Cattle Today

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RAISING OR BUYING REPLACEMENTS IMPACTS FUTURE PROFITABILITY

by: Clifford Mitchell

The ability to analyze different market situations and make profitable decisions often helps operations become successful in the beef industry. Sometimes factors that determine profitability are out of the rancher's control; however, most of the time supply and demand will be the key component.

The cyclical market structure presents many challenges when it comes to establishing a sound bottom line. As prices swing up and down producers evaluate production scenarios for the right answer. The burning question for a lot of producers in the current market is whether to raise or buy replacements.

“Can cow/calf producers save heifers at this market level? It is a trade off, do producers take the incentive provided by the immediate market or develop a view for the long run. I am at a quandary how the cow/calf producer is going to deal with it,” says Dr. Darrell Peel, Oklahoma State University Extension Economist.

A firm's ability to assume financial risk plays a role in deciding if it is time to cash in or invest in the future. Strong cases can be made for both buying and raising replacements to help the program progress.

“As an economist looking at the numbers, a lot of producers cannot justify raising heifers,” Peel says. “We operate in a slightly more efficient industry today and there are firms that specialize in developing replacement females. Producers place a lot of value on genetics and sometimes there is a risk buying outside cattle.”

“We don't buy replacements. We run problem free cattle and anytime you buy something you seem to inherit problems,” says Scott Starr, Cedar Top Ranch, Stapleton, Nebraska. Cedar Top Ranch produces Gelbvieh, Angus and Red Angus genetics along with maintaining a large commercial cowherd.

The concern most producers have, when it comes to replacements, is the individual's ability to adapt to their management program. Most cattlemen are strong believers heifers should be raised in a similar environment.

“Acclimation is a word that gets thrown around a lot. Cattle that are born there acquire certain learned behavior. This will result in producers facing the same challenges working together,” says Bob Prosser, Bar T Bar Ranch, Winslow, Arizona. Prosser has been producing Balancer females for 15 years and according to the NCBA is one of the Top 20 seedstock producers based on numbers.

“This is a legitimate concern if heifers are fed whatever it takes to get them bred. There is no natural selection process to remove cattle that won't work in a forage-based system,” says Patsy Houghton, Heartland Cattle, McCook, Nebraska. This firm is in its 14th year of providing replacements and has marketed 48,000 females into 31 states.

Proper management is key to protect the investment. Cattle that are properly developed should fit a variety of production scenarios.

“You can't feed these heifers in a manner where they won't perform on grass,” Houghton says. “Our ration is forage based and we get cattle in the right body condition to make them work.”

“In good times everything goes well, in bad times you have to be a low cost producer to remain profitable,” Prosser says. “We have to identify genetics that will work in a low cost scenario. Heifers don't have to have added management to be a value-added product.”

The natural selection process of the environment impacts future production. Mother Nature decides which genetics will fit the program's resources. Raising heifers in the same environment they are expected to produce in is the chief reason cattlemen choose to retain replacements.

“You have to raise your heifers like you run your cows. Cattle will learn to eat what is in front of them and not go out and forage,” Starr says. “Our biggest selection pressure is the environment. We turn weaned heifers back to grass in the fall and every month we eliminate cattle that can't make it on their own. When we're done we have a good set of big-bodied, high volume females to breed.”

Another concern most cattlemen have is, knowing the background of the females they introduce into the herd. Today, with the sophisticated end product market system in place this could impact future profitability.

“We're building the factory. Put whatever bull you want to on them,” Prosser says. “What we want to emphasize is these heifers will be there as mature cows. They are multiple trait cattle and you can enhance any trait out there that fits your program by using the benefits of heterosis.”

“We work with a group of suppliers that have ties to a seedstock source. I have anywhere from five to 13 years of historical data on the genetic base,” Houghton says. “The genetic background might differ as we try to match females with each customer. We have to establish baseline performance levels to show them improvement.”

One of the things that continue to plague the beef industry is the dropout rate of two- and three-year old females. This is a costly expense since the producer does not have the opportunity to realize the return on his investment.

