High feed costs again in 2019 have many producers wondering about the economics of overwintering their cows.
“The question is, is it even feasible to keep cows?” said Ted Nibourg, a farm business management specialist at the Alberta Ag-Info Centre. “Some are liquidating their entire herds. Others are culling heavily, and many are trying to find economical ways of maintaining them.”
The two main factors to consider in developing feeding economies are price and availability of feed.
“One factor to consider this winter will be the availability of quality forage,” he said. “Parts of the province experienced drought again this summer while others suffered the other end of the spectrum. The wet areas of the province had difficulty getting their hay off dry and many producers resorted to putting their forage up as silage or haylage.
“This tends to solve the supply dilemma locally, but it greatly increases transportation costs to areas of reduced supply as much of what is being trucked is water.”
To arrive at daily feed costs, Nibourg ran some rations through CowBytes to add perspective to feed price variations, and its effect on a producer’s bottom line.
“The rations assumed 1,400-pound cows at mid-pregnancy. The barley-straw ration priced barley at $5 per bushel and barley straw at $50 per ton.”
That produced a ration price of $2.20 per head per day.
“With a straight grass hay ration for hay priced at eight cents per pound, the daily cost increased to $2.75 per head,” said Nibourg. “Hay priced at 10 cents per pound jumped the daily cost to $3.40 per head. With hay at 12 cents per pound, the daily cost bounced up to $4.10 per head.”
Nibourg then ran the numbers through Rancher’s Risk and Return spreadsheet to look at the effect that varying feed prices have on a producer’s bottom line.
“Using a 100-head herd with a weaning percentage of 85 per cent, it assumed that 650-pound steer calves averaged $210 per cwt and 600-pound heifer calves averaged $190 per cwt. The feed costs for the barley-straw ration amounted to 53 per cent of the total production costs for the herd and resulted in a gross margin of $13,250.
“A hay ration priced at eight cents per pound increased feed costs to 58.5 per cent of total production costs and reduced the gross margin to minus $250 — basically break-even.”
With hay at 10 cents per pound, feed costs rose to 63.5 per cent of the total, resulting in a negative $15,131 gross margin. Feed costs increased to 68 per cent of total production costs for hay priced at 12 cents per pound and this resulted in a loss of $30,350.
“Feed costs this winter are basically charges against next year’s calf crop,” said Nibourg. “Break-evens in the fall of 2020 for this example herd on a barley-straw ration, comes in at $176 per cwt for next year’s calves.
“The herd on eight-cent-per-pound hay ration would need $202 per cwt to break even. At 10 cents per pound, break-evens are $229 per cwt. Break-evens for 12-cent-per-pound hay are $258 per cwt.”
The analysis underscores the necessity of managing feed costs for a cow-calf operator, he said.
CowBytes is beef ration balancing software that can be purchased online at alberta.ca.