Is it time to sell cows, build herds, or get out?
By Doug Rich
This year it is nearly impossible to talk about the cattle industry in this country without talking about the drought in the southwestern U.S. At the K-State Beef conference in Manhattan, Kan., on Aug. 16 nearly every speaker alluded to the drought.
"The drought in the southern Plains has put pressure on the national herd and limited the number of states with the ability to expand their herds," said Glynn Tonsor, assistant professor of agricultural economics at K-State.
In July Tonsor said 40 percent of the beef cows in the U.S. were in states where 40 percent of the pastures were rated poor to very poor. Drought in the southwest and high cull cow prices in other areas has resulted in a large number cows leaving the herd this year.
"The drought is a big issue for the cow-calf segment of the beef industry," Tonsor said.
Tonsor said it might be 2014 before there is the potential to expand the national herd.
There are strategies that cattlemen can use if they are faced with the prospect of downsizing or selling off their cows. Southwest Area Extension Specialist Justin Waggoner said early weaning of calves reduces cow nutrient requirements and can increase the number of days cows can stay on grass.
"The goal of drought intervention is to match your herd to the available forage," Waggoner said.
Calves can be weaned as early as 45 days of age, but the best results have been when calves were weaned between 90 and 150 days of age. Research shows that this can reduce a cow's dry matter intake by 10 percent and reduce maintenance energy requirements by 28 percent.
If producers are planning to wean calves early Waggoner suggested delivering small amounts of feed to calves on pastures prior to weaning. Don't over feed the calves. Waggoner said to anticipate low feed intake since lightweight calves only consume 1 to 1.5 percent of their bodyweight.
Daytime temperatures have been extremely high this year and Waggoner said producers should take precautions when working cattle. He said to work cattle when it is cool, allow cattle plenty of pen space, provide adequate water supply, and think low stress.
A lactating 1,400-pound cow needs 30.3 pounds of dry forage, but a dry cow only needs 27.3 pounds of dry forage on a daily basis. Weaning calves 30 days early equals an extra week of grazing for dry cows.
Producers can stretch their forage supply by grazing underutilized areas in pastures. Waggoner said cattle could be enticed to use these areas by placement of minerals or supplements.
Waggoner said the long-term drought outlook is not good. The current weather pattern could last through the end of October.
"There does not appear to be much change in the moisture patterns," Waggoner said.
Another strategy that producers might consider is to implant cull cows. Chris Reinhardt, K-State Department of animal Sciences and Industry, said cull cows have a tremendous response to implants. The average daily gain can be increased 10 to 30 percent by using implants on cull cows. This could return an extra $75 per head to producers when the cows are sold, Reinhardt said.
Reinhardt said implants stimulate new lean growth in mature animals. Implants stimulate satellite cells that contribute to DNA.
"If you are going to feed cull cows you might benefit from using implants," Reinhardt. "They can make cows more efficient gainers."
Sell, build, or get out
Producers are faced with the decision to sell cows, to build their herds or to get out of the business.
"The correct answer will vary for every individual operation due to varying production and economic factors as well as personal goals and objectives," said Kevin Dhuyvetter, K-State professor of agricultural economics.
Selling cows might be the correct choice for producers with limited forage resources or those who are starting to transition out of the business, Dhuyvetter said. Except in the southern plains cull cow prices have been at record high prices.
There are tax implications if the decision is to sell cows. Justin Waggoner said a capital gains deferral is possible if more animals than usual business practices dictate were sold due to weather related conditions.
Some producers might decide to get out of the business. The reasons for this decision might include the stress of high input costs, price volatility and changes occurring in the industry.
"If you long term goal is to remain in the industry and your cost of production is average or better and you are willing to embrace new technologies, this could be a good time to add cows," Dhuyvetter said. "Cow numbers are low, calf prices are high and we will be short numbers for quite a while."
The impact of the drought in the southern plains will impact the entire beef industry and play a role in whatever producers decide to do.
Doug Rich can be reached by phone at 785-749-5304 or by e-mail at email@example.com.