Cattle Today

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CATTLE TODAY

GOOD DECISIONS HELP PRODUCERS MAINTAIN PROFITABILITY

by: Clifford Mitchell

Most cattlemen are no strangers to hard work. Blood, sweat and tears have been the heart and soul of more than one successful operation. Stories are told about seemingly immortal cattlemen willing a herd through uncharted territory to the marketplace. This no-nonsense attitude of toughness and strong resolve has helped more than one firm stay the course. However, in today's market these ideals may not be enough to hang on and stay in business.

Today, working smart may trump working hard. Volatile markets and rising costs have some ranchers on their heels. Most are searching for ways to keep profit margins at acceptable levels, while balancing proper management techniques to keep the operation moving forward and providing a product that is acceptable to a demanding industry.

“In the flurry of trying to take care of everyday business, it's easy to forget that we have to know our costs and make sure there is adequate return for our land, labor and management,” says Eddie Parker, Parker Angus Ranch, Waurika, Oklahoma.

“We have to have records. We need to know what each cow is doing for us. Treat them like employees and give them a yearly exam to decide if you want to keep them employed or not,” says Justin Rhinehart, Beef Extension Specialist, Mississippi State University.

Production goals are a key component of any business. Cattlemen must frequently evaluate their plan to reach these goals. Changes to management may often lead to success; however, operations have to position themselves to take advantage of viable opportunities.

“Cow/calf men need a strong set of goals and then adjust management to accomplish them. At the same time, he has to be able to take advantage of opportunities that will add profit to the operation,” Rhinehart says. “We have to be careful because sometimes, in a volatile market, we'll try to change and get caught in a bad situation. The market is likely to change before you can take full advantage of it.”

“At our place, we have production goals and a budget we hope to use to achieve those. We have to re-evaluate sometimes because we operate in two realms: the things we can control and the things we can't control. If there are dramatic changes we have to make sure there is still enough margin to cover fixed cost,” Parker says. “We are looking at the budget more often today than we ever have in the past. We don't change our goals, but re-evaluate how we can accomplish them.”

Day-to-day management sometimes forces cattlemen into a false stage of comfort. Daily operation seems easy because most operate “status quo”. A quick evaluation of the expenses and the majority will find there are always ways to improve.

“To stay profitable, I have to be willing to change due to circumstances. Change is the hardest thing for most cattlemen and in certain situations you might have to do things that make you uncomfortable,” Parker says. “For instance, when fuel got really high, I changed to liquid feed rather than cubes. This changed my fuel use dramatically and to my surprise, I didn't lose any performance. It's easy to stay profitable when times are good, but the key to maintaining a long term viable operation, is making changes in the tough times.”

As long as Mother Nature cooperates, grass is a resource that will be available to most cattlemen. Managing that resource is critical to cow men, no matter if times are good or bad.

“To be a good cattleman, most are grass farmers first. With high fertilizer prices we have to keep a good handle on our soil tests and not over fertilize. Another component of that soil test, pH, which is very important because we have to make sure the nutrients we do put down are available to our plants,” Rhinehart says. “Good stands of legumes will cut nitrogen costs and this will be extremely important to the bottom line.”

“We have re-established the legumes in our improved pastures to avoid that fertilizer cost. Even when fertilizer didn't cost that much it was easy to run up a pretty good bill,” Parker says. “Some of the things we don't really think about make a big difference. Legumes have been a big part of our pasture management. We can get by without any fertilizer most years.”

Taking care of this valuable resource includes more than just soil testing, proper fertilization levels and planting legumes. Having a plan, when to graze each pasture, could help performance and insure plant health.

“Sorting cattle into groups with the same nutritional needs is another part of our management plan. Hay is an expensive feed and we try not to feed anymore than we absolutely have to. We'll stockpile forage for our dry cows during the winter months. They hustle and get by on that forage, liquid feed and a good mineral. We have to plan ahead and make sure those pastures are adequately rested during the growing season because they'll be heavily stocked for short periods of time,” Parker says. “The forage production and utilization plan doesn't have to elaborate, but it helps to do some cross fencing. We move cattle a lot from one pasture to another, when the grass tells us to. The typical stocking rates are one cow per 10 acres in our area. We get by with one cow to every six acres and don't hurt the grass. We have to match our production cycle to availability of quality forage. Cows calve at a body condition score of 5 to 5.5 and flesh up to breed back with the spring forage growth.”

