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Reducing Feed Costs for Cattle

Reducing Feed Costs for Cattle. Kenny Burdine UK Agricultural Economics. Outline for Discussion. Quick update on feedstuffs and hay supply Feed oriented strategies Grazing oriented strategies Inventory oriented strategies Questions and discussion.

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Reducing Feed Costs for Cattle

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  1. Reducing Feed Costs for Cattle Kenny Burdine UK Agricultural Economics

  2. Outline for Discussion • Quick update on feedstuffs and hay supply • Feed oriented strategies • Grazing oriented strategies • Inventory oriented strategies • Questions and discussion

  3. Kentucky has lost 184K beef cows since 2007 Livestock Marketing Information Center Data Source: USDA/NASS

  4. Corn Balance Sheet(Million bu) Ethanol will account for about 40% of total use

  5. Dec 1 Kentucky Hay Stocks

  6. Constantly Watch Feed Prices • Cow-calf goals – meet nutrient need as economical as possible • Stockers – manage cost of gain to maximize return • Both require choosing most economical feeds and this may constantly change • Commodities, corn, silage, hay, pasture • Price regularly • Know seasonal patterns

  7. Does Corn Have a Place • Maybe, but likely very regional and primarily bin corn • Fall price drop • Weaker basis / higher transportation cost areas • Look at most economic protein supplementation

  8. What about Silage • Market value = (grain value – harvesting / hauling costs + chopping cost + nutrient loss) / yield • Production costs – likely much less, especially cash costs on owned ground • Still compare to realistic grain value • Generally speaking – don’t discount silage

  9. What if Hay Feeding is My Only Option? • Manage storage losses • Manage feeding losses • Avoid extreme thinking, sometimes simple solutions pay big dividends • Consider hay access time

  10. Restricting Hay Intake for Cows in Last Trimester of Gestation

  11. Restricting Hay Intake for Cows Nursing Calves

  12. Don’t Waste Pasture • Pasture costs sunk at this point • Only charge if you have another use for it • Ie: pure stocker maybe not • If calves are grazed on existing pasture, we must feed more hay to the cows as a result • Pasture charge is meant to capture this trade-off • Can be ignored if irrelevant

  13. Example • Simple assumption: 30 lbs of hay / cow / day valued at $70 per ton • Estimated daily hay costs at $1.05 per day • Each day we lose on cows cost us $1.05 • I simply used the average weights to estimate the day-for-day tradeoff • Ie: if calves average 600 lbs and cows average 1200 lbs – 1 calf day = ½ cow day

  14. Scenario # 1 • Weans calves in October, graze until December • 1.5 lbs per day ADG over 60 days • Pasture costs assumed to be sunk • Tradeoff between calves grazing and winter feeding days on cows • 550’s worth $1.35 = $742 • A nickel on placement costs = $27.50

  15. Wean now, grass only for 60 days(without grass tradeoff) -Weaned steers (550# @ $135) $742.50 -Vet / Medical Expenses $10 -Mineral $3 -Commission diff $3 -Hauling $0 -Interest $6.10 -Death Loss (1%) $7.43 -Inc. Hay Days (29.75 @ $1.05 / day) -------- Total Expenses $772.03 B.E Price = $1.20 per lb on 640 lb steer

  16. Wean now, grass only for 60 days(with grass tradeoff) -Weaned steers (550# @ $135) $742.50 -Vet / Medical Expenses $10 -Mineral $3 -Commission diff $3 -Hauling $0 -Interest $6.10 -Death Loss (1%) $7.43 -Inc. Hay Days (29.75 @ $1.05 / day) $31.24 Total Expenses $803.27 B.E Price = $1.26 per lb on 640 lb steer

  17. Scenario #3 • Wean now, drylot until December • 8.6 lbs per day of 50/50 Hull / Gluten Mix @ $250 per ton • 9 lbs per day grass hay at $70 per ton • 2.3 lbs per day ADG over 60 days

