Economists say management makes the difference in cow-calf profits

Gracie Crayston

Studies done in Alberta and Saskatchewan both found that lowering 
days on feed is the key to boosting profitability

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Cow-calf producers should expect margins to shrink in the coming years and will have to improve their management to maintain profitability, say two economists.

Producers should work on the assumption that average margins will be five per cent smaller five years from now, said Dale Kaliel, senior production economist with Alberta Agriculture and Rural Development.

“Since BSE, many cattlemen have focused on cutting costs by shortening the grazing season,” added Kathy Larson, chief economist for the Western Beef Development Centre.

Larson’s 2012 study of cow-calf returns found feeding periods ranging from 130 to 219 days, but the most profitable 25 per cent of cattle operations were all at the lower end of that range. Those producers used a variety of methods to cut feed costs, including putting cows out on stockpiled grass and stubble, having them rustle in straw or chaff piles, or graze corn or swathed cereals. The cost of grazed feeds can be half to 75 per cent that of hay — and unlike hay, the cows move to the feed rather than having the producer fire up the tractor.

“Whatever you can do to keep the cows out of the yard and at least have them spread the manure on the field themselves, cuts the cost per pound of calf weaned,” said Larson.

Her study group averaged a profit of $46.54 for a 510-pound April calf — or nine cents per pound of calf weaned, after all costs, including unpaid labour and homegrown hay and pasture, were charged to the cows. Kaliel and Larson work together and said Alberta and Saskatchewan figures are very similar. Both also said margin per pound of weaned calf is the crucial number.

“The patterns are very consistent,” said Kaliel. “There’s been a shift to feeding less and grazing more. The best way to do that is different from one producer to another.”

“The cost per pound of weaned calf is about productivity,” added Larson. “You have to make the best of your pasture as your main source of feed, but also manage nutrition, herd health and breeding program.

“Marketing is important, too. A change in mindset, considering opportunities beyond the local auction mart can pay off — online sales or contracting with a feedlot, or look at preconditioned contract or auction sales.”

Most of the producers in the Saskatchewan study backgrounded at least some of their calves. But, when a 550-pound calf brings over $900, you have to wonder if this might be the year to take a holiday.

“Knowing your costs of production and your calves’ likely performance numbers (daily gain, cost of gain, total costs) as well as managing your market risk is key to profits from backgrounding,” said Larson.

Kaliel recommends focusing on things which offer the biggest payback — whether that’s grazing longer, using a new source of grazing, or shifting the calving season — but don’t negatively affect nutrition, herd health or breeding management.

“You can’t control the price you get — but you can manage what it costs you to produce each pound of calf,” said Kaliel, who is still accepting participants in the 2014 version of his AgriProfit$ program.

The participants provide financial data and receive back financial and benchmarking reports. Individual data is kept confidential.

“Our farm information and management tools can take you well beyond the simple benchmarks that are more common,” says Kaliel. “We analyze the cow herd plus other key enterprises of interest to the producer. The emphasis is on showing whether or not each aspect of the business is carrying its weight and contributing to profits.”

Kaliel can be reached at 780-427-5390.

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