In recent discussions with veterinarians and beef producers across the U.S., all agree it's a great time to be in the beef business. Despite the recent BSE case and a mostly closed export market, demand for beef is high and cattle prices are excellent.
So, is this a new era in beef production where we'll never see 500-lb. feeder steers trading for less than $80/cwt.? No one I talk with thinks this is the case. Maybe everyone remembers the wild predictions of corn “never going below $3/bu.” made back in 1996 when corn hit $5/bu. While everyone expects feeder calf prices to be excellent this fall, most see prices declining over the next five years.
Important herd tools
BEEF “Market Advisor” columnist, Harlan Hughes, advises readers to know their herd's unit cost of production (UCOP). This is a powerful tool if you're truly in the beef business.
Another important “must-have” is a portfolio on your cattle. Do you know the health status of your cattle once they leave your farm?
The fact is maybe your cattle are a source of angst for feedlot cowboys. Many studies show health has the highest correlation to profit in the feedlot. Healthy cattle grow and grade while sick cattle stall and become Standards.
What about growth rate and carcass quality; how do your cattle compare? Are your cattle the type that make a profit for the feeder and find tremendous acceptance with the consumer? Unfortunately, the answer of most producers to most or all of these questions is, “I don't know.”
While record-high prices over the past years have helped many operations pay off debt and add to family living, it's done nothing to build a portfolio on our cattle. It's hard to turn down a profit of $200/cow or more when selling calves at weaning, but now's the time to build this portfolio so when high calf prices retreat, your calves can command the price they deserve.
Building a portfolio
The easiest way to build a portfolio is to retain ownership of your calves through the feedlot phase. With today's calf prices at such high levels, however, retaining ownership on 100% of your calf crop — if you've never done it before — would be a huge risk. Cash flow would also be a huge concern if you normally sell calves before the end of the year.
But what about retaining ownership on a portion of your calves? If you have 200 cows and retain ownership on 20 head, that's only 10% of your calf crop. Many states have state-sponsored programs to make this a very easy option.
Our Indiana program has been a tremendous educational experience for participants. We now have herds that retain ownership of all their calves so they capture more of the value of their health and genetic programs. Other owners found they had health or genetic concerns that limited their profitability. Most found solutions to their weaknesses, and are now realizing more profit and selling a better product because they built a portfolio on their cattle.
Another option is to ask for health, growth and carcass data from your feedlot. This isn't a huge challenge if all your calves go to one lot, but that rarely happens. However, even the health, growth and carcass data on just a percentage of your cattle will help build your portfolio.
As the price of cattle decreases, the gap between high-dollar cattle (high health status, excellent growth, top quality carcass) and commodity cattle will widen. Now is the time to develop a portfolio on your cattle. If over the next 3-5 years you fail to build this portfolio, you will likely be selling commodity cattle for a much lower price than you deserve to receive.
W. Mark Hilton, DVM, is a clinical assistant professor of beef production medicine at Purdue University in West Lafayette, IN.