by Gordon Jones, Red Hill Farms, Lafayette Tennessee

by Gordon Jones, WKU Animal Science Professor (Retired)

Cattle market fluctuations during the last 3 to 4 years have been difficult to understand and explain. Even the most competent agricultural economists have difficulty explaining recent market trends. Until recent years, most economists used the concept of “supply and demand” to explain market trends. For example, in December, 2003 and during the first half of 2004 when the first cases of “mad cow disease” were identified in the US, many countries banned US beef products for several months. Consequently, the supply of beef quickly became greater than the demand resulting in a major decline in live cattle prices.

The purpose of this series of articles is not an attempt to explain the recent cattle market fluctuations, but to address concepts that producers could potentially use to improve profitability in both the short and long term. Every producer is acutely aware of the profitability equation:

Profit = Income or Revenue-Production costs

During the last 20 to 25 years, most seedstock suppliers as well as commercial producers have concentrated on the income or revenue side of the equation by selecting to increase growth rate, milk production, and to improve carcass traits. The first 2 articles of this series will address the cost or expense side of the equation. The third article will address sustaining high levels of revenue.

Feed costs represent a major portion of the cost of beef production. Most experts agree that roughly 70% of the total feed used in beef production is for body maintenance and only 30% for production. The following are areas that producers may consider as a means of saving on feed costs.

Cow Size – maintenance requirements increase at the 0.75 power of body weight which means that an 1100 pound cow should require 7.5% more feed for body maintenance than a 1000 pound cow. A cow weighting 1500 pounds should require 37.5% more feed for body maintenance than a 1000 pound cow. As selection for growth rate has steadily increased in the US, cow size has increased at approximately the same rate. Because there is NOT a direct correlation between growth rate and cow size, it is possible to have both excellent growth and moderate cow size. There are herds that have reported a steady increase in growth rate for 30 years while cow weights have remained the same. Selection strategies based on EPDs are available in various breeds to allow producers to continually improve or maintain growth potential while holding cow size in check.

Milk Production Potential – the conversion of milk to growth is NOT an efficient process. There is NO argument about the need for plenty of high quality colostrum for the newborn calf, but excessive milk production requires high levels of feed input. If extra feed input is not available, fertility of high milk producers will likely be compromised. Based on research data from the USDA Meat Animal Research Center, it is clear that heavy milk producers not only have greater nutrient requirements during lactation, but that extra nutrient requirement continues during the dry period. Producers need to focus on matching milk production potential with available feed resources. Recent research by Dr. Dave Lalman at Oklahoma State University shows that cows with high milk production potential may actually produce less milk than cows with lower milk production potential when feed resources are limited.

Net Result of Smaller Cows with Lower Milk Production Potential

Running more cows on the same acreage should decrease production costs per pound of calf sold. By having smaller cows with lower milk production potential, it is possible to run more total cows on a given acreage. Also, the reproductive efficiency of smaller cows with lower milk production potential is likely to be much better than for larger cows with more milk production potential, particularly during times of limited feed resources such as during a drought. Table 1 prepared by Dr. Bob Weaber shows the effect of weight and milk on cow counts with fixed resources. Data from this table show clearly the feed savings that are possible by having smaller cows with lower milk production.

Table 1: Effect of Weight and Milk on Cow Counts with Fixed Resources

Weaber, 2009

Heifer Development – The recommendation that heifers should reach 65% of mature weight at first breeding has been recently challenged by Dr. Rick Funston at the University of Nebraska. His research data shows that heifers developed to 55 to 60% of mature weight perform as well or better than heifers developed on a higher level of nutrient intake. Lifetime studies are being conducted to determine if there is also a difference in the years that heifers, developed on this lower plane of nutrition, will continue in production. Many theorize that heifers developed on the lower level of intake will last longer. It certainly stands to reason that heifers developed on a lower plane of nutrition should more likely maintain condition and rebreed when feed resources are limited.