“I believe fertility is the number one trait and is not to be sacrificed. There is not enough premium on the other end to make up for open cows,” Prosser says. “Making two's rebreed at an acceptable time to come with their second calf is a problem whether females are bought or raised. Cattle with bloodlines that don't have reproductive success aren't here.”

“There is a place to spend money when it is simply an expense or spend it as an investment. There is a lot of value per dollar spent when it is returned on the investment,” Houghton says. “If you can continually optimize fertility it will make the biggest difference in value per dollar spent.”

Developing heifers in the correct manner will allow a head start on next year's calf crop. Selection pressures put on young females should mold them into producers.

“With proper management, selection pressure put on young females will minimize problems they have later in life,” Houghton says. “If producers can continually decrease dropout rate, particularly of two- and three-year old females it will increase profits. Producers have the maximum amount invested in these females with very little return.”

“Our heifers end up running with the mature cows once they have had their first calf,” Starr says. “Since we really started roughing those heifers through, we have eliminated open cows because they fit our management program.”

“We have to identify outliers that don't work in a high pressure culling situation,” Prosser says. “The insurance policy is if she works she stays, if she doesn't she goes to town.”

Identifying a quality supply of replacement heifers is important. Making sure these suppliers are on the same page when it comes to management philosophy should dictate where producers purchase these females. Purchasing females from a reliable source could help cattlemen more adequately manage their resources.

“For every two open heifers you can run one bred female. From our perspective producers increase revenue flow by 20 percent maintaining all pregnant females,” Prosser says. “If you can find a supplier with similar philosophies, it is more profitable with leveraged inputs to manage one resource.”

“We breed heifers to calve three weeks before the mature cowherd. This gives these females longer to rebreed and keep in time with the mature cows,” Houghton says. “The benefits are huge when it comes to retention of young cows. Appropriate management has to be in place, selection can't make up for bad management.”

The production scenario often will dictate the need to buy or raise replacements. Producers looking to maximize profit potential by producing targeted end products often benefit from the expertise of qualified replacement heifer suppliers.

“A lot of our replacement heifer market is with producers who are involved in terminal production,” Houghton says. “These producers send all their calves to the feedyard and are in need of a constant source of replacements. Some producers haven't been as aggressive as others with individual data management. We'll send these customers females from operations that excel in individual data management.”

Economies of scale can also place an emphasis on the avenue a producer pursues. Smaller producers often look to a source of replacement females not only to meet their replacement needs, but also to improve the quality of the cowherd.

“The smaller producer needs to decide if it is worth his time to produce replacements or send his heifers to the feedyard and buy his replacements,” Houghton says. “Since we have such a detailed data base, we can develop females that will meet any customer needs.”

“We couldn't make replacement heifers work with small numbers, but we could with a large group of females,” Prosser says. “We buy heifers from our customers to market as bred females because we know the genetics. We expose 1,000 head of females for 45 days and have a 95 percent conception rate.”

“I see purchasing replacements from qualified suppliers working for smaller producers,” Starr says.

Whether replacements are raised or purchased, eliminating dystocia and tightening the calving interval has definite benefits. Intense management is required to shorten the calving season and get heifers bred to proven calving ease bulls.

“There are a lot of economic benefits when it comes to calving heifers in a short period of time. Subsequent management is easier,” Houghton says. “Since we use proven calving ease bulls there are less calving problems, which is another factor that will increase retention of these females. This is part of the service we provide our customers to help their program and decrease labor costs.”

“The good cattle sort to the top. We'll increase the plane of nutrition on these heifers in February, then we'll artificially inseminate them to proven calving ease bulls,” Starr says. “We don't have any calving problems.”

There are benefits to raising and buying replacements. Producers must decide which fits their program the best. Like most things in the cattle business time will tell if the right decision has been made to enhance the bottom line and fit the production scenario.

“The biggest challenge we face is the relationship with the rancher,” Prosser says. “At the end of 15 years does the arrangement work for both parties involved.”

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