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Tips For Staying Profitable In A Depressed Livestock Market

By   /  February 13, 2017  /  9 Comments

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There has been quite a price change in the livestock world in the last two years. There has never been a time in recent history that cattle prices crashed as quickly as they did in the fall of 2015. Historically high prices were being paid for anything that looked like a cow. The new normal for 2014 and part of 2015 was rocket fuel prices never seen before in history.

Tons of folks threw caution to the wind and wanted to get in on the action of the super high cattle prices. I read an editorial during this feverish price action from a respected cattleman that predicted, “Prices would never go back down!” I kept the article for that quote, because this was the mentality during this phase of the cattle cycle.

From the USDA overview of the U.S. Cattle Industry

People just lost their common sense, completely bonkers. This guy had been in the cattle business his entire life, he got sucked in with the vacuum and hype that was running rampant. I’m sure most of you have heard it before but it is true, “There has never been a rock thrown high enough, that eventually it comes crashing back to earth.”

When you are dealing with commodities they always move up and down, period. It comes back to the mob mentality with humans, we certainly don’t want to miss out on what the rest of the mob is doing. We had local sale barns where black 2 day old bottle calves were selling for $700. Four hundred pound un-weaned calves were bringing $1400 right off the cow teat.

The bank lenders certainly add to the hype by giving loans when cattle prices are at their highest and refusing to give loans when cattle prices are low. When I was younger and just getting started in the cattle business, I experienced this situation with the banker. I got a loan from the banker when prices were high. I was wanting some of that high cattle price action!

It was not a pleasant ending for me. I remember going to make my yearly payment to the banker that winter. He exclaimed, “We had a pretty good year, how much do you need for next year?” I replied, “You had a good year, I didn’t think it was so hot.” I barely made enough to make the interest payment. There was nothing left in my pocket to live on.

The recent crazy prices wer the result of several scenario’s coming together at once. First were the droughts of 2011-2013 that severely impacted the major cattle growing states. Cow numbers were at historic lows due to whole ranches having to destock. Pasture land was at historic lows due to high grain prices several years earlier. Millions of acres of pastureland wer plowed up and put back in crop. Then in 2014 crop prices plummeted, making cheaper livestock feed available. Export markets for beef took off as well. So you add it all together, low cattle numbers, minimal pasture, low grain prices for feedlots, good export numbers and the rest was history.

The really astronomical part of this whole historic price peak in cattle was the fact that most of the really high cost producers were either barely breaking even or losing money. It’s hard to imagine that folks could lose money at those prices, but imagine what their balance sheet looks like with today’s cattle prices at half of what they were. Predictions are coming in that 20-25% of the cattleman today will go out of business in the next couple years if prices stay where they are today. That is a pretty somber trend that we sure don’t need. It would be nice to have more livestock operations out on the land instead of less.

Three Changes You Can Make

Send Iron Down the Road

Well we can do something about our costs of running a livestock operation if we focus on things that make an impact on our bottom line. First we need to eliminate waste or idle things that we do not need. The first thing on that list is iron. If it is iron and not used every couple days, sell it. Scrap metal prices are $145/ton, which have rebounded quite nicely since last fall at $50/ton. Get the unused iron off your farm and put the money in the bank, buy some livestock, reduce your debt load, etc. All that unused metal is simply rusting away.

Send Cows That Aren’t Working For You Down the Road

Go out and take an inspection of your cow herd. Look for any thin cows that are struggling in the winter conditions.  Any cows that gave you a dink calf last year should go. Bad udders? Temperamental cows? Anything that stands out, sell it.

Sell the grain bucket cows. These are the cows that need some grain every day to make it through the winter to spring grass. Beef cattle should never be fed grain if you want any money left in your pocket at the end of the year. These grain bucket cows do not have a large enough fermentation vat to hold the proper amount of forage for their body size. After several months of winter they look like they have been on a starvation diet with all their ribs showing. This is just wrong, cows should not look like this.

This cow is 3rd period bred and still has last years calf grazing with her. You gotta have gut in your cows!! Photo by Greg Judy

I was talking to a really conscientious beef extension fellow the other day. His job is to help folks out with suggestions and methods of improving their beef cattle operations. He is aggravated daily by watching these young guys struggling brutally to try and make the bills on their beef operations with giant cows.

These giant grain bucket cows are killing their bottom line, no chance of ever making a dime. They all dream of one day quitting their full time job in town to become a full time beef cattleman. He said it is depressing working with them, because they refuse to change anything. The all believe bigger is better. You can drag a horse to the water tank, but you can’t make them drink. You must be able to break outside the mold of what everybody else is doing to make money in today’s environment.

Choose Cows That Can Work For You

You need cows that can stay fat on your winter stockpiled grass without any supplementation. There are such cows out there that can make you a good living. They work for you instead of you working for them. These cows will have big guts to hold massive amounts of forage. A lot of the cows today have what we would call “pencil guts on them.” They weigh 1200-1500 pounds and require too much forage for simple daily body maintenance just to stay warm.

Your biggest savings in the beef cattle business is allowing the cattle to feed themselves every day of the year. This forage is grown in the pasture and the cows eat it right where it is growing. No hay period. Once you start carrying hay to livestock, your money is leaving your pocket at a rapid pace. This does require good grazing management of your pasture resources.

The best place to start is with the right size cows for eating your grass, not grain in a feed bunk. These cows will be in the range of 950 to 1100 pounds or so. Do not think that you can starve a profit out of a big old cow, it will not work. Keep your medium size cows fat on grass and they will winter just fine without any supplement. At the end of the day your profit is built in a cow/calf operation when you eliminate costly inputs and still get a nice calf born from the cow eating only grass.