Summary

Based on research findings, there appears to be tremendous potential to reduce the cost of production per pound of calf produced. By using smaller cows with lower milk production potential, it should be possible to increase the number of cows for a given acreage of land. Also, those smaller, less productive cows should logically be more efficient reproducers to result in a higher % calf crop each year. By developing heifers to lighter weights prior to breeding, there can be significant feed savings while producing cows that are likely to be more adaptable when feed resources are limited. Consequently, reducing feed requirements can contribute to more profitable beef cattle operations.

by Gordon Jones, WKU Animal Science Professor (retired)

Continual evaluation of pasture management and forage systems should be routine for all beef cattle producers in KY. Numerous articles concerning the advantages of improved pasture and forage management systems have been published. For example, Tommy Yankey did an excellent job of discussing the benefits of rotational grazing in the June issue of Cow Country News. Yet, as one travels through the state of KY, it is easy to see more pastures overgrazed than pastures that have been rotated and rested. In addition to rotational grazing, strategic use of legumes as well as incorporating warm and cool season forages can enhance profitability.

Getting Started in Rotational Grazing – Many cattle producers think that rotational grazing requires a complex system with equal size paddocks. This author believes every farmer who owns cattle could begin a system of rotational grazing with very little additional investment.

Initiating rotational grazing may only require the farmer to open and close gates to divide pastures into smaller paddocks. As an example, a typical hillside, bottom, and upland farm of about 40 acres of pasture was utilized as a single pasture with continuous grazing for 15 spring calving cows and calves. The farm was continuously overgrazed, and as expected, the cows were thin with Body Condition Scores (BCS) of 3 or 4. The farm was leased to a very progressive cattleman who had the desire to run more cattle on the farm. By simply closing gates and running one strand of poly wire electrified by a solar charger, the farm was divided into 7 paddocks, varying in size from 3 to 8 acres. With no seeding of additional forages, the farm now runs 25 to 30 pairs of spring calving cows and calves. The pastures seldom appear overgrazed and the cows usually have BCS of 5 or 6.

When beginning rotational grazing, it is advisable to begin by using temporary electric fencing before dividing paddocks with permanent fencing. By working with temporary fencing and observing grazing and watering and shade usage, the cattle farmer can determine where permanent fencing and additional water sources may be needed.

Number of Paddocks and Frequency of Moving – How many paddocks are necessary to begin rotational grazing? The simple answer is 2; however, it is important to realize that improved forage utilization will occur by adding additional paddocks to allow for longer periods of rest and recovery for each paddock. Research data indicate that efficiency of pasture utilization will increase with each added paddock up to about 8. There are no disadvantages to having more than 8 paddocks, but the improvement in utilization by adding paddocks beyond 8 is usually minimal. One of the most important concepts for success in rotational grazing is the need for rest and recovery of pastures. It is probably a fair statement to say that even the most experienced graziers often do not provide enough time for pasture rest and recovery, particularly during periods of drought. Dividing pastures into more paddocks simply allows for more management control of the available forages.

How often should the cattle be moved? This is a common question that cattle farmers ask when considering rotational grazing; however, there is NO simple answer. The best answer is that the cattle should usually be moved when about half of the available forage has been consumed. The real “art of becoming a good grazier” is in learning to recognize when cattle need to be moved. Or stated another way, the art is in recognizing the “cattle signals” that indicate the cattle should be moved. Cattle quickly learn to recognize the sounds and appearance of the vehicles that are used by those moving the cattle. When the sights and sounds of those people and/or vehicles are recognized, the cattle will usually signal if it is time to rotate.

Maintaining a Mixture of Legumes in Fescue Pastures – Adding legumes to fescue pastures will increase the protein content of the forage mixture, dilute the detrimental effects of the fescue endophyte, and fix nitrogen to enhance the growth of grasses. This is particularly important for late spring and summer grazing since fescue tends to become less palatable and much slower in growth as temperatures increase during the summer. For spring and summer grazing, it is desirable to have both red and white clovers in the pasture mix. Korean, Kobe, or Legend lespedeza can also provide excellent late summer grazing.

