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Lowering Beef Cattle Production Costs

By Rick Funston, Extension Beef  Specialist, Montana State University

Low cost producers (in all segments of the production chain) will survive in this system of competitive markets. Others [high-cost producers] will eventually be unable to compete and will exit the business”. This statement has never been more true than it is today. Many producers believe that they are at the lowest cost of production that they can be given their particular environment, the intent of this paper is to provide ideas for producers to possibly lower production costs even further. 

The Profitability Formula

Breakeven Price = (annual cow costs - value of cull cows/bulls sold)
                                average weaning weight x % calf crop

Management decisions should focus on decreasing costs while optimizing percent calf crop, weaning weight and market price. The most profitable combination of production and costs will vary from ranch to ranch and is largely dependent upon the unique set of resources each operation has. Table 1 demonstrates the effects of varying the annual cow costs and or the weaning percentage on the unit cost of production in a herd with an average annual weaning weight of 550 pounds.

Goals for Long- Term Profitability

Following are proposed industry goals for factors in the profitability formula which have been proven to be attainable by many progressive cattle producers. These are critical factors for the success of any cattle operation. If you fall out of these ranges it is important to take a closer look and identify problems within each component of the formula. Hopefully this discussion will give some ideas on how to manage production costs without compromising reproduction or growth. Cost of production - keeping breakeven prices of calves near $.60/lb or lower

Reproduction - optimum levels of % calf crop in the mid 80's to low 90% range – based on calves weaned per 100 cows exposed

Growth - moderate average weaning weights in the 475-550 lb range for 7 month old calves

How much can I afford to pay for increased production and/ or reproduction?

Example: you determine your operation has annual cow costs of $275, 70% calf crop and 550 # weaning weight, based on goals for profitability you determine your % calf crop is low, the question is: How much can I afford to pay in increased cow costs to raise % calf crop 15%? Disregarding cull animals, consider the following ratio.

275

=

X

---->

275

=

X

----> X =$333.93

550 x 0.70

 

550 X 0.85

 

385

 

467.5

   

     

This means that you could afford to increase cow costs $58.93 and maintain the same break even of $.71, anything less than this and you would lower your breakeven, the same scenario can be made for increasing weaning weight. The important consideration here is to make management decisions based on all factors affecting profitability. It is difficult to increase weaning weight or % calf crop without affecting cow costs and decreasing cow costs often times adversely affects weaning weight and % calf crop. The intent of this paper is to give some management considerations that will decrease cow costs without adversely affecting production characteristics.

Cost of Production (Cow costs)

A recent IRM analysis indicated a 275% variation in cost of production between high and low cost producers which indicates opportunity for increasing profitability exists on most operations in the US. It has been estimated that less than 10% of today’s beef producers know their cost of production, without knowing cost of production it is difficult to reduce costs because we don’t  know where to begin to reduce costs.

Feed costs represent the single largest cost item for most cow/calf producers in all areas of the country. Between 40-70% of the total production costs come directly from feed and supplement costs. Other operating costs such as labor, interest, vet supplies, freight, fuel and repairs also have a major impact but not to as great a degree as feed and supplement.

The competitiveness of the beef industry and particularly the cow/calf producer lies with the ability of cattle to convert  forage into a product the consumer demands. Livestock management plans should be made to maximize forage utilization.

Minimize the use of harvested forages

1- Match the cow production cycle to the grazing season. Ideally the spring calving cow should graze green forage for about three weeks prior to the start of the breeding season. This coordinates the breeding season with peak forage production and best matches the time of highest requirements with the best grazing.

2-Use cool season forages to hasten and extend the grazing season. Cool season grasses have the potential to provide green forage up to 3 weeks earlier in the spring than native range. Higher quality fall forage can also be provided with cool season grasses.

3- Maximize the use of crop residues. Most areas of the US have some form of crop residue which is typically the cheapest grazed forage available for use by beef cows.

4- Stockpiled forages managed for use during the fall and winter grazing will help reduce the amount of harvested forage required.

