In the last issue we began a discussion of issues and thought processes that should be employed when considering a cattle producing venture. In this part we will continue the overview of different sectors of the beef industry and what it takes to get started. Evidently this is a subject of some interest given the e-mails and messages I have gotten after the first installment. If you have specific questions, comments or concerns relating to this subject please give me a call or drop me a note and I'll gladly respond as expediently as I can.
Stocker Cattle Production
As we've discussed, stocker cattle operations are a step between the commercial cow/calf operation and a feedlot. In general, stocker cattle operations receive cattle that have been recently weaned and place these cattle out on grass to grow or gain weight for a period of time prior to shipping to a feedyard. You will see many variations of this concept which may include the following:
1) Stocker operation coupled with a cow/calf operation. In this situation, the rancher weans his calves and separates them from the cows. He must have additional pasture for these cattle so they can be managed as a separate group. Aside from the requirement for extra land this can work well since it makes additional use of other resources such as facilities. This helps maximize the return on his investment in these resources. It also produces more total pounds of beef from his operation. The downside is, as mentioned, the need for additional land. Another potentially complicating factor is the need for especially good fences to keep the cows and newly weaned calves apart unless they can actually be moved some distance from each other. It will also require additional labor and other inputs such as feed, forage and labor but generally these inputs will result in a positive return and contribute to the overall profitability of the operation.
2) Stocker operation by itself. In this operation the rancher buys or receives newly weaned cattle for placement out on grass. These cattle may come from other ranches or out of auction facilities. The first and most important issue the stocker operator has to contend with in these new cattle is handling the weaning and transportation stress and followed by subsequent health issues. This is generally the most difficult as well as the most expensive part of the process. This requires appropriate handling facilities as well as a certain degree of training in diagnosis/detection of disease conditions. If managed properly this type of operation can produce the most beef per acre in many situations. This is especially true if the producer is able to run several “turns” of cattle per year. What this means is that he purchases cattle to run on a given area or pasture(s). Once he has grown these out and shipped them he procures another set immediately after these and does it again. The ability to accomplish this depends on a lot of factors. Stocker operations are based primarily on the utilization of grass in both winter and summer months. These programs will typically employ the use of winter annuals (wheat, oats, rye, ryegrass) and summer perennials, bermudas, crabgrass or possibly summer annuals such as sorghum sudan grasses or others. Much of this will depend on soil types to determine what will or will not effectively grow on the soil type you have as well as climatic conditions. For instance, there is not a lot of use in attempting to plant grass varieties which require significant moisture levels if you are in a semi arid or arid (low rainfall) area. All this goes to say, the ability to run one or more sets of cattle on a given area will depend on forage availability. In many cases the ability to accomplish this effectively may also depend on the implementation of a good feeding or supplementation program in conjunction with the grazing program. Cost-effective supplementation can accomplish several goals. First, it can enhance weight gains and therefore produce more pounds of beef. Second, it can get the cattle to a predetermined weight faster thus saving interest dollars or allowing for additional turns of cattle. Third, it can allow more cattle to be produced per acre at one given time or it can relieve some of the grazing pressure so that grass is available for future cattle.
Stocker operations can also procure cattle in different manners. One, obviously is for the operator to purchase the cattle himself. This takes a lot of capital. In today's market with 400 to 500 lb. steers costing well over $1.00 per lb. the producer is looking at investing over $500 per head in many cases. This will depend to a large degree on the quality of the cattle. Better quality commands higher prices but also will generally get you better performance. This means purchasing enough cattle to stock a 100 acre pasture (~1 head per acre) one time could cost over $50,000; more if you stock more densely because you use a supplementation program (possibly as much as 2 to 2.5 head per acre). A second method is to allow someone else to own the cattle and you simply graze them for the owner. This is called a custom stocker or grazing operation. You go through the same motions only that you do it for a person that owns the cattle and you are paid for your resources, inputs and time. This is normally done on a gain basis ($X per head per lb), on a cost plus (operating costs plus a profit margin) basis or possibly on a flat fee basis ($X per head per month). There are as many possibilities as there are combinations of cattle owners and custom growers. If you are new to this, be sure to find out what type of agreements are common in your area and get as much background as you can. Secondly, DO
NOT enter into an agreement of this nature without a written contract. Also, before you sign such a contract, have it reviewed by an attorney. Unfortunately, the good old days of operating on a handshake are long gone, even in agriculture.
One of the big positives behind a stocker cattle operation is that cash flow is more steady. In other words, you get paid more than once per year depending on the number of turns of cattle you run. This normally makes spouses and bankers much happier.
