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CATTLE TODAY

UPGRADING CULL COWS SIGNIFICANTLY IMPACTS BOTTOM LINE

by: Clifford Mitchell

A cattleman was once overheard saying, “If you don't make excuses for your cows, they won't make any excuses and do their job.” Every operation faces difficult decisions. One of the most trying times for some ranchers is when it comes time to cull animals. Often, one of the main questions is whether the answer to the problem lies within the genetics or the management side of the equation. Fact is whether management is good or bad it is the same for every animal. If a cow does not get the job done, it's her fault.

Like many other things dealing with the beef industry, Mother Nature is the only real decision maker. Forcing cattlemen to sell into untimely or bad markets due to drought or other weather related issues. In a normal year, many cattlemen, who think they are savvy, leave a large portion of cull cow income on the table by simply taking cows to town whenever it is convenient, rather than timing market decisions.

“Too many people have gotten used to loading the culls on the end of the trailer when they take the calves to town in the fall. Cattlemen have to change their approach. Put cull cows in the proper condition and find the best market,” says Dr. David Sanson, Rosepine Research Station, Rosepine, Louisiana.

“Under a wide variety of market conditions, there is almost always an opportunity to add value to cull cows,” says Dr. Jason Sawyer, Texas A&M University, College Station, Texas.

“The least desirable time to market cull cows is in the fall of the year when everyone else is. Historic lows come in October and November. If producers will identify culls and take advantage of changes in the market, they can add value to cull cows,” says Dr. Clay Mathis, New Mexico State University, Las Cruces, New Mexico.

As with any market, cull cow prices are driven by supply and demand. An added bonus will be paid for cows that move up the chain in classification based on their condition. The most important factor in the decision to retain and try to upgrade cows lies on the cost side of the equation.

“In a normal year, the cull cow market is pretty predictable. Most producers calve in the spring so the majority of the cows go to town in the fall and are marketed during the lowest prices of the year,” Sawyer says. “Producers need to figure all of their options and know their costs for each scenario. A producer will be able to make reasonable and realistic projections when they know cost. When producers budget the program out, the risks are actually pretty low.”

“Most cow/calf operations have a low profit margin. Any time there is an opportunity to add value, in a cost effective manner, producers need to take advantage of it,” Mathis says. “Producers have to know their costs in a cull cow program to add value and take advantage of the market.”

When producers look to add value to poorly conditioned cattle in the fall, it involves more than just putting feed in front of them. Like any other class of livestock not every animal can be upgraded or has the potential for added value. Certain individuals will not work in any scenario and producers need to sometimes take a “get out while you can” approach.

“The first thing producers must do is evaluate cattle based on risk, and remove high risk cattle. High risk cattle are not the best candidates to raise value,” Mathis says. “Healthy cattle that have a body condition score (BCS) of three or four are the best candidates for upgrade. Cattle that are a BCS of 6 or higher aren't good candidates. They could work in a maintenance program if abundant forage exists, but they aren't very efficient at this point. If they are that fat, sell them in the fall anyway.”

“When producers sort the culls, younger cattle less than six or seven years old, have the most potential. Feed resources have to be very cheap to try and upgrade 10 year old cows,” Sawyer says. “Go ahead and get rid of the cattle that are a BCS 6, because there is very little potential to add value.”

“It's a rare year when a healthy cow that is a BCS of three or four won't make you money by holding her over,” Sanson says. “It's not worth carrying a six or seven over.”

There are many different philosophies as producers look to find the best way to upgrade their culls. One of the most popular scenarios is taking thin cows and putting them in an intense management program for a short period of time. This will not only add pounds, but it changes market timing.

“An intense program, either dry lot or send them to a commercial feeder, will capitalize on their efficiency. Healthy, thin cattle do well in the feedlot. They have low energy reserves and it's cheap to put on pounds,” Mathis says. “On a high concentrate ration cattle can gain 150 to 200 pounds in a short period of time (30 to 50 days). After 50 days their efficiency really declines.”

“If feed is cheap, these cattle are incredibly efficient in the feedyard. They will gain four to five pounds per day and convert at four to five pounds. You can increase BCS by a full score in three weeks,” Sawyer says. “In six weeks you have made that cow a BCS five, added 150 to 200 pounds and moved from a November market to selling them in January. Younger cows still have the most potential earning power.”

If producers can add pounds cost effectively, this will help them become “price makers” instead of “price takers” during a normal year. Improving the condition makes the end-product more valuable, which translates into added dollars.

“Packers want lean meat. A cow that is in really bad condition will have a low dressing percentage,” Sanson says. “Increasing the BCS to a six there is more red meat in her carcass. Anything that will make a calf grow, cows will gain weight. The higher quality the feed resource the better they do. Producers are losing value by not taking advantage of the market.”

“Marketing cows direct to a packer is certainly an option. There are a number of them around and they'll price cows five days to a week in advance. The nice thing is a producer can pick up the phone get a quote and at least have an indication of what the market is. The quote is a carcass price not a live price so producers need to learn to translate and make sure to figure in freight,” Sawyer says. “Once producers know what to get rid of and when they are going to market them, they can examine all their options and find the best price.”

