Management Considerations for Your Cows During These Tight Economic Times

1. Management Considerations for Your Cows During These Tight Economic Times Dr. Curt Lacy Extension Economist-Livestock UGA-Tifton

2. Cost of Production 2002-2008

3. What Does it Cost to Keep a Cow? Source: Stan Bevers, TAMU

5. A Statement of the Obvious • Things are not going well for us in the beef industry. • Government’s imposition of ethanol mandates will continue to keep feed and fertilizer prices at current or higher levels. • Even though supplies are tight, a tenuous economic situation is going to make it very difficult to increase beef/feeder demand. • Serious cattlemen are going to need to keep their chin-strap buckled for the foreseeable future.

6. Overview for This Morning • Some economic concepts and practices for all times. • More specific suggestions and scenarios. • Conclusions and Questions.

7. Some Economic Truths • Competitive markets are just that. • Don’t owe you a thing. • Consumer based  function to pay a price that just keeps the producer from doing something else. • Long-term the price of a good approaches the average cost of production. • Cruelly efficient at weeding out high-cost producers.

8. Financial BMPs - a.k.a. Things you should always do, but especially now. • Coordinate revenue and cost management. • Develop contingency plans and conduct what-if scenarios for the entire operation not just the cattle enterprise. • Debt • Disability • Divorce • Departure • Regularly monitor budgeted vs. actual performance. • Prioritize and do 1st things first. Adapted from: Dr. Danny Klinefelter, TAM Agri-Life Extension

9. Financial BMPs • Conduct autopsies on the results of key decisions. • Recognize the 5% rule. • Spend as much time analyzing what to STOP doing as you do analyzing new opportunities. • Benchmark your performance against the Top 25% • Lenders • Cattle-fax • IRM-SPA • Labor • Machinery & Equipment • Interest Cost Adapted from: Dr. Danny Klinefelter, TAM Agri-Life Extension

10. Warning Signs • Accounts payable increasing. • Working capital decreasing. • Record-keeping practices decline. • Don’t disclose the total business to the lender. • Diverts proceeds. • Living expenses increase rapidly and expenditures for capital assets increase. • Works less and plays harder. • Domestic situation changes.

11. Risk Management Considerations • Uncertainty is not risk • Three Rules of Successful Poker Players • Always know the odds  identify your largest and smallest sources of risk. • Never risk more than you can afford to lose  what happens if this doesn’t work? • Never risk a lot to gain a little  Don’t cut corners on the things that matter!

12. Delivering as many live animals to market at as low a cost as possible. What Really Matters?? Retaining as much equity as possible.

13. Health Genetics Nutrition So How Do We Prioritize our Spending? • Determine the amount you have to work with. • Cash • Liquid assets • Non-liquid assets • Loans • Identify your costs. • Rank them in order. • Focus on the larger number. • Understand the difference in cutting costs and cutting corners.

14. The Fallacy of Cow Cost • Most requested number from cattlemen and agents. • Doesn’t account for: • Calf weight • Calf crop percentage

15. Different Types of Cost • $/Cwt. Produced • $/Calf Marketed • $/Cow

16. Example Budget for Central Florida • 250 cows • 2.0 acres of bahia pasture per cow • 500 total acres • 300 owned • 200 rented @ $20/acre • 1 paid laborer • Mix of new and used equipment • Baler payment • Family living expenses of $30,000 per year

17. Total Costs of Cow-Calf Production TC $210.57/Cwt. FC $98.56/Cwt. VC $112.01/Cwt.

18. Practical Ways to Lower Variable Costs • Cull open or unproductive cows • Retain as much value as you can from your cull breeding stock. • Determine those variable expenses that have the biggest impact on costs.

19. Cull Unproductive Cows • Yeah Buts: • Must be able to match cows and calves • Based on average cow cost • Borderline young cows may get a pass

20. Effects of Cow Age on Productivity BIF Adjustment Factors for Weaning Weights (Steers)

21. What Determines Cow Value? • Percent Lean Meat Yield • Live weight

22. Marketing Classifications of Cull Cows

23. Cull Cow Economics 1,100 pound cow BCS 5 worth $55.00/Cwt. = $605 800 pound cow BCS 3.5 worth $51.50/Cwt. = $412 Difference =$188 + plus cost of feed

24. Cull Cow Marketing • When • Before October 1 • What • Cows in good flesh (BCS 4+) • Cows without obvious defects • How • Local market • Direct???? • Live weight • Carcass basis

25. Breakdown of Variable Costs

26. Ways to Lower Variable Costs • Feeding/forages • Forage test hay/silage or baleage by cutting • Segregate cows and heifers • Reduce bale losses

27. Moisture distribution of twine wrapped alfalfa/grass round bales stored on the ground or pallets Soil Contact Pallet Shinners, U of Wisconsin Source: Dr. Lawton Stewart, UGA

