Cattlemen still waiting for herd expansion to begin
By Doug Rich
Beef producers are faced with two big questions right now. When will the rebuilding phase in the cattle industry begin, and how can they manage around fewer numbers of cattle until that happens?
Producers attending the 2012 KSU Beef Stocker Field Day went home with some possible answers for these important questions.
Glynn Tonsor, Ph.D., K-State professor of agriculture economics, said he expects the total number of cows to begin expanding next year with the peak expansion to occur in 2015. Herd expansion has been delayed one to two years by the severe drought this year and is dependent the weather next year. Currently over 77 percent of the cows in this country are located in regions with poor to very poor pasture conditions, according to Tonsor.
"While the total number of cows will expand next year, the total number of beef operations will decline," Tonsor said.
Until the expansion gets underway, concerns about excess capacity in the industry will remain. Tonsor said we have too much bunk space for the size of the calf crop. Calves coming in from Mexico are taking up the slack for the time being.
We are slaughtering fewer cattle, but these cattle have high carcass weights. Improvements in breeding and feeding efficiency have increased beef production per cow.
"We don't need the same number of cows we have had in the past," Tonsor said. "I don't think we will go back to the number of cows we had in the 1970s."
How to manage around fewer cattle was the subject of panel discussion following Tonsor's presentation. The panel included Margaret Ann Smith, Southlex Cattle company, Fairfield, Va.; Fred Berns, a stocker operator from Peabody, Kan.; Jeff George, with Finney County Feedyard, Inc.; and Ken Woods, a lending officer with Frontier Farm Credit.
Berns said they run a grass operation and currently maintain ownership through the feed yard. Typically they handle around 1,500 head of yearling cattle and a small cowherd on 10,000 acres of Flint Hills grass. They use cool-season grass in the spring, hay part of it in the summer, and use it again to start cattle in the fall.
"First and foremost we try to run a simple, simple operation utilizing grass," Bern said. "We are trying now to add more weight to the animal from our own resources. We are trying to diminish the cost of in and out expenses by trying to put 700 to 900 pounds on an animal instead of 200 to 300 pounds."
Woods said their customer base has continued to change with the smaller supply of cattle. His customers are developing more partnerships with feed yards and lenders. Woods said they are about a $1.4 billion dollar lending institution and about 30 percent of their business is focused on the cattle industry.
"It is becoming more of a relationship business," Woods said. "Capital requirements will continue to grow especially as they are holding cattle for a longer period of time."
Woods said with the smaller supplies and the increased price of the cattle, a lot of producers are using more risk management on the other end.
Smith said they began to see the decline in numbers five to six years ago when the economy started to go down. Most of the cattle operators in that part of the country are part time, working full-time jobs off the farm.
"What they use cattle for are their savings accounts," Smith said. "When they lost jobs or the mortgage problems hit them that is when they started to liquidate cows."
Smith said that is a big difference between here and back on the east coast. Cattle are not their main source of income, so they operate differently.
"That is why we have cattle year round," Smith said. "They market when they need money not when the market indicates they should market their cattle."
George said the feedlot sector has been very difficult for the last 12 to 16 months. There is too much bunk space. He said some changes need to occur and the thing that will force those changes is reduction of feed bunk space. George said he expects 5,000 to 10,000 head feed yard to go out of business.
"I don't know that a person should operate any differently in times of short supply," George said. "You always need to be a shrewd operators and know your costs. You need to know your breakeven costs."
The KSU Beef Stocker Field Day concluded with presentation on pasture weed control, purchasing commodity feeds, and by-product utilization.
Doug Rich can be reached by phone at 785-749-5304 or by email at firstname.lastname@example.org.