Adding Warm Season Grasses – There are several warm season grasses that can be utilized during the summer when fescue becomes somewhat dormant and unpalatable. Crabgrass and Johnson grass are recognized as pests for crop farmers, but are two of the very best grasses for summer grazing. Native crabgrass or one of the improved varieties, Red River or Quick-N-Big®, developed by Dr. Dalrymple at the Noble Foundation in OK can provide excellent grazing during the hot summer. Most farmers have probably noticed that if patches of crabgrass are available, cattle will graze the crabgrass before any other forage species. Johnson grass is also highly palatable and grows rapidly during the summer. Beef cattle producers should treat Johnson grass as a luxury rather than as a pest. Also, millet, sudan grass, and sudan x sorghum hybrids are grasses that can be seeded to provide grazing during the summer months.

Using Winter Annuals for Late Fall and Early Spring Grazing – Probably the two most desirable winter annuals are cereal rye and annual rye grass. These two forages can be sown together, separately as a monoculture, or sown into an existing fescue stand. Marshall rye grass has been a very popular choice to use in either setting. A quick recovery time following grazing is a positive attribute of Marshall rye grass. Other crops such as some of the brassicas have been used successfully by many farmers.

Net Results of Rotational Grazing and Improved Pasture Management

• Increased microbial and earthworm activity results in improved soil health. As the soil health is improved, the need for fertilizer application declines.
• More even distribution of manure over the pastures results in better utilization of the manure for fertilizer.
• Appropriate ground cover reduces water runoff resulting in greater water supplying capacity of the soil.
• When the ground is covered with desirable forage plants, weeds are less likely to become established.
• An extended grazing season decreases the need for stored and purchased feedstuffs.
• Cattle performance improves and the stocking rate can be increased.

These results increase profitability by reducing feed, labor and management cost per pound of calf marketed!!! Almost always, total pounds produced per acre will also be greatly increased!!!

by Gordon Jones, WKU Animal Science Professor (Retired)

There are tremendous differences in value between the “best” and “worst” feeder cattle marketed in KY. Do the prices received for feeder cattle in KY reflect these differences? The prices at most sale barns or even on internet auctions do not account for the real differences in value that exist for feeder cattle. For a group of 156 KY cattle finished recently at Tri County Feeders in Iowa, there was greater than a $200/head difference in profitability between the top 1/3 and bottom 1/3 of the cattle. Trends in the US and export markets indicate these price differences will become even greater over time.

How much do stockering operations and feedlots know about the calves they purchase? Data provide transparency to the potential buyers. Modern data management systems allow buyers of calves to record information of economic importance. Data concerning morbidity and mortality rates as well as costs related to treatment are maintained by stocker and feedlot operations. In addition, growth rate and feed conversion data is calculated and recorded for each lot of calves. In recent years, more cattle are sold on a carcass grid system allowing both quality grade and yield grade information to be recorded. This recorded information provides prospective buyers the information needed to identify their preferred sources of cattle. This data also provides the basis to determine if premiums are to be paid. In the future, the price of cattle may be largely determined by their genetic information, and over time, feeders and packers will demand increasingly more data.

Short Term Management Practices

Routine management practices such as castrating, dehorning, weaning, vaccinating, and backgrounding or preconditioning all have economic value to prospective buyers. Admittedly, marketing methods are associated with the degree to which these management practices influence the price of feeder calves. Furthermore, it is difficult to get optimal return from any of these management practices unless calves can be grouped and sold in truckload lots.

CPH 45® is a KY marketing program that is designed to allow both small and larger producers to take advantage of these management practices. In CPH 45® sales, calves are graded and comingled. This practice provides larger groups of calves of similar type that have been managed and vaccinated according to the specifications of the program. There are also progressive livestock markets that offer special sales for calves with documented management and vaccination programs. In most of these special sales, calves are comingled in order to increase lot size to attract more potential buyers. There are also video auctions conducted by KY markets and national firms that provide the opportunity for monetary compensation for recommended management and vaccination practices. In order to utilize the video marketing venue, it is generally necessary to market in truckload lots.