  18. Wean now, drylot 60 days (owned calves) -Weaned steers (550# @ $135) $742.50 -Hulls and Gluten ($250 / ton) $64.50 -Grass hay (9lb @ $60 / ton) $18.90 -Vet / Medical Expenses $10 -Mineral $3 -Commission diff $4 -Hauling $0 -Interest $6.10 -Death Loss (1%) $7.43 Total Expenses $856.43 B.E Price = $1.24 per lb on 688 lb steer

  19. Conclusions on Calves • Short term system looks pretty good on owned calves • Less attractive when purchasing calves • A lot of costs are front-loaded • Think about transportation and commission • Notice that dry lot BE’s were very comparable to BE’s using grass • Caveat: cash versus opportunity cost • Should we quit or December? What about longer term programs

  20. What are additional lbs worth? • 650# steers @ $127.77= $830.51 • 750# steers @ 123.36 = $925.20 Additional 100 lbs worth $94.69 • 850# steers @ 122.00 = $1,037.00 Additional 100 lbs worth $111.80

  21. Timing of Post-weaning Sales (2004 to 2011) • Wean 530# in October, sell 650# in Dec • $72.65 gross margin to put on 120 lbs • must put gain on for $0.61 per lb • From 650# in December to 770# in Feb • $169.82 gross margin to put on 120 lbs • Must put gain on for $1.41 • (NOTE: This assumes no price premium)

  22. Feeder Cattle Futures(yesterday morning) Think about margins all the time!!!

  23. Say No to Sticker Shock • “Calves are too high to keep” • “Feed is to high to buy” • Focus on the margin, not a single piece of the puzzle • 5wts $135 - $140 • Spring futures $147 - $148 => 8wts this spring likely in the $135 to $140 range

  24. Grazing vs. Hay Feeding • Grazing days cheaper than hay feeding days on average • COP on Hay likely $75 - $100 per ton • Question becomes cost of grazing days at the margin – 1st days we add are usually fall • Stockpiled fescue • Grazing systems

  25. Improved Grazing – Cow-calf • Benefits • Ability to run more cows • Decreased dependence on stored feed (> $1 per day) • Costs • Temporary fencing – posts, tape, charger, etc. • Watering system • Set up time • Management time vs. hay feeding

  26. Is Grazing Always Cheaper? • Know winter feeding costs – that’s the baseline • Work every alternative back on a cost per day basis - Consider ALL costs – establishment, fencing, water, etc. • Look to constantly replace more expensive days with cheaper days

  27. Inventory Strategies • Stocking rate is dynamic, not static • Adjust with conditions • Running fewer cows on same acreage • Balance return per cow with # of calves sold • We don’t always have to reinvest profit into more cows • Grazing, hay storage, facilities, debt reduction, etc.

  28. Replacing More Cows • Cull cow market remains relatively strong • Feed cost much lower on retained heifers • We can reduced short-term feed cost by replacing cows this year • Only encourage if it makes economic sense

  29. Estimated Heifer Development Costs(Assuming 12 months) Weaned heifer (550# @ $124) $682 Pasture Maintenance (1 acre @ $75) $75 Hay (1 ton @ $70) $70 Feed (1% BW through winter @ $250 / ton) $90 Mineral (0.25 per day at $0.35) $31.50 Vet / Med $25 Breeding (A.I. or nat service) $30 Interest $50.18 Depreciation and overhead $30 Estimated Total $1084.18

  30. Now where are we? • We’ve taken her from weaning in fall of 2011 to fall of 2012 • She’s bred to calve in spring 2013 • Will be wintered one more time before calving • Compare this to fall bred heifer prices • Remember allows us to sell cow cull and the heifer

  31. Key Costs that are unaccounted for… • Dollars spent on heifers that do not enter the cow-herd • Possible loss in weaning weight associated with calving ease bulls • Money made on calves that would have been sold from purchased bred heifers

  32. Questions, comments, etc.

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