The take-home pay for the cow-calf producer has dropped from 23 per cent of the total beef dollar to 6.4 per cent in the past 25 years. Is this madness, a market catastrophe or a slow erosion of production efficiencies?
During the past 25 years there have been price, inflation and currency fluctuations. It would be easy to point in that direction, but they alone cannot carry the blame of the diminishing return per beef dollar to the cow-calf producer.
There were production changes that contributed significantly to the drop in the cow-calf producer’s share of the beef dollar.
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First, the beef cow strayed from her purpose of a low-cost harvester of marginal land and trash to a high-cost occupant of expensive land. Then, with the introduction of new genetics, the industry was able to add to calf production but in doing so often increased the cow size. As beef production per unit increased, often so did the costs associated with it.
To be fair, each breed has desirable attributes, but realistically no breed can be all things to all people. In stretching the cow, we also increased her intake and added to her cost at a time when she needed to remain functional, fertile and feminine while being a low-cost harvester, preferably grazing much of the year.
The rail is not a maternal trait
The cow-calf industry has faithfully tried to serve many masters. At some point, there was a huge swing in the cow herd to produce calves with terminal attributes targeted for the packer rail and in some cases, the cow was selected with those traits. The rail is not a maternal trait and should not be a strong consideration in cow selection. Terminal sires can do that job as can expertise in the feeding industry.
The increase in the rail performance of the calf via the cow did not always translate into value for cattlemen as it contributed to infertility and feeding costs. The added calf weight can be directly related to the increase in cow weight with a net gain of zero.
The counter argument then shifts to salvage value. A bigger cow would have more salvage value. On a per-pound basis that is true. But if it costs an extra $100 per year to keep her and she lasts for six years, you need to recoup that $600 either from an extra $100 on the calf each year or as a lump sum in her salvage value. History tells us that neither is likely.
The real impact of salvage value played out in 2003 when cull cow prices collapsed and producers suddenly saw their margin evaporate. In the decade leading up to the market adjustment, many farms counted on the salvage value of the cows to cover losses or break evens on the calves.
“Weighing” on prices
One of the unseen effects of bigger cows is the added tonnage in the system. In times of fiscal stress when cattle, especially cows, are sold off, that volume becomes cumbersome to the beef pipeline. That has been one of the reasons why there was such a delay in the market rebound.
There is always a lot of discussion in favour of smaller cows and calves that add more value to the forages and decrease overall beef production, recognizing that this would be counterproductive to the feeding industry, a large user of energy with a yield/grade focus.
Which master does one serve? Has the industry gone mad trying to produce a super cow at all costs? And what of the end-users; do they want yield or quality?
The answer is in value. Today, many ranches benchmark their cow herds to take advantage of fine tuning production efficiencies in a maternal herd rather than counting on salvage value in a non-efficient herd and to identify areas of greatest economic contribution.
A successful cow-calf program marries technology, marketing and tradition. There is opportunity to DNA test and become part of supply chains that add value. Markets and market information are readily available and animals can be sold from the farm. Relationships form the basis of negotiating the needs of the ranch with the needs of the feedyard.
And finally, the consumer prefers quality attributes and nowhere in the cattlemen’s code are we forbidden from challenging the tough questions regarding quality and yield. The solutions for the ranch are on the ranch.
Rarely, if ever, has an increase in price been able to offset production inefficiencies and that is especially important to remember in this environment when calves and feeders are selling well. Regardless of the style or model of the calf, it is the cow factory that has to be a well-oiled, functional and highly maternal machine.
Brenda Schoepp is a market analyst and the owner and author of Beeflink, a national beef cattle market newsletter. A professional speaker and industry market and research consultant, she ranches near Rimbey, Alberta.[email protected]
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Whichmasterdoesone serve?Hastheindustry gonemadtryingto produceasupercowat allcosts?