Long Term Management Decisions and Practices

The first step involved in moving a cattle operation to a value based production and marketing system is to establish a defined calving season. It is challenging to conduct industry recommended management practices without a defined calving season. Of course, the shorter the calving season the better from a management standpoint. A practical goal for most KY farms would be a breeding season of 45 to 60 days. If converting from calving throughout the year to a defined season, too many open cows may become a problem. After transitioning to a defined calving season, most producers soon embrace the interactions of genetics, management and nutrition that are necessary to maintain a short calving season. The success of a short calving season is dependent on pregnancy checking and culling of open cows.

Cow identification is another critical step toward value based production. Identification of cows does NOT necessarily mean that calves must be tagged at birth. Tagging at birth is an excellent practice for those who have the time and labor to get this accomplished, but tagging the calves at vaccination can provide the opportunity to match calves with cows. The main reason for identifying calves is to determine which cows may need to be culled from the herd.

There is simply no way to refute the fact that selling in truckload lots is the first step toward obtaining market premiums and avoiding discounts. This does NOT mean that each producer must have enough calves on his own to fill the truck. In KY where there are many smaller producers, cooperation and coordination are essential in forming marketing groups. The Barren Beef Group, presently with 11 members, has been in operation for about 20 years. These producers coordinate genetics and management practices allowing several uniform loads of comingled calves to be marketed each year. There is no set manner in which these comingled groups are marketed; however, each group must decide on the marketing venue. Another value of forming groups of this nature may be in group purchasing and the education obtained by learning from other members of the group.

The next step toward garnering premiums is finding the right system to use for documenting the “true” superiority of calves that makes them worth more money. The genetic evaluation systems of major breed associations have advanced to the point that it is possible to predict the performance of progeny of sires based on their EPDs. Feedlot operators are interested in cattle that grow fast and efficiently and produce high quality grading carcasses with limited waste fat. EPDs for growth, marbling, ribeye area and feed intake provide the information needed by feedlots to predict the profitability of calves. Several systems are already being used by producers to document the value of feeder calves. An excellent article written by Dr. Bob Hough and published in this issue of Cow County News describes those systems and the manner in which they may be utilized in the future.

Summary

All indications are that prospective feeder cattle buyers are becoming more discriminating and most likely rewards for superior management will become greater in the future. Also, the discounts for substandard calves will increase during the next few years. The recommended protocols of castrating, vaccinating, dehorning, weaning, and preconditioning will be essential to avoid discounts at the market place. Proven marketing methods that result in rewards for superior management are selling in organized graded sales or cooperating with other producers in putting together truckload lots. In the future, buyers will demand more and more information to aid them in predicting the performance and carcass characteristics of feeder cattle. Therefore, using superior genetics that can be documented will likely become necessary to optimize premiums and avoid discounts in the future.

by Gordon Jones, WKU Animal Science Professor (Retired)

During the last two decades, programs have been developed and utilized to provide cow/calf operations the opportunity to gain premiums for “superior” quality calves. The majority of these programs have related to health protocols and management practices. The most notable of these programs in KY has been the CPH 45 approach. CPH 45 is based on specific health and management criteria. This protocol has resulted in calves that are less prone to sickness, exhibit better performance in the feedlot, and yield higher quality carcasses than calves that have not been on a premium program. There are many programs in various parts of the US that are quite similar to CPH 45.

According to industry experts, programs such as CPH 45 were gaining traction prior to 2014. However, auction market personnel and cattle buyers are now quick to point out that the industry has taken a huge backslide in health and management practices because of the unprecedented high cattle prices during 2014 and 2015. Instead of weaning calves and pre-conditioning them with two rounds of respiratory vaccines, many producers were simply selling calves “straight off the cows” in order to reap the benefits of the high cattle prices.