All this said, to reiterate for a second, if you are going to enter into a stocker operation you need the following resources.
a) The land to operate (either owned or rented).
b) The necessary money to buy the cattle (may not be necessary if doing this on a custom basis) and to pay expenses (medicine, feed, hay, labor, etc.).
c) Facilities to receive and process the cattle as well as to process any sick cattle. This would include a loading chute, the necessary pens and a squeeze chute (or at least a headgate).
d) Labor availability to check cattle daily (more than once is preferable for several days after they first arrive).
e) Feed or commodity storage, a way to put out the feed (5 gallon buckets, tractor with front-end loader, feeder/mixer wagon, self feeders, etc.) and a place to provide feed or supplement to the cattle (troughs/bunks).
f) Facilities to gather and load cattle back onto a truck.
g) A truck and trailer to haul cattle if necessary.
While this appears substantial it's really not any more than is required to operate any other type of cattle operation and possibly less, especially since the size of facilities does not have to be as great as when you are running a herd of mature cows.
Preconditioning or backgrounding operations
Relatively speaking, preconditioning (Precon) or backgrounding operations are somewhat new to the industry. They have, in fact been around for quite some time but they have not really seen the popularity of recent years. Precon operations fall between one production stage and another. For instance, between the ranch and a stocker operation, the ranch and a feedyard or a stocker operation and the feedyard. Sometimes these may be referred to as a warm-up yard or a growing yard which are slightly different in their orientation. A properly managed precon operation is probably one of the most intense type of operations in the industry. The main reason for this is that ALL the cattle in the facility are relatively new cattle and are therefore subject to being checked regularly and are still showing much of the stress effects from weaing and transportation. In many cases, these cattle stay in the facility only 30 to 60 days maximum. The function of a precon operation is to receive the cattle, provide the necessary injections and other processes (dehorning, castration, branding, etc.), get them over stress effects, adapt them to eating from a bunk and drinking from a waterer and in general, prepare (or precondition) them for the next phase in their journey. This is generally most useful in cattle heading to the feedyard since the transition from pasture to a typical commercial feedyard is so significant.
In many cases precon operations are operated in combination with stocker or grazing operations or feedyards. A custom, stand-alone preconditioning operation is difficult to get started because of the cost involved (normally, medicine cost per head is significant as related to the short period of time they are there). Additionally, there is not a clear-cut realization of the demand for this service since it is relatively new and procurement of cattle by a new operation can be a challenge. Secondly, if an operator does not have a well-established reputation or track record, many cattle owners are hesitant to place cattle there because of the uncertainty of how the cattle will perform. For these reasons, as mentioned before, precon operations are often operated together with other entities to help spread out some of the risk. The resources and facilities needed are very similar to a stocker operation with the exception of needing more pens and a bunk feeding set-up similar to a feedyard. Starting cattle on feed is equally important to health management of the cattle since the two are directly related. These two facets are inseparable. Additionally, while record keeping is important in any operation, it is especially important in a preconditioning operation. When you examine the medical data collected on a group of newly received cattle any you then recognize that ALL the cattle in the operation are newly received cattle, a 2000 head precon operation will generate as much information as a much larger (18,000 to 20,000 head) feedyard. It is vitally important that a precon operation track health data closely to first, aid with overall health management and secondly to track costs.
Precon operations are challenging to say the least and are not to be entered into lightly. If you are considering getting into the business and do not have extensive experience in health management of new cattle as well as feed management, etc., this is NOT the place to start.
Unless you have a LOT of money and a lot of experience, a feedyard is also not where you want to start. It is true, you can run a lot more cattle on a lot less land but with this stocking intensity comes some significant concerns. One is the implementation of an intensive feeding program. You provide all the nutrients that the cattle require. There is no grazing. This means you have to have extensive feed storage, processing and delivery systems in place. Pens will require an extensive bunk system as well as waterers for the cattle to drink from. A second consideration, and this is becoming more significant all the time is environmental impact of a confined animal feeding operation (CAFO). Large feedyards have substantial water run-off control systems to contain the movement of particulate matter from the operation into the environment.
Feedyards must also have extensive marketing programs in place to insure maximization of sales price in any given market. Finally, they must also have a detailed record keeping system in place. Even very small operations require extensive management and a lot of money to operate.
Many opportunities exist for entry into the cattle industry. Do as much research as you can to determine what sector is of greatest interest to you. Take a detailed look at the resources you have available. Allow yourself room to make some mistakes (they will happen). Above all, start slow and carefully.
Dr. Steve Blezinger is a nutritional and management consultant with an office in Sulphur Springs, TX. He can be reached at 667 CR 4711 Sulphur Springs, TX 75482, by phone at (903) 885-7992 or by e-mail at sblez@ direcway.com.