Every overhead that you eliminate goes directly to your bottom line. When the cost of gain is based on your grass that is grown in your pasture and harvested by the cow, this insulates you from market price drops. Work on eliminating these costly inputs that are robbing you of a happy profitable lifestyle on your grazing operation. Grazing cattle is a blast when you can make money with your livestock operation no matter what the cattle prices do.

This picture, shows the blur of the cow tongue action ripping off her next bite of succulent stockpiled grass in February. Photo by Greg Judy

Some Sage Advice

Ian Mitchell Innes, my old friend from Africa that helps us with our annual mob grazing school, always tells me, “Greg it doesn’t matter what you get for your cattle, it matters what you have invested in producing that animal.” Pretty sage advice from someone that has not only survived South Africa policies but thrived by focusing on his pastures and removing the animals that don’t work. We have to be the predator in our herds today, just get rid of the ones that don’t work.

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About the author

contributor

Greg and Jan Judy of Clark, Missouri run a grazing operation on 1400 acres of leased land that includes 11 farms. Their successful custom grazing business is founded on holistic, high-density, planned grazing. They run cows, cow/calf pairs, bred heifers, stockers, a hair sheep flock, a goat herd, and Tamworth pigs. They also direct market grass-fed beef, lamb and pork. Greg's popularity as a speaker and author comes from his willingness to describe how anyone can use his grazing techniques to create lush forage, a sustainable environment and a successful business.

9 Comments

  1. Rob Havard says:

    Hi Greg,

    I’ve really benefited from your books and teaching in the past and just wanted to say thank you. I’ve gone from a 50 acre small holding and increased my acreage by about 180 acres every year for the last 3 years. When you know it’s difficult to make a loss it gives you confidence for expanding the business.

    One Question – How many acres per cow do you need for stockpiling them? I’m at pretty low stocking levels and would like a bit of a comparison about where I might get to.

    Many thanks.

    Rob.

    • Greg Judy says:

      Hi Rob,

      That is a pretty hard question to answer accurately without knowing the quality and quantity of your stockpile. On our stocking rate for our farm we are stocked at 1 animal unit (1000 lbs) per 2 acres of pasture.

      Before we switched to planned high density grazing we were stocked at 4 acres per 1000lbs.

      For winter forage calculations, take 3% of the body weight of your entire herd (daily forage required for the herd) and multiply this figure by your anticipated winter non growing season days. This gives you total pounds of forage for the winter for your herd.

      To calculate how much forage you have on your farm, google “grazing stick to assess pasture forage” This method teaches you how to calculate how much available forage you have available on your farm.

      Now you know how much forage is available to you on your farm for the winter. You know how much you need for your herd from your first calculation. You can now calculate how many grazing days of winter stockpile that you have in front of you. Add a 30 day drought reserve cushion for late spring green-up growing conditions. If you have a dry winter, slow growth spring, this drought reserve is critical.

  2. Nesikep says:

    Wow, if you consider a 950 lb cow “Medium”, I’d hate to see what a small cow looks like.

    I like my cows around 1300 lb or so and thick,.. I do agree that no beef cow should ever need grain…

    The old iron? well.. if you’re starved for cash, sure, send it along, but not before you *have* to… There’s nothing more expensive to own than NEW iron, even if you never turn the key… For the amount of money you get for an old working tractor, you can save a lot of money on the more expensive stuff.. Having several tractors, each with it’s own set of tasks, and each perfectly sized for the task saves money in the long run.

    • Greg Judy says:

      If those 1300 lb cows are working for you, by all means keep em. As long as they’re paying the bills and you’re having fun, then don’t change a thing.

  3. Amen Greg! the grazing gospel has been heard in new york!

    • Greg Judy says:

      Meg, my hat is off to you folks in New York that are pushing the grazing paradigm in the winter months. Keep up the great work. We need more young ones like you out on the land teaching the older generation that maybe there is a more profitable way of managing our livestock herds. When you get to the end of the calendar year, producers can keep some of the money on their farm instead of it all ending up in other peoples pockets.

  4. chip Hines says:

    One of the reasons for feed bucket cows are our Land Grant Universities when they decreed that producers had to increase weaning weights to become profitable. Their premise was “since you sell calves by the pound, more is better.” No one was thinking about the cost up front, which was ignored (apparently thinking raising a bigger calf was free), then when cows began getting larger, not understanding the result. On top of this producers were told they had to take better care of the cow (read more feed) it was a race to the bottom. This began in 1969. In 1979 I sat in a sale barn watching the calf sale. I realized 500 pound calves were only brining $10 a head more then 400 pounders. How is this making money? I thought there was some big secret I did not understand. Then it got worse. The universities and breed associations were on a roll with bigger performance numbers every year. Production and profit must be by the “acre”, not by the animal. That will lead back to the smaller, do it on their own, cows that Greg Judy and Ian are talking about.

    • Greg Judy says:

      Chip you are spot on with your remarks. I always wondered myself while watching auctions how folks could raise bigger calves on their farms and not get paid for it when they sell them. Another disturbing trend that is starting to be pushed by bigger is better is keeping beef cows in very large hoop barns their whole life. All the so called professionals claim it is a much more efficient system than letting the cows graze. Wonder how that is working out for them today with present day calf prices?

  5. Curt Gesch says:

    Ranchers and farmers in our area tend to increase their herds according to something other than sale price: forage price. They stock for a maximum-production year (of forages) which means either they can produce more or buy more cheaply. Stocking for optimum–not maximum–land usage and average production (though this changes as fast as the weather patterns recently) may help with the bad spells.

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