INCREASE RETURNS BY IMPROVING VALUE OF CULL COWS

by: Chel Terrell
Gulf Coast Cattleman

Over the next few months, producers with spring-calving herds will be evaluating their cowherd and assessing the productivity, health and reproductive efficiency of their females. This is a great time to scrutinize and clean up the factory because most calves have been weaned and sold and annual pregnancy testing is conducted as part of a good management plan.

Cows are culled for a variety of reasons, and now is an opportune time to decide if she gets to keep her job or to send her packing. Producers should consider several factors when deciding whether to cull a cow. Is she open? Is she too old? Are there troublesome health issues such as prolapse, eye problems like cancer eye, diseases such as Johne's or poor disposition? Other important factors such as productivity and whether she falls out of a producer's controlled breeding and calving season window should also be weighed.

“Producers should really pay attention to reproduction, health issues, productivity and efficiency, disposition, pasture stocking rate and their breeding and calving seasons when deciding to cull a cow,” said Dr. Jane Parish, Mississippi State University extension beef cattle specialist.

Fall is generally the peak marketing period for cull cows. Prices typically trend on the lower side with increased supplies, but pick back up in early spring and run strong from March through June. Since cull cows can represent 10 to 20 percent of gross revenue in a cow-calf operation, producers may want to consider alternative marketing periods to maximize returns.

Given current market conditions, selling earlier in the fall, in August or September, rather than waiting for the traditional October through December marketing period might be advisable. Or, ideally, if adequate forage is available through the winter and costs to feed cows are reasonable, producers may benefit from feeding out cull cows and marketing them next spring, when prices are usually higher. This would provide extra time to add weight to thin cows and improve carcass quality grades.

“Most beef cows are culled in the fall, and that's typically the time of year that beef cow slaughter is the highest and when prices are the lowest simply because of how much supply is out there,” said Dr. David Anderson, Texas AgriLife Extension livestock marketing economist. “That always leads to the idea that if you keep those cows through the winter, you may increase the amount of money you get for those culls in the spring because supplies are lower and prices are higher from March to June. Most of the seasonal increase in cow prices is captured by the end of March and into April.”

Current marketing conditions are influencing many culling decisions, Anderson said.

“There are several overriding issues happening in the market right now that are affecting supplies and prices. One is the economy and people trying to spend less money. In a way, this has helped cull cow prices because it's helped support the demand for hamburger. As people shift between the types of beef they eat, they may buy fewer steaks and more hamburger. We've had more of a shift in demand like that recently, and that's offsetting some of the impact on supplies.”

A second factor is the relationship between fed cattle prices and the cull market.

“Cull cow prices are affected by fed cattle prices,” Anderson said. “Right now is the time of year that fed cattle prices typically decline. You usually see it hit lows in July and August. We've seen that decline already in fed cattle – a little earlier and a little faster and we've been holding prices around $81-$82 for three or four weeks now. When fed cattle prices started lower, cull cow prices fell also, calf prices declined, everything declined.”

The third impact on the market right now is the rise in dairy cow slaughter rates due to the CWT Herd Reduction (Buyout) Program. This will put additional pressure on prices for cull cows, Anderson said.

“The dairy industry has a checkoff-funded program with one of the goals to do some whole herd buyouts. In the cow slaughter data over the last couple of weeks, dairy cow slaughter has really gone up. The buyout is taking out about 101,000 dairy cows. It started in May 2009 and slaughter started showing up in June through August. CWT just announced another buyout, with producer bids accepted through July 24.

“The problem is, 101,000 is probably only 40 percent the number of dairy cows that are going to be culled. Whether it's the buyout or market prices doing it, we're going to have a lot more dairy cows come to market for the rest of 2009. That's going to pressure cull cow prices.”

On the positive side, Anderson notes, producers are culling fewer beef cows than a few years ago, in part because there are fewer beef cows and a smaller inventory.

“The increase in dairy cow culling is actually being offset by decreased beef cow culling,” he said. “So, the net balance so far is we're about the same number as last year on all cows. I do think that for the year, we're going to see a lot more dairy cows going to market, so we may actually increase the total number of cows going to market, but we may stay close.

“I think at the end of the day, the two things that are going to pressure cull cow prices the rest of the year are a lot more dairy cows and a lot more cows overall on the market.”

Anderson also suspects that the value of the dollar making foreign beef more expensive will help cull cow prices some, too.

“Just about all the beef we import is trimmings for hamburger. As the dollar has weakened the last couple of months, that's making imported beef more expensive,” he said.

Given these factors, Anderson believes that this year the strategy of holding onto cull cows and feeding through until next spring is optimal, if adequate forage is available for grazing.

“This is going to be a year where that's going to be a strategy people have a lot of interest in because if we really cull all those dairy cows, we're going to have a lot fewer dairy cows next year. Not only that, if we continue to shrink the beef cowherd, which I think we're doing, we'll have fewer beef cows to cull next year.”

The potential is there for better cull cow prices next year because supply is lower.

“That sets up an idea that we may have a stronger seasonal price movement this year in cull cows because we hit that low in October to December like we usually do in terms of prices, then there's more upside into 2010 because we've got fewer of them out there,” Anderson said. “That really hinges on if people have grass or not. If you've got to buy expensive feed to feed them, then that makes it a lot harder to make that strategy work. If you've got the forage for them, then this is probably a year to really think about doing that.”

Parish plans to utilize this strategy in her own herd. “My husband and I are actually holding on to some of our cows and feeding them out to sell next spring,” she said. “We've got the available grass to do it right now.”