“Every producer's goal should be to feed as little harvested forage or purchased feed as possible during the winter months. We can get by with stockpiled forages, winter annuals and other means of utilizing forages year round. There is a lot of flexibility in our growing season, we just have to pay attention to what's available,” Rhinehart says. “Find a way to operate within the environment, rather than change the environment. An ongoing debate, for most producers, is whether to calve in the spring or in the fall. You might get more per head for that fall born calf, but what did it cost you to get him to market.”

As the management tactics tighten, to make sure adequate profit is being held in the balance, producers re-evaluate the plan to accomplish production goals. Different situations call for different measures, which may lead cattlemen to abandoning long term practices and finding other ways to replace the cow herd. Even in small herds, the genetic base is important and producers must find ways to not sacrifice top quality genetics.

“Producers need to look at the money they are taking away from the cow herd when it comes to the cost of developing replacement heifers. It may be better to sell those heifers as feeders and purchase replacements that have better genetics or send those heifers off the ranch to be developed,” Rhinehart says. “Producers can't afford to skimp on genetics. There is nothing wrong with using a good bull a year longer than normal, if you don't retain daughters. The trick is to make sure you don't miss out on better genetics because your seedstock supplier is always making improvements.”

“There are enough variables in beef production rather than to always have to gamble on the production potential of a heifer. Developing heifers or replacement costs may be the highest single expense a cow/calf man has,” Parker says. “It's hard to put a value on fertility and longevity, but it's always cheaper to retain that older proven cow than to bring a heifer into production. Building in these traits has sure helped us become more efficient.”

With any operation, once producers start evaluating different parts of the management plan, changes will inevitably be made. However, there are often large expense items that must be a mainstay of any successful operation. Limited labor has forced most operations to invest in a set of facilities that help get the job done.

“We're a seedstock operation and it's often just my wife and I doing the work. Limited labor is a result of two things, a lot of times we can't find somebody who wants to work or they lack the skills we need. Without good facilities we couldn't do what we do,” Parker says. “Since we're in the seedstock business most of what we do is very timely. We built an all weather facility and we can work 200 head in a day pretty easily without killing ourselves. Good facilities are expensive initially, but when you build-in the per head cost, it gets cheaper in a hurry.”

“Facilities are a high dollar item. Most will find a little planning and good working facilities will help make the best use of your time. If the facilities are right, producers can become very efficient,” Rhinehart says. “Plan ahead and match the work load with what you can accomplish in the time period allowed. If you plan the day step-by-step and do encounter glitches, it will be easier to handle them.”

As budgets tighten, it's easy for some operators to eliminate certain parts of the management protocol. Spending dollars wisely is often the difference between staying in business and selling out.

“Producers can't sacrifice the health program to maintain profitability. Maintaining the health of the breeding herd and presenting a marketable calf are very important. Maintaining immunity is a lot cheaper than treating calves with an expensive antibiotic,” Rhinehart says. “Mineral is something that has gotten extremely expensive. Producers need to customize this program to match cow needs during the year.”

“One thing a lot of people forget about, when times get tough, is a good mineral program. Mineral is expensive, but sometimes you have to spend the money to maintain production goals. A good mineral isn't always the most expensive one,” Parker says. “A good vaccination program will go a long way to insure you have healthy calves and your cows will breed back.”

Sound minded business decisions may, in fact, be more important than hard work for most ranchers at this critical juncture. However, for most, there will be no substitute for hard work. Combining the two intangibles could propel cattlemen down the road and prepare them to withstand the toughest conditions.

Buying in bulk or locking in a price for feed or other inputs well in advance has often been a way for producers to deal with times of high costs and low market prices. Current markets show this could be a time where producers need to make changes rather than hoping to ride it out as in the past.

“Buying bulk ingredients is fine as long as you're buying when the price is going up, but it hurts when the price is going down and you're sitting on high priced inventory,” Parker says. “Some expenses pay higher returns than others. When times are tough you have to have the highest percent calf crop and get cows bred back in a timely manner. There are certain things you can't skimp on to get the job done.”

“Buckle down in your record keeping and take the time to evaluate each individual. Each operation has to reach the overall production goal, by evaluating each individual you know which cows are advancing or keeping you from reaching that goal,” Rhinehart says. “We have to become more aware of total risk management. Lock in a profit rather than the cost of an input or a calf price. I know a lot of producers that locked in some ingredients and got burned. As producers, we have to become more diligent about knowing where things are at and locking in our margin.”

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