5- Early weaning will allow cows to increase body condition prior to the winter months and may allow a longer winter grazing period with reduced supplemental feed.

6- Proper range management can increase both carrying capacity and individual animal performance. Since forage is the base for any successful beef cattle operation it is of vital importance to insure that this resource is sustainable and highly productive. Range management practices will vary depending on area and public land use. Some considerations include: rotational grazing, noxious weed control, water development, riparian area management, improved pastures and sagebrush control.

Supplementation

An extended grazing season will likely involve grazing of poor quality mature forages which will be deficient in nutrients that will have to be supplemented if cow performance is to be maintained.

1- Type

Protein vs Energy

This is really a misnomer, because high quality protein supplements contain similar energy as cereal grains. Soybean meal and corn have similar energy levels but will have different effects on digestibility and intake of poor quality forage. In general, protein is the first limiting nutrient in poor quality forage, supplementation with an all natural protein supplement has been shown to increase digestibility and intake of poor quality forage and prevent loss of body condition during the winter grazing period. Supplementation to supply about 1/2 a pound of supplemented protein per head per day has been shown to be effective provided adequate forage is available for grazing. All natural protein supplementation has also been shown to be effective when fed on alternating or even every four days provided animals receive an equivalent of 1/2 a pound of supplemental crude protein daily. All feedstuffs contain protein but all feedstuffs do not have the same effect on supplementing poor quality forage. Some examples of supplements which have a positive effect on digestibility and intake of poor quality forages include: alfalfa hay, high protein meals, high (20+ %)protein cake, wheat middlings, and corn gluten meal.

Mineral Supplementation

In general, when forages are deficient in protein,  phosphorus is also deficient. Rations should be balanced for the macro and micro minerals. Minerals of primary concern include: calcium, phosphorus, magnesium, copper, zinc and selenium. There is extreme variation in micro mineral content of forages based on region. Phosphorus is generally the most expensive of the macro minerals to supplement. Strategic supplementation 30-45 days pre-calving through the breeding season has been shown to be effective due to the ability of the animal to store minerals in the bones and liver.  Strategic supplementation can reduce mineral costs considerably. Free choice iodized salt must be provided to animals at all times.

2- Cost

Price supplements on a cost per pound of nutrient basis. If protein is determined to be the first limiting nutrient, value supplements based on a cost per pound of crude protein basis.

Alfalfa hay valued at $80/ton with an 18% crude protein content would cost $.22/# of crude protein. (80/2000 = .04; .04/.18 = $.22/# CP). A 32% all natural cake valued at $200/ton would cost $.31/# CP. (200/2000 = .1; .1/.32 = $.31)

Genetic Management

Match cow type to forage base. High growth and milk production translate into increased nutrient requirements for the cow. Increased milk production and cow size increase both energy (TDN) and crude protein requirements (Table 2). A 1 pound increase in TDN  would equal 2 pounds of average quality (50% TDN) forage and a 1 pound increase in crude protein would equal more than 4 pounds of 12% crude protein forage. Excess milk production and cow size can significantly limit the carrying capacity of any ranch operation.

Use crossbred cows to increase profits. It was determined from research at the Northern Agriculture Research Center near Havre, MT that crossbred cows have a substantial economic advantage over straight bred animals, primarily through increased longevity and calf weaning weight per cow exposed which takes into account calf weight as well as cow reproductive performance (Table 3).

It is important to remember that these animals have to be of the appropriate biological type to fit the environment they will be in. Research at Ft Keogh has demonstrated that both large body size and high milk production decreases longevity of crossbred females in that environment (Table 4).