Cull cow prices are holding fairly steady right now. But as supplies shrink next spring, producers may reap the benefits financially of holding any culls over and marketing during that period instead.

According to Anderson, market information out of the Southern Plains for the last week of June 2009 indicated culls sold for $54/cwt. for 85 to 90 percent lean. In 2008, prices peaked at $60/cwt.

“I think at some point in 2010, given this cutback in supplies if we get all these cattle moved out, I wouldn't be surprised to see $60 cull cows at some point during the year,” he said.

“If we look at a five-year average in April, we've run about $51/cwt. And on average, we've seen an increase in that another dollar or so into June and July before prices start falling off. From a supply standpoint alone, not thinking about demand and imports, etc., I think it's certainly possible to have $60 cull cow prices at some point in 2010 simply because we're cutting into the total cowherd deeper and deeper. And that's a shockingly high price for cull cows, historically speaking.”

Maximize Value of Culls

Improving the value and quality of cull cows will pay dividends when selling those animals, whichever marketing period a producer chooses. Following Beef Quality Assurance (BQA) practices will help minimize any quality defects such as bruising, injuries or injection site lesions that could affect carcass quality and result in discounts at sale time.

“Make sure that if cows are in low body condition, you watch for bruising that could affect the end product,” Parish said. “If you can put condition on those cattle economically, it's going to result in less bruising. Don't treat them as culls; treat them more as market animals.

“Also, it's important to watch withdrawal periods if you use some type of medication or vaccine and are selling those cattle for harvest. This is all part of BQA.”

Understanding market cow grades and their impact on cull cow pricing is a valuable part of maximizing the value of these animals. Cull cows grades are broken down into four classes: “Breakers,” “Boners” or “Boning Utility,” “Leans” and “Lights.” The highest condition cows are the Breakers and the lowest are the Leans and Lights, which are very thin cows that have body condition scores ranging from 1 to 4.

According to Dr. Glenn Selk, Oklahoma State University beef cattle reproductive specialist, the Leans and Lights “are in general expected to be lower in dressing percentage than the fleshier cows and are more easily bruised while being transported than are cows in better body condition. ‘Lights' are thin cows that are very small and would have very low (less than 500 lbs.) hot carcass weights.

“Leans and Lights are nearly always lower in price per pound than are the Boners. ‘Lights' often bring the lowest price per pound because the amount of saleable product is small, while the overhead costs of harvesting and processing are about the same as larger, fleshier cows.”

      “If you can move a cull cow from one grade into the next, that might help some on the price,” Parish said. “There are also some markets that look for those white fat cows that have a little extra condition on them. You may want to watch the market to see.”

Direct marketing groups of cattle might allow producers to earn a few extra dollars for their culls, too, Parish said.

“Sometimes, if you can sell in groups or direct market, that'll help. Someone may be looking for a group of cows that they want to put in a stocker operation and they want to be the one to add the weight to them. Or, someone may be looking for a group of replacements. If you've got some cows that may not necessarily have something wrong with them, but you're just trying to reduce your stocking rate, then you might find someone looking to buy some replacements ... especially right now with cow prices down, people are looking to buy.

“There are producers that will direct market to the harvest plants. They'll contact them and actually send a whole trailer load instead of selling them one or two at a time to the stockyard. You can't just necessarily show up and dump the cows off; you need to call ahead and see what the guidelines are such as when they accept cattle, what they do and don't accept, etc. Some may even pay a premium or won't discount if you can source verify those cattle.”

Increasing revenue for cull cows is a viable option for producers with a good management plan and marketing during an optimal period. Keep your options open to get the most return on your investment.

(Reprinted with permission Gulf Coast Cattleman August 2009.)

Adding Value to Cull Cows

To maximize value of cull cows, consider some or all of the following changes in management if they appear to be profitable, according to Dr. Ron Gill, Texas AgriLife Extension livestock specialist.

• Add weight to thin cull cows before selling. This is particularly valuable when cows are BCS 3 or lower at culling. High quality forage efficiently replenishes muscle mass on cows. Extremely old cows may not gain as efficient as younger cows. Target a BCS of 5 for light muscled cows and BCS 5-6 for heavier muscled cows.

• Cull old cows before they lose their teeth, decline in body condition and fail to breed. Besides having lower cull weight and value, such cows have also weaned lighter calves than the younger cows for probably at least two years.

• Explore selling directly to a packer on a prearranged price. Caution should be exercised! Bids are more competitive at local auctions. Only a knowledgeable producer should attempt to market good quality cows directly to a packer.

• Market crippled cattle directly to a packer, without going through usual marketing channels. Cows with other blemishes, such as bad eyes, probably should also be sold directly to a packer.

• Sell cows before they become fat

(BCS 8-9). Fat cows are discounted for low lean yield regardless of their potential to classify as Breaking Utility.

• Sell cows outside seasonal marketing trends. Cull cow prices are normally lowest in October and November. If possible, consider marketing between February and September when slaughter rates are lower.

• Consider cull cows as a valuable asset and handle them as such. Bruising is a major problem with cull cows. Most bruises are caused by rough handling and hauling from the time they are sorted at the ranch until they are processed at the cow plant.

• Be cautious and concerned about withdrawal times when marketing cows which have been treated with animal health products.

Excerpt from “Marketing Cull Cows: Understanding What Determines Value,” by Ron Gill, Ph.D., Extension Livestock Specialist, Texas A&M University, 1998.







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