Perhaps reflecting on the swine industry of the early 1990’s could provide a glimpse of the future direction of the cattle industry. Pork packers began to advise producers of the changes that were needed in the swine industry to provide more desirable products for consumers and to eliminate wastes for the packers. The large integrated swine operations took notice and began to produce market hogs that were packer acceptable. However, many small swine producers continued to “do business as usual”. Packers established merit buying systems with discounts MUCH greater than the premiums. It became evident that if producers wished to stay economically viable in the swine industry, their pigs had to meet packer expectations. As this system progressed, some producers were getting financially robbed because of the huge packer discounts. When the packers were able to acquire enough pigs to meet their expectations, many producers simply had no viable market for their pigs—packers simply refused to buy the pigs that did not conform to their specifications.

Now, could a similar scenario occur in the cattle industry? This scenario may not occur to the extent that it occurred in the swine industry because the cattle industry is by necessity more segmented. Only a small portion of cow/calf operators ever have direct communication with the packer that will eventually harvest their calves. As discussed in previous articles, the beef industry has three distinctly specialized production segments. Cow/calf producers have tremendous capital outlay in land resources and usually concentrate efforts toward producing calves up to or shortly past weaning. Stocker operators take advantage of the ruminant’s ability to convert forages or by-product feedstuffs into cheap gains. The stockering segment is necessary because this segment plays the role of leveling the supply of cattle throughout the year. The feedlot segment concentrates on finishing cattle or feeding cattle to allow deposition of marbling to produce high quality beef carcasses.

There is a viable portion of the stockering segment, particularly in the southeastern US, that concentrates efforts on taking substandard calves and “straightening them out” to become acceptable mainstream calves. These substandard calves are usually purchased at prices that are well below industry average prices for their respective weights. The calves are designated as substandard for multiple reasons such as small lot sizes, bulls that have not been castrated, calves with eye lesions or horns, mixed colors, and a myriad of other characteristics that can be identified to make calves appear different than mainstream calves.

Even though the cattle industry may not get to the point that there will be NO market for inferior cattle, there is little doubt that the price difference between industry preferred feeder cattle and those deemed substandard will become increasingly greater as years go by. So, now is the time for producers to plan management, health and genetics programs that will make calves attractive to buyers that are willing to pay premiums for cattle that meet their specifications. My article next month will address specific strategies to garner premiums and avoid discounts.

by Gordon Jones, Ph.D.

Efficiency has been one of the major buzz words in the beef industry for the last few years being discussed at every level of the beef production chain. Many outstanding beef cattle researchers have delved into research relating in some way to measuring and defining efficiency of beef production, and most breed associations have made some attempt to include measures of efficiency in their suite of Expected Progeny Differences (EPD’s) or Index values. Also, many seedstock producers promote bulls as being selected to improve some parameter of production efficiency.

Kentucky cattle producers are fortunate that efforts have been made to provide sound scientific information to them. Dr. Jeff Lehmkuhler from UK had the foresight to write a grant proposal to secure funding for an annual Efficiency Conference to be held each year at the KCA Convention. The inaugural Efficiency Conference was held in 2013 with subsequent conferences in 2014 and 2015. It is not too early to begin making plans to attend the 2016 Efficiency Conference which will be held in conjunction with the KCA Convention in Owensboro, KY on Friday, January 15, 2016.

Register for the KCA Beef Efficiency Conference

In addressing beef production efficiency, discussion should begin with cow efficiency. Dr. Roy Burris did an excellent job of laying the basic groundwork relating to cow efficiency in his March Cow Country News article. Dr. Burris suggested that the long used ratio of calf weaning weight to cow weight was a good starting point to consider. He suggested a goal of 50% or greater with a calf of “high value”. It is important to emphasize producing a “high value” feeder calf or a replacement heifer, and one of the main ways to get uniform calves of higher value is to get a large percentage of the calves born during the first 30 days of the calving season. Heifers born early in the calving season usually reach puberty and begin to cycle earlier than heifers born later in the calving season. Furthermore, heifers that become pregnant early in the breeding season and calve in the first one third of the calving season usually have much greater lifetime production compared to heifers that calve later in the season. So, the most important efficiency to emphasize for cow/calf producers in KY is reproductive efficiency.

