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Cattlemen’s Association hears tips from UK agricultural economist

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By Larry Rowell

A University of Kentucky livestock economist told a recent gathering of local beef cattle producers that the beef cattle market is “super strong” and producers have several things working in their favor right now.

Dr. Kenny Burdine, a professor at UK, spoke to 105 members of the Casey County Cattlemen’s Association on Feb. 20 at the Central Kentucky AG/EXPO Center.

Burdine said the biggest factor driving the feeder cattle markets right now is corn prices.

“The last two years for me have been an absolute clinic on how corn crops can impact feeder cattle markets. We’ve seen a $3 swing in corn prices in the last 24 months, from the low to mid $7s in the spring of 2012 and we’re in the $4 range again,” he said.

And with every $1 or so in corn prices, Burdine said, that translates typically to something like $4 per 100 on heavy feeders and $5-$6 on calves.

The UK economist also mentioned the USDA’s release of cattle inventory numbers for January 2014.

“Our beef cow numbers nationwide were down yet again. We had a lot of weather challenges. The southern plains were extremely dry driving beef cows down another percent from January 2013-January 2014,” Burdine said.

However, the number of heifers held for beef development, to be replacement heifers, was up about 2 percent, but that’s equivalent to three-tenths of 1 percent of the cattle market, he said.

Burdine, as economists do, predicted that cattle numbers will begin to move on the cow side more than on the heifer side of the market.

“We’ve had so many areas pressured with drought the last several years that we’ve had to cull pretty hard. At the same time, cull cattle prices in the last several months have been extremely high and I’m convinced that’s having an impact on our cattle numbers. My guess is the last few years we’ve probably reduced the average age of the cow herd,” Burdine said, adding this contributes to fewer cattle to supply a growing market.

Burdine also predicted that with a large corn carryover from last year, it builds a buffer going into 2014.

“That should make the grain market in 2014 a bit less price sensitive so you shouldn’t see the price swings you’ve seen in the last 2-3 years,” he said.

Burdine advised producers to abandon “old rules of thumb” in determining costs for a more detailed, pencil to paper method.

“Convince yourself that everything you do has dollar signs,” he said.

Burdine then presented attendees with nine management considerations for beef cattle production.

— Conduct a cost analysis and track all costs. “Good beef cattle producers have a good feel on what it costs to maintain cattle for a year. Burdine said that what frustrates him is the fact that very few beef cattle producers try to push the pencil to figure out what their costs are. With beef cow costs ranging from $450 to $650 per cow annually, producers who monitor their cost per cow can reasonably expect to make about $200 a cow above total cost.

— Optimize productivity per cow.

— Manage the calving season.

— Don’t waste your cheapest feed, which for at least eight months a year, is pasture land.

— Think hard about hay production. Grazing days cost one-half to two-thirds of what hay costs.

— Evaluate heifer development. While small operations often cannot justify developing their own heifers, cost comparisons should be made between heifer development and buying bred heifers.

— Use seasonality to make decisions. Burdine said that fall calving is on the rise because fall calvers enjoy stronger spring prices. Marketing cull cows should be in the spring but don’t hold cull cows until the following spring.

— Practice good financial practices. Every cattle producer should establish and work a budget for cattle much like they do for a household budget, and that includes saving money to weather some storms.

— Protect the downside by minimizing risks and making the proper use of insurance such as Livestock Risk Protection policies which provide protection against price declines, covering one calf to 100 calves, or more.