by: Wes Ishmael

Crop and forage production has “pretty much shut down” due to exceptional drought conditions, says Travis Miller, a Texas AgriLife Extension Service statewide crop expert.

“If you look at the U.S. drought monitor, about 26 percent of the state of Texas is in exceptional drought,” Miller says. ‘Exceptional' means it is a one-in-50-year occurrence. Much of the rest of the state was in what's classified as moderate, severe, or extreme drought.

“…it's a pretty grim picture,” Miller explains. “And it's not just Texas; it's New Mexico, Oklahoma, Louisiana, and parts of Arkansas. It's an exceptional drought across a big area.”

At the other end of extremes are the devastating tornadoes that shook the South, and now flooding.

Bottom line, as mentioned previously in this column, prospects for beef cow herd expansion looked iffy at best this year due to economics, though it appears some producers in the Midwest are retaining more heifers. Now, Mom Nature has made the choice against expansion for producers across a wide swath of the southern U.S.

“Feedlots are fairly full, but they are holding a high percentage of cattle that normally would still be on graze-out wheat or stocking grass pastures in the Southern Plains,” explained analysts with the Agricultural Marketing Service in mid-May. “Dry conditions in the Lone Star State are causing cow/calf producers to disperse their already whittled-down herds and may be enough to offset the heifer retention in Nebraska and surrounding areas.”

Derrell Peel, Oklahoma State University Cooperative Extension livestock marketing specialist, points out beef cow numbers at the beginning of the year decreased sharply in Missouri, Iowa, Kentucky, Louisiana, Texas and Oklahoma. Some attribute losses in Missouri, Iowa and Kentucky to pasture acres lost to row crops.

Throw in the cold, wet weather across much of the U.S. this spring which has kept grills under cover for longer than usual, pressuring domestic beef demand.

“Just about everything has been affected, from supply impacts to demand inputs to input market impacts,” Peel says.

That same cool wet weather is behind delays in crop planting. May's World Agricultural Supply and Demand Estimates project record large corn production from a record number of acres planted to corn—and increased ending corn stocks. Even with decent weather, however, plenty of analysts believe those estimates are too optimistic.

“Each day of planting delay is likely to have noticeable impacts on corn yields,” Peel says. “There seems to be little likelihood of any relief for cattle producers from high feed prices.”

Basics are Magnified

Of course, even without cow herd expansion, none of this means individual operations are locked into static production while facing higher costs.

For instance, the difference between an 82 percent weaning rate (per cow exposed) and one of 85 percent in a herd of 100 head is three weaned calves. That's about $2,100 difference at $134/cwt. on calves averaging 525 lbs.

Though increasing the weaning rate, an extension of the herd reproductive rate can cost more on the input side, lots of producers prove that doesn't have to be the case.

For instance, two producers spend the same for parasite control, but one times the application more effectively. Two producers spend the same money for bulls, but one chooses genetics more suited to his cow herd and has built cows more suited to his environment. One producer weans calves at the same time every year because it's convenient; the other weans earlier, allowing cows to go into breeding season with more body condition, and on and on. One producer weans an 82 percent calf crop, the other 85 percent.

None of these kinds of management choices are newfangled secrets. Any one of the management decisions mentioned above, as well as the plethora of others, may or may not work for a particular operation. The point is that proven management options exist that can increase production and decrease breakeven production costs without added direct cost. These leverage-enabling options gain incremental value, too, when times are toughest, when Mother Nature prevents herd expansion, though input costs rocket ahead.

Hybrid Gain

Among all of the options available to increase current production with the same level of inputs or to maintain current production with fewer inputs, crossbreeding continues to offer the greatest economic leverage and insurance against the unknown. That's especially true when you consider the value of managing maternal heterosis.

“Commercial cow-calf producers are faced with optimizing a number of economically important traits, while simultaneously reducing costs of production in order to remain competitive,” says Scott Greiner, beef extension specialist at Virginia Tech University in Crossbreeding-It's Cool Again. “Traits such as reproduction, growth, maternal ability, and end product merit all influence productivity and profitability of the beef enterprise. Implementation of technologies and systems that both reduce costs and enhance productivity are key. One of the oldest and most fundamental principles that has a positive influence on accomplishing these goals is crossbreeding.”

Greiner goes on to explain. “The primary advantages of crossbreeding beef cattle are heterosis (hybrid vigor) and breed complimentarity. The power of crossbreeding results from the advantages of the crossbred cow, due to her advantages in fertility, weaning weights, and longevity. In fact, 60 percent of the advantage of crossbreeding is realized through the crossbred cow. In addition, individual heterosis exhibited in the calf results in increased livability coupled with an increase in growth rate. Breed complimentarity provides the opportunity to capture the strengths of various breeds, and enables selection of individual animal within those breeds for specific purposes.”

As producers consider and exploit heterosis, though, Greiner stresses, “A well-implemented crossbreeding program does not diminish the importance of sire selection. In fact, appropriate sire selection is the key to making the system sustainable.”

Countering Volatility

Consider the added value of crossbreeding in light of what appear to be permanently higher input costs that whipsaw up and down, often apparently without regard for market fundamentals.

“Since March, the December Corn contract has traded as low as $5.50/bu and as high as $6.80/bu.,” Dillon Feuz explained in the May 11 In the Cattle Markets. Feuz is an agricultural economist at Utah State University. “That volatility is likely to continue into the summer and early fall as it appears we will have a later planted crop that could be at risk of early frost damage. With a $1/bu. swing possible in corn prices, feeder cattle prices could also be very volatile. Calf prices could change over $10/cwt. and yearling prices could change $5-8/cwt. depending on the weight of the yearling…”

Think back to the earlier weaning rate example. Suppose Feuz is right and corn prices could knock $10 off calf prices. That would decrease the $134/cwt. price received in example to $124/cwt. The extra three percent weaning rate would be the equivalent of adding another $4/cwt. or so.

“Certainly, limited feeder supplies will maintain upward pressure on feeder cattle prices, but the question of just how much pressure depends on the bigger question of herd rebuilding,” Peel says. “That question, in turn, depends on what the industry is trying to do, as well as what Mother Nature will permit us to do.”

“Persistent drought conditions in the southern Great Plains can easily overwhelm any herd expansion that takes place in other areas, particularly if beef cows continue to move out of the Midwest.”

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