Producers should set reproductive goals for their farms and work toward achieving those goals. A realistic goal is a 60 to 75 day calving season with 70% of the calves being born during the first 30 days of the season. It is also realistic to expect greater than a 95% calf crop (calves weaned/cows exposed to the bull). Another goal should relate to longevity of production, and a realistic goal is for cows to calve regularly for 10 to 12 years. Most economic research shows longevity of production or cow stayability to be the greatest profit driver for cow/calf herds. Achieving these ambitious goals involves both genetics and the environmental factors of nutrition, herd health, and outstanding husbandry.

Now what do we know about the science of brood cow efficiency? We know clearly that as cow size increases the nutritional requirements for body maintenance increase. Maintenance requirements increase at the 0.7 power of body weight which means that an 1100 pound cow has a 7% greater requirement than a 1000 pound cow and a 1400 pound cow would have a 28% greater requirement for maintenance than a 1000 pound cow. Dr. Gene Rouse, Professor Emeritus of Animal Science at Iowa State University shared that 70% of the feed or nutrient use in the US beef industry is for body maintenance and only 30% is actually used for production. Consequently, any time the maintenance requirement for cattle is reduced, there will likely be an improvement in efficiency. This concept applies to brood cows as well as for cattle in the stockering and finishing phases of production.

It should be clear that cows with more milk production potential have greater nutrient requirements during lactation, but researchers at the University of Nebraska and at the US Meat Animal Research Center have shown that cows with higher milk production potential also have higher maintenance requirements during the dry period as well. This is related to the fact that cows with greater milk production potential have greater visceral organ mass relative to empty body weight compared to cows with lower milk production potential. The rumen, small and large intestines, liver, heart, and kidneys tend to be larger in cows with more milk production potential. The gastro intestinal tract and liver make up only 10% of the cow’s body mass, but combine to use 40 to 50% of total energy expenditure in a beef cow.

There is no argument about the need for an adequate level of high quality colostrum to provide antibody protection to the newborn calf. Also, an adequate supply of milk is necessary to provide nutrition to the calf until the calf becomes capable of grazing or consuming enough stored roughages for optimal growth. Since genetic evaluation systems have included milk EPD’s, many breeders have continually selected to increase milk production potential. The result is that many commercial cows today have very high milk production potential. So, how efficiently do calves convert milk to weight gain? Lewis and co-workers at the University of Nebraska compared the pounds of milk required per pound of calf gain for low, medium and high milk production cows and found the conversion ratio of milk to calf weight gain to be 11.6, 15.2 and 52.6 for the low, medium and high milk producing cows, respectively. These data indicate that calves are much less efficient in converting large volumes of milk to weight gain. Consequently, meeting the nutrient requirements of cows with high milk production potential may be a wasteful use of feedstuffs.

Another concern about cows with high milk production potential relates to what may happen if feed/forage supplies are limited such as in a drought year. Dr. Dave Lalman’s work at Oklahoma State University shows that cows with high milk production potential may actually produce less milk than cows with lower milk production potential in situations where feed resources are restricted. The other net result for the cows with high milk production potential is that those cows are likely to be in a state of negative energy balance when feed resources are limited; thus, the likelihood of those cows becoming pregnant in a 60 to 75-day breeding season is reduced.

In summary, to realize optimal efficiency in the cow herd, it is of extreme importance to have cows that are adapted to the farm environment and that thrive and reproduce on the available forage resources of the farm. Identifying and producing or purchasing cows of optimal size and milk production potential for a particular farm is the ideal way to have an efficient cow/calf operation in KY. There are many advantages to having a relatively short calving season with a high percentage of calves born during the first 30 days of the season. Efficiency in the growing and finishing phases of production will be discussed next month.