Cattle Economics

Reproduction Is A Key To Improving Ranch Profitability

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If cattle producers want to increase profitability and whole-system efficiency, reproduction can have one of the greatest impacts.

“In today’s changing and volatile input markets, it is critical that, as individual producers and as an industry, we examine the economic efficiency of our production systems and be prepared to modify some of the rules of thumb that have guided decisions in the past.” So says Derrell Peel, Oklahoma State University Extension livestock marketing specialist.

Consider that dog-eared mantra that a dime’s difference in the cost of a bushel of corn pushes feeder cattle prices $1 in the opposite direction. Dillon Feuz, Utah State University agricultural economist, ran the numbers recently for the years 2002-2006 and 2007-2011 (Table 1). Change corn price $1/bu. and the price of heavyweight feeders goes 35¢ in the opposite direction; less for lighter weights.

Consider, too, the industry’s current fascination with selecting for feed efficiency, utilizing residual feed intake (RFI). The goal is sound. Whether or not it leads to increased economic efficiency is another question.

Scott Lake, University of Wyoming (UW) Extension beef cattle specialist, and Gary Moss, a UW animal science professor, say selecting for RFI or efficiency doesn’t necessarily translate into performance or profitability. They believe RFI and selecting for feed efficiency offer opportunity, but they stress that it has to be considered in tandem with everything else that affects profitability.

Consider the difference between a bull in a recent UW performance test that was among the top for positive RFI (a low score) and one that scored significantly lower (a high score).

Lake and Moss explain: “The difference in feed intake between the low-testing RFI bull (more feed efficiency) and the second highest RFI bull (lower feed efficiency) was a little over 3 lbs./day of feed. If this is translated to a cow and her performance, that would equate to about $54 of extra feed over the course of a six-month, winter-feeding period that the high-RFI cow would consume compared to a low-RFI cow. That’s assuming they perform similarly in efficiency to the bull test.”

In the case of these particular bulls, though, the less feed efficient one possessed weaning and yearling performance substantially superior to the more feed efficient one.

Extrapolating the difference in bull performance to the calves of their daughters, Lake and Moss explain, “If the low-RFI calf weighed 500 lbs. at weaning, the high-RFI cow would produce a calf weighing 600 lbs., again, assuming that calf performance will reflect that of the bull. With today’s cattle markets, even after considering a slide of 8¢, the heavier calf is worth about $96 more than the lighter calf. Simple math tells us that even after subtracting out the added feed costs, the heavier calf was worth $42 more than the lighter calf.”

The point of all of this is that the cow-calf industry stands at the cusp of historic opportunity. The cowherd has declined 7.2% in the last six years. Rebuilding the national herd to even the recent peak levels of 2006, means the addition of 2.4 million more cows. What those cows are will go a long way in determining where the industry can go.

Should they be capable of hitting Choice if it means sacrificing some carcass yield, and how much can be sacrificed to make it a wash? Do the potential savings in cow feed costs via selection for feed efficiency outweigh the potential performance lost in the calves? Can the industry seriously consider increased efficiency without being willing to embrace maternal heterosis more than it ever has? And on and on.

Getting the correct answer will depend on asking the correct questions and not confusing one thing with another. At least one of those answers remains the same as it’s always been.

“If cattle producers want to increase profitability and whole-system efficiency, reproduction can have one of the greatest impacts simply because even small calves are worth more than no calves,” say Lake and Moss.

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What's Cattle Economics?

Wes Ishmael provides tightly focused analysis and commentary on specific beef quality and marketing issues of practical importance to beef producers.

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Wes Ishmael

Among the industry’s most insightful thinkers, Wes Ishmael concentrates on industry price and market perspectives for BEEF magazine. Along with his monthly “Cattle Economics” column...

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