28. Round Bale DM Loss Hunke, OK State Source: Dr. Lawton Stewart, UGA

29. Storage Losses Source: Dr. Lawton Stewart, UGA Source: Forage Crop Pocket Guide

30. Cost of DM Loss Source: Dr. Lawton Stewart, UGA • Assuming $100/ton Hunke, OK State

31. Method of Feeding Hay Feeding Bale – up to 50% loss Wagon – 11% loss $150/ton actual cost Unrolling Ring – 6% loss Source: Dr. Lawton Stewart, UGA

32. Ways to Lower Variable Costs • Cull open or unproductive cows • Feeding/forages • Forage test hay/silage or baleage by cutting • Segregate cows and heifers • Reduce bale losses • Compare costs of supplements based on what the animal needs

33. Comparison of Alternative Feeds

34. Ways to Lower Variable Costs • Cull open or unproductive cows • Feeding/forages • Forage test hay/silage or baleage by cutting • Segregate cows and heifers • Reduce hay losses • Storage/feeding methods • Compare costs of supplements based on what the animal needs • Pasture/hay fertilization • Soil test • Lime • Split Nitrogen and Potash Applications • Utilize legumes if possible • Reevaluate rotational grazing

35. DO NOT cut back on lime! Get your priorities right! Lime is still job #1. Sources: Dr. Joe Vendramini, UF and Dr. Dennis Hancock, UGA

36. How Soil pH Affects Availability of Plant Nutrients The Difference of a soil pH of 5.8 vs. 6.2 Source: Dr. Dennis Hancock, UGA

37. Fertilization Strategies Pasture A pH = 6.2 P = 35 K = 180 OM = 3% Hayfield 2 & 3 pH = 5.5 P = 15 K = 90 OM = 1.5% Hayfield 1 pH = 6.0 P = 25 K = 120 OM = 2.5% Source: Dr. Dennis Hancock, UGA

38. Reducing Fertilizer Costs 2. Split Nitrogen and Potash Applications • Long-term, this can increase yields by 5-10%and increase NUE by 25-30% • Especially important under extremes • Leaching • Volatilization (in the case of urea-based products) • Late freeze • Drought • Helps to prevent NITRATE TOXICITY! Adapted from: Dr. Dennis Hancock, UGA

39. Use Legumes as Much as Possible Source: J. Vendramini, 2009 UF BCSC

40. Current Situation 120# N/acre N cost $0.35/lbs. 2 acres/cow 90% calf crop with 500# calf @$100/Cwt. Clover 3#/acre of Durana @ $5.25/# - good for 3 years Additional 10# P/acre required @ $0.40/# Additional 10# K/acre required @ $0.60/# 2.13 acres per cow Weaning weights increased 20# Economics of Replacing 100 Acres of Commercial N with Clover

41. 100 Acres in Clover Additional Costs Additional Revenue 3#/acre of Durana or Patriot @$5.25/pound good for 3 years = $525/year Additional 10# phosphorous/acre per year @$0.40/# = $400 Additional 10# potash/acre per year @$0.60/# = $600 Total additional costs = $1,525 Additional 20 pounds on calves from 43 cows @ 90% calf crop sold for $100/cwt. = $774 Reduced Revenue Reduced Costs • Savings on 2 applications of 60#/acre of commercial nitrogen @ $0.35/pound = $4,200 • 7 fewer cows @ $400/cow = $2,800 Stocking rate reduced by 15%  7 cows@ 90% calf crop, 500 pound calf @ $100/Cwt. = $3,150 Total additional costs +reduced revenue =$4,675 Total additional revenue +reduced costs = $7,774 Total Profit = $3,099

42. Impacts of Fertilizer Cost & Usage on Profitability

43. What if Pounds Weaned do Not Increase?

44. Forage Utilization with Various Harvest Methods Rotational Grazing. UK ID-143 Source: Dr. John Andrae, Clemson University

45. Effect of grazing system on animal performance *NS = nonsignificant. Cattle grazed common bermudagrass and EF tall fescue near Eatonton, GA. (Hoveland, McCann and Hill, 1997). Source: Dr. John Andrae, Clemson University

46. Effect of grazing system on hay needs -39% -31% lbs hay fed/cow -22% -25% $37.54/cow savingsusing $100/ton hay Source: Dr. John Andrae, Clemson University

47. Use grazing management to maximize utilization AND flexibility Many people think of the increased utilization from rotational stocking as a way to increase stocking density- it also can allow stockpiling or improve utilization of grasses in late summer, early fall months Flexibility in management is rotational grazing’s biggest attribute Source: Dr. John Andrae, Clemson University

48. Summary on Reducing Variable Costs • Cull open/unproductive cows • Soil test • Apply lime • Split fertilizer applications • Save more hay • Reexamine legumes and rotational grazing

49. Reducing Fixed Costs

50. Reducing Fixed Costs