High fuel prices are putting the hurt on Southeastern cattle operations
It's hard to say who is the most stressed by the 1,200-mile ride to feedlot country, the calves or the person paying the shipping bill. While exorbitant fuel prices are taking a chunk out of budgets all over the country, producers far from the feedyards are especially hard hit.
Mike Whitehead knows that from almost all angles. He's an auction barn owner, he preconditions cattle both for himself and on a custom basis, he's in the cow-calf business and he hauls cattle.
“I'd say the calves coming through the barn are a nickel to a dime off what they were this time last year,” says the Blakely, GA, cattleman. Little wonder. Speaking from the cattle-hauling side, Whitehead says, “When fuel was $2.50/gal., it cost 5¢/lb. to ship a calf. Now it's 10¢. Our rate has gone up from $2/loaded mile to $4.25. It costs me $30,000/month to run three trucks. That puts more cost on the cattle in the feedyard.”
Once again, he knows firsthand since he partners on cattle in a Texas feedlot. “That hasn't been very pretty the last year. In December we shipped calves weighing 575 lbs. They were delivered at $1.08. They are coming out now losing $75/head.”
While much of that is due to horrendous corn prices, Whitehead points the blame for 25% of the red ink to fuel costs.
In Preston, GA, Jimbo Moore is feeling the same pinch. He and his father Buster, brother Rusty, and right-hand man Chris Howell precondition around 4,000 calves/year. They normally retain ownership and ship five loads/month to feedlots in Nebraska and Kansas.
“Last year, we could ship a calf for 6¢/lb. Now it's 10¢. That's $2,000 more a load you have to make up,” Moore says.
It isn't happening. Like Whitehead and other feeders, he's seeing negative returns. “Eighteen months ago, I had cattle that went to the feedlot with a projected cost of gain at 65¢. Now it's 95¢.”
Moore also sells feeder cattle and is feeling the effects of sky-high diesel prices on the basis. “The futures are $115 and they take 10¢/lb. off for freight.”
Walt Prevatt, Auburn University Extension economist, is seeing the same thing. “Normally the basis here is 1-3¢ off the Chicago price. This year it is 8-12¢.” He adds, “That is transportation and handling plus a fudge factor for the uncertainty of corn prices.”
While much of battering from fuel prices is unavoidable, both Whitehead and Moore are taking steps to manage around it.
Whitehead says, “We have six cattle trailers. I'm only running four. There aren't as many cattle to haul anyway. Our producers have gotten out of the business because of three years of drought and high expenses.”
Whitehead also understands how his cow-calf customers feel about their narrow margins. “We have 350 mama cows. I know what fertilizer costs.” As a result of the spike in both the fertilizer and application costs, combined with drought, he's cut way down on fertilizer for his pastures and is mostly just spreading lime.
Prevatt says haymaking is another area producers can shave a bit off their breakeven costs. “The large majority of people don't need to put up hay. We have it budgeted at $132/ton. Bermudagrass hay is selling for $100/ton. Putting up 400 tons or more lowers the breakeven price; or if you also use your equipment for row crops, that helps. But if you're only putting up 100 to 200 rolls, it's way too expensive.”
In Moore's case, he quit buying cattle in mid-July and didn't start back again until late August. “When corn was almost $8/bu. and diesel was close to $5/gal., it just didn't make sense. We wanted to work on our facilities anyway.”
He and his family also bought a semi-truck and trailer. His father now drives it on the feedlot hauls. “Now, instead of writing a check to whoever, I write it to Moore Brothers. It at least makes me feel a little better.”
Becky Mills is a freelance writer based in Cuthbert, GA.