“December through February, historically, is the steepest increase in market price. Packers can't do a whole lot with really thin cows. When you move those cows into the Boner or Breaker category, they can be sold as wholesale cuts,” Mathis says. “The best way to increase value, other than market timing, is to increase the value of the end-product.”

Obviously, upgrading condition and adding weight are “no brainers” when it comes to adding value to the cull commodity. Holding cattle over and waiting for a higher market makes perfect sense. Management scenarios will not work for every operation. Selling early before increased supplies diminish market prices is also an option.

“Historically, the September market is six percent higher, while the August market is nine percent higher than the October/November market for cull cows. Identify cull cows and sell them in August rather than wait until October or November if you can manage the calves,” Mathis says. “You can get those cows in a higher market and relieve some of the grazing pressure on the forage resources as supplies get short late in the summer.”

“Mid-summer is probably not in the peak marketing position, but it's better than waiting until the fall. By selling early, the shape the cow is in might hurt you a little and the market is in steady decline from its peak in April until November,” Sawyer says. “Selling early vs. holding over depends on the ability and the cost to manage the calves. Obviously, this is a very viable scenario for some operations.”

Depending on the availability of forage and other resources, it adds options for the producer. If there is an abundant supply of forages, different opportunities exist for cattlemen not only to add value to their product, but also spread out fixed costs.

“We can upgrade cows by putting condition on them or getting a calf in them. I recommend you put a bull with your cull cows once you have identified them and sorted off the high risk cattle,” Sanson says. “We sell cows in December and if they are in the first stage, they're usually worth $100 per head more than a slaughter cow, if she's a good cow.”

“Cattle on pasture can't gain as weight as rapidly, but it might be the most economical solution for some producers. If you have adequate forage resources, good young cows could be worth more when you get them bred,” Sawyer says. “You have to have good forage reserves for this to work because it will be several months before she's advanced enough in her pregnancy to make it pay. If they won't test six months bred, a lot of times they go to slaughter anyway and you get discounted. Another advantage to this is you're making use of a resource (bulls) that isn't being used this time of year.”

“Breeding these cows is very resource dependent, but could add value. You have to have the resources to get cattle in shape to breed,” Mathis says. “Corn stalks or irrigated cool season grasses work well in this situation to put cows on an increasing plane of nutrition.”

Some outfits cull cows based on age, selling every female from a calendar birth year at a certain time. Others identify potential culls if they lost their calf, just look bad or have other problems that could affect earning power. Health is the number one thing that usually demands culling, these cattle are not candidates for an upgrading program. However, cattle that do not fit the management program, that are sound in every way could be very valuable in current market conditions. Many producers lose money by not taking advantage of a service that is performed at just about every livestock auction or the local vet could do on the ranch.

“Preg checking cull cows give producers the opportunity to clean up a group and market them as bred cows. Depending on the time and place, this could command tremendous value,” Sawyer says. “If cows aren't in good condition, but are bred, it might be worth adding condition. Look at the local replacement market, there may be a big profit in that cow that is three months bred if you keep her two months and add some weight.”

“Producers need to preg check their cull cows either at home or at the salebarn. It is a worthwhile investment. People will pay for good bred cows. We buy cows for research projects and 20 to 25 percent of those cows that weren't preg checked will be bred,” Sanson says. “Just because she doesn't fit your operation, she might fit someone else's. Some of our producers want a 60 day calving season, but they leave the bulls in for 90 days. Anything that hasn't calved by the cutoff date is sold as a bred cow or a pair. They are selling bred cows in a higher market rather than open cows in poor condition in the worst market.”

“If you have identified a cow to cull and she's pregnant at weaning, producers increase their options,” Mathis says. “Producers can market them as bred cows or hold them over and market them as pairs.”

Most producers do not have anything good to say about their culls. Few operations use price discovery to find the best options for marketing what some call their “throw away” cattle. Many cattlemen would be surprised to know the impact cull animals have on the bottom line. Opportunity and options do exist to harvest this resource. Producers who take the time to examine their options could discover gold in a place where few have looked.

“There is a reason the cull cow market is the lowest in October and November every year. Cull cows account for 10 to 20 percent of the annual income,” Mathis says. “If a producer can pick up an extra $20 per head by adding value, there could be a big difference in the profit margin at the end of the year.”

“You can add value to the majority of the cull cows if they are marketed at the right time in the right condition,” Sanson says. “Twenty to 25 percent of a producer's income is derived from cull animals. If you have the resources, it makes sense to hold them over and add value. Producers who do this can easily realize a $90 per head profit.”

“A lot of times all producers have to do is change market timing or the condition score to add dollars to cull cows. Thirteen to 18 percent of a ranch's income comes from selling cull animals,” Sawyer says. “If a producer can add 10 to 15 percent net profit from those sales, it makes a pretty big impact on the bottom line. SPA analysis show, on average, the top income ranches generate more income from cull cows.”

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