmerman.

Actually, there’s been some heifer retention in non-drought areas since about 2010, CattleFax analysis indicates. It’s been modest enough, and cow culling rates high enough, that it hasn’t nudged total cattle inventory, still at the lowest level in 60 years. “We think we could see heifer retention up about 140,000 head in 2014,” Zimmerman says. “And we project it to grow another 250,000 head in 2015. That will put us firmly in beef expansion mode.

“In the past few years, Mother Nature never gave us a shot to expand.”

$2,000 investment

Now, says Zimmerman, we’re at about 29 million beef cows in the U.S. Three years ago, that number was 30 million. “We project it will take us five years to get back to 30 million. The reason is because of the cash outlay. It takes a $2,000 investment to add a female to a herd. That’s expensive. Ranchers are looking for sure signs that we’re turning weather conditions before they justify it,” he says.

In the meantime, cattle slaughter levels will be lower as heifers are retained. That could go on until 2017 or even beyond, says Zimmerman, perpetuating the current high cattle prices. “We have a disadvantage to the other meats when it comes to expansion,” he adds. “It takes us three years to expand beef production, from the time you retain a heifer until her calf is harvest weight. Compared to beef, the pork and poultry people can practically flip a switch.” The chicken industry can go from hatch to harvest in about six weeks, he adds.

In 2014, CattleFax projects poultry production will grow by 2.6 pounds per person in the U.S. Pork will hold steady (growth in 2015), while beef consumption will drop by 2.4 pounds to about 55 pounds per capita. “Beef demand could be down in response to still-sluggish consumer income growth, and cheaper competing meats,” says Zimmerman Still, he says, total consumer spending on beef is in record territory at $275-$280 per person per year, up from $210 in 2010.

More record prices

Expanding beef exports have taken up about six pounds worth of the slack in domestic consumption, Zimmerman points out. And exports have more room to grow. While about 20-22% of pork and poultry are exported, only 10% of beef is. If the beef industry can open the China market, that will help.

 

 

Cattle markets should stay strong in 2014, he concludes. Weaned calves (550 pounds) will average $1.85 a pound, up from $1.75 in 2013, as lower costs of feedlot gain get bid backward through the calf supply chain. Feeder cattle (750 pounds) will average $1.64, up from $1.50. And finished steers at harvest weight will bring $1.30 or more, with highs near $1.40 in the spring of 2014. All of those prices will set new annual average records for beef.

Learn More: www.Cattlefax.com

Tips for each market segment

CattleFax offers this outlook and advice for the cattle industry segments:

Cow-calf: Historically strong prices for next 3-4 years. Consider adding to herd by buying from reputable heifer development suppliers.

Stocker-backgrounder: Profitability will be squeezed by much competition and high prices for calves through at least 2015. Look for calf value opportunities outside of the normal green grass demand in spring.

Feedlot: Lower feed costs have put this segment into solid profits after several years of breakeven. With record fed cattle prices looming, now the trick is to manage feed cost risks. Use quality programs (such as Certified Angus) to enhance margins.

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Buying vs Raising Heifers

PDF file of the most cussed and discussed subject on Bred Heifers.

Click Here

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High Input Prices Indicate the Need to Work on Business

Walt Davis

 

The Grazier’s Gazette

WITH cattle prices in the stratosphere and costs of inputs following right along beside, and sometimes racing ahead — funny how that seems to happen — maybe it is time to re-evaluate some of the prevailing wisdom in the cattle business.

Don’t quit reading now: I promise not to go on another rant about the false promise of oversized cattle.

The point I would like to make in this column is that we spend too much time and effort on the cattle and not enough time on the business.

As you know, most “cow people” are afflicted with a disease that makes it very hard for them to spend more than a short amount of time sitting at a desk. This disease also makes holding a pencil to record information difficult, and it makes adding and subtracting numbers almost impossible.

Given this ailment, it would seem a good thing that agricultural economists have spent a lot of time researching the most financially viable ways to manage agricultural production. I seldom take issue with their figures, but I sometimes question the practices they choose to examine.

Heifers, for example

We are told, for instance, that it is a better business decision to buy replacement heifers than it is to raise them from your own herd.

Given such things as “normal” weather patterns and market conditions, research shows it is usually possible to buy a bred heifer ready to calve — sometimes even a first-calf pair — for less money than you would have spent on a home-raised animal taken to the same stage.

In the studies I have read, a big part of the expense of developing a heifer comes from the additional feed and medical costs, plus the death loss associated with getting a nursing calf to the bred-heifer stage. Usually added in is the loss of use of the money the calf would have brought if sold at weaning.

What would the financial picture look like if, instead of weaning heifers at 7 months and feeding them a medicated ration high in energy and protein, and giving them the full course of immunizations, they were simply left on their mothers until about 10 months of age, and then weaned with little or no stress onto the best pasture available with minimal supplementation?

I have used both practices a number of times over the years, and I think most people would be pleased with both the cost and the animal performance of the low-cost, low-stress technique.

A second part of the equation is how you will choose to develop a cow herd that performs under your conditions and management.

The best way this can be done is by selecting replacements that do well under your management regime. It helps tremendously if you have enough numbers to be able to select both male and female replacements of your own raising.

Dietary effects

At 1 year old, heifers fed a hot ration will most likely be the heaviest, but will they be the best-suited to become cows in a grass-based operation?

For example, which set of heifers will have the most developed rumens and thus do the best on an all-forage diet (meaning on a low-cost ration)?

Many of today’s cows are not capable of nursing a calf for 10 months without losing too much body condition, and they are poorly suited to low-cost management. The question becomes not how to prop up these cows, but rather whether the genetics of these heavy-milking, harddoing cows is what you want in your herd.

The same logic applies to the argument that without being pushed with a grain ration, the heifers will not be large enough to breed to calve two months earlier than the cow herd. This is frequently recommended so first-calf heifers have two extra months to get rebred after they calve.

I believe that every day of normal growth before calving is worth a whole lot more — in terms of overall well-being of the heifers — than is several days of growth after calving.

The low-cost way to get cattle rebred on time is to select for early-maturing animals and to calve on green grass.

To be successful, this low-cost program will require planning.

It will require planning as to the season of calving — on green grass.

It will require good grazing management — making the best use of what you grow.

It will also require the right kind of moderate-sized, easy-fleshing and lowmilking cows.

Okay, I lied about not beating up on big cows, but if we are discussing ranch finances, that is one of the factors which must be addressed!

Learning to do a production practice cheaper is good financial management. Learning how to not need a production practice is even better management.

In future columns, we will look at other ways to cut costs without cutting profitability.

Davis is a semi-retired rancher who does teaching, consulting and writing. He can be reached by emailing wwdranch@brightok.net or visiting http://www.waltdavisranch.com.

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