Selection for economically important traits: What traits to select for and how much emphasis should be put on each is a common question in the beef industry today especially with the movement towards consideration for end product and value based marketing.  This is not an easy question to answer due to the large number of traits that are of importance in beef production. The importance of traits varies depending on environment, management, economic conditions and segment of the beef industry.  Many genetic antagonisms exist in beef production today, among the most important include:

1. Milk production and growth rate vs fertility

2. Growth rate vs calving ease

3. Lean yield vs carcass quality

4. Milk production and growth rate vs maintenance requirements

These traits vary in rank of economic performance among segments of the beef industry; however, the final product must be considered in each segment if the beef industry is to overcome loss of market share it is experiencing today. Obviously compromises will have to be made and single trait selection will have to be replaced with a balanced trait approach. There is a lot of talk in the industry about carcass traits, it is important to realize that unfavorable relationships exist between increased red meat yield and age at puberty, services per conception and mature size. It is important to first match cow type to production environment and feed resources to reduce extremes that may compromise reproductive success and then consider other economically important traits.

Two strategies have been recommended to overcome or at least limit genetic antagonisms:

1) Find a happy medium by choosing appropriate breeds, breed combinations and individuals within breeds. Some breeds or breed combinations are better with respect to a particular antagonism. For example, some breeds are sufficiently fertile that they can tolerate more milk and size before fertility becomes limited. Some breeds and breed combinations represent better compromises. British x continental crosses, for example, generally do better at producing carcasses with both quality and cutability.

2) Use terminal sires and heifer bulls. With terminal sires, we can have fast growing, efficient calves and still have a maternal cow herd that is fertile and easy to maintain.  Carcass yield and quality can be excellent in this system as well. By using heifer bulls, calving difficulty can be reduced in first-calf heifers.  Older cows can be bred to terminal high-growth sires.

Bull costs and bull:cow ratio can significantly impact cow costs (Table 5). A high priced bull may not always increase the value of offspring, make sure you have a marketing system to recapture the extra expense of higher priced genetics.  Many production systems have been shown to successfully run one bull with 35-40 cows. Bulls must be in good body condition, checked for breeding soundness prior to breeding and be in moderate sized pastures without extreme elevation changes for this to be successful. Increasing bull to cow ratios also requires closer observation of bulls during the breeding season.

Forage testing is one of the most cost effective technologies available to producers. Forage analysis will provide you with information to plan your winter feeding program to match the highest quality forages with the highest animal nutrient requirements. Often times forage is of higher quality than cow requirements. Overfeeding nutrients can be costly to a livestock operation and it may be profitable to sell higher quality products and replace with cheaper products or use higher nutrient forages as supplements for poorer quality forages.

Sort cattle based on body condition score and age, this is critical for re-breeding performance of the first calf heifer. Nutrient requirements for this class of animal are much higher than for mature cows. If there are extremes in body condition in mature animals it may also be profitable to sort and feed according to body condition. It is generally unprofitable to develop rations for the herd average especially if there is extreme variation in age and body condition.

Minimize the number of replacement heifers. High heifer replacement rates can greatly increase the cost of production, taking away resources available for producing cows. As mentioned previously crossbred females have greater longevity than straight bred animals. Proper supplementation and body condition score management will also reduce the number of open cows each year. Consideration must also be given to raising vs purchasing replacement heifers. 

Pregnancy check and cull open cows early may be a profitable alternative to traditionally selling in the fall when cull cow prices are at season lows, especially in times of limited forage availability; however, producers may want to consider keeping young open cows rather than raising replacement heifers. Open cows require less maintenance feed and generally have greater calving ease. This decision will depend on why the animal was open, her genetic merit and the value of resources that particular year. 

Develop a sound herd health program. It is not recommended to cut corners when it comes to herd health. Low-cost producers try to shift their herd health expenditures to preventive medicine rather than treatment. Most cost effective herd health programs focus on preventing: reproductive diseases in breeding stock, calf scours and respiratory disease in calves. Work with your veterinarian to establish management procedures that reduce herd health risks and develop a cost effective herd health plan.

Reduce labor costs through reducing use of harvested feeds, improving grazing management, purchasing replacements and buying hay may all be considerations which will decrease labor requirement.

Market don’t just sell. Your cattle will be treated like a commodity until you differentiate them into a product. Provide the potential buyer with as much information as possible so that you receive the true value of your cattle: