HUNTIN' DAYLIGHT - SHRINKING HAY LOSSES

by: Wes Ishmael

Expanding beef production and looming increased calf numbers continue to pressure cattle prices lower, further and faster than many expected.

“Futures prices have plowed through all of the support prices and continue to look for new contract lows,” explained Andrew P. Griffith, agricultural economist at the University of Tennessee, in his early-September weekly market comments. “Contracts for live cattle for June, August, and October of 2017 were trading under $100/cwt., which was the first time a live cattle contract traded below $100 since November 17, 2010 when the December 2010 contract did so.”

Griffith added that it was unsurprising to see cash feeder cattle giving back most of the $10-$15 gained from late July and early August.

“Cattle markets have been extremely volatile for a couple of years now, which seems to be the new normal. The market is now back in the trading range that it played in from the middle of June to the beginning of August,” Griffith explained. “The most worrisome aspect is that downside pressure remains. Calf prices will take the brunt of the blow, as the fall calf run will soon be under way. As more and more calves make their way to town, calf prices will continue to decline. These declining prices will make it tough for many in the cow-calf business to be profitable.”

There are already signs that nascent herd expansion could be stalling.

“Total daily August steer and heifer slaughter was 15.9 percent larger than last year (through August 20),” explained David P. Anderson, livestock economist for Texas A&M AgriLife Extension Service, in a recent issue of In the Cattle Markets.

“Digging deeper in the data is even more interesting. Steer slaughter is up 13.4 percent. Heifer slaughter was up a whopping 22 percent, compared to August last year. The increase in steer slaughter suggests a rapid pace of marketings, perhaps providing the opportunity to avoid the marketing backup experienced last year. The pace of heifer slaughter and the total numbers may suggest some information on the pace of herd expansion. Total cow slaughter is 19 percent larger than a year ago. While dairy cow slaughter is up about seven percent in August, 37 percent more beef cows went to slaughter.”

In its mid-year market outlook, analysts with the Livestock Marketing Information Center explained that cattle prices were lower than expected at that point. At the time, they projected calf prices to be about 15 percent lower this fall.

If anything, prices continue to decline more steeply than expected.

As cow-calf margins thin, one of the easiest ways to preserve possible returns is avoiding losses on the input side of the ledger.

Hay Cost Depends on Lots of Variables

“Without knowing the weight and the storage and feeding losses associated with round bales, producers cannot possibly know the true cost of hay nor manage the quantity of hay consumption and cow herd nutrition,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in recent market comments.

Among examples, Peel offered the comparison of a 5x6 round bale (5 ft. wide X 6 ft. in diameter or height) priced at $52.50/bale. If the bale weighs 1,500 lbs., Peel explained that the price is equivalent to $70/ton.

“A comparable 5x5 bale (with equal density) would weigh 1,046 lbs. and be priced at $36/bale ($70 ton) and a 4x5 bale (with equal density) would weigh 833 lbs. and be priced at $29/bale,” Peel said.

But density of round hay bales varies considerably. Peel says they typically range between 9 and 12 lbs. per cubic foot (lb./ft3).

“In the example above, the bales are assumed to have a density of 10.61 lbs./ft3. Bale density varies depending on the type of forage, adjustment of the baler and skill of the baler operator,” Peel explains. “Bales with lower density weigh less; are more difficult to handle and transport; and have more storage losses. If the 5x6 bale in the example above has a density 10 percent less (9.55 lb./ft3), the bale weighs 1,350 lbs., while a density 15 percent less (9.02 lb./ft3) results in a bale weight of 1,275 lbs. If the 5x6 bale is priced at $52.50/bale, the per-ton price increases to $78 and $82 for the lower density bales.”

Moreover, some of the hay will be wasted as it is stored and then fed. Peel says these losses frequently run as high as 50 percent or more.

“Round bales stored outside, uncovered and on the ground and fed in unrolled, exposed bales or in simple open-sided ring feeders will have the biggest losses, easily 30-50 percent,” Peel explains. “In contrast, bales stored inside or covered, off the ground and fed unrolled or in cone style feeders can limit losses to 5-15 percent. The amount of hay actually consumed by cows drops dramatically with increased storage and feeding losses. At 10 percent loss, hay consumption is 1,800 lbs. for each ton of hay; at 25 percent loss, hay consumption is 1,500 lbs. and at 40 percent loss, hay consumption is 1,200 lbs.

“At $70/ton, storage and feeding losses increase the effective hay price to $78/ton (10 percent loss); $93/ton (25 percent loss); and $117/ton (40 percent loss). Storage and feeding losses combined with low bale density increases hay price further. The low-density bale above (5x6 at 1,275 lbs., priced at $52.50/bale) results in a hay cost of $91/ton (10 percent loss); $110/ton (25 percent loss); and $137/ton (40 percent loss). The combination of low bale density and high storage and feeding losses result in actual hay cost nearly double ($137 versus $70) the stated per-ton price of hay.”

That's before considering hay quality, which varies with everything from the type of forage to baling conditions to age and storage.

Peel contrasts well-fertilized Bermuda grass to prairie hay.

Harvested early in Oklahoma, Peel says the crude protein of Bermuda grass will be 12-15 percent and total digestible nutrients (TDN) will be more than 55 percent. Conversely, he says crude protein in under-fertilized, mature Bermuda will drop below six percent with TDN less than 50 percent.

By way of caparison, Peel explains the typical crude protein value of prairie and meadow hay is six percent to nine percent with TDN of 50-52 percent. Harvested late and excessively mature, he says the values can drop to four to five percent for crude protein and below 50 percent for TDN.

“Whether purchased or produced, it is critical for producers to know the quality of hay,” Peel says. “Round bales of unknown quality and bale weight, subject to significant storage and feeding losses is wasteful, expensive and make it very difficult to manage cowherd nutrition.”

Peel offers these considerations for round bale use:

• Manage the quantity and quality of pastures to extend grazing and minimize hay needs. Consider stockpiling pasture for fall and winter grazing. Feeding hay costs 2.5 to 5 times as much as grazing. Every day that cows graze instead of receiving hay will save $0.50 to $1.50 per head in feed costs.

• Know the quantity and quality of purchased or produced hay. Buy tons of hay…not bales. Weigh it and test it.

• Know how much hay cows are actually eating. Measure storage and feeding losses in order to know actual consumption and the true cost of hay.

• Calculate the cost of hay nutrients compared to other supplemental feed sources. Projected record-large grain crops this fall mean that energy and protein from other feed sources will likely be cheaper this winter. Supplements using grain and/or by-product feeds may actually be less expensive than poor quality hay.







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