Monday, November 2, 2009

Chute N The Bull

People who study change and its causes have observed that change is

often caused by a disturbance. Production agriculture is in a period of
rapid change, with an economic environment that many have never
experienced. If the agricultural industry is changing, what has been the
disturbance? A few of the disturbances are the Renewable Fuels Standard,
higher incomes in the highly populated countries of China and India, a
lower value of the U.S. dollar relative to other currencies and higher
oil prices. These "disturbances" are causing us to change the way we
produce food and fiber.
No other sector in production agriculture has felt these disturbances
more than the cow-calf sector. Corn, the primary ingredient for
finishing cattle, has tripled in price in only a few short years. Corn
prices have influenced other feed inputs, such as byproduct and protein
feeds. This has escalated prices, causing the cost of gain in feed yards
to double. This phenomenon is causing cattle feeders to bid less for
calves and yearlings, thus lowering revenue to cow-calf producers.
Prices for fertilizer and fuel have also soared. Add in the increases in
steel prices for T-posts and barbed wire, and one can quickly see that
cow-calf producers, especially those who rely heavily on introduced
forages, are in a bind.
The Food and Agricultural Policy Research Institute, an agency that
develops long-term projections for agricultural commodities, foresees
negative cow-calf profitability for the five years starting with 2008.1
They predict profitability to decline to a low in 2010, with a $70 loss
per cow. This is a considerable difference from the $150 per cow profit
experienced during 2004 and 2005.
So is there anything cow-calf producers can do to increase their chances
of survival over the next five years? The answer is yes. There are
several possibilities, some of which will be more reasonable to
incorporate than others. In the end, each producer will need to analyze
his or her own situation and determine which changes are the most
logical and economical.
There are two basic components that determine profit - revenues and
costs. One producer may choose to concentrate on the revenue side while
another producer may choose to concentrate on the cost side or even work
on both revenues and costs. There are a couple of production practice
changes that seem most applicable to all producers. One of these is
applying fertilizer to introduced forages, i.e., bermudagrass, for the
purpose of providing enough forage to graze another cow. Unless a
cow-calf producer is producing animals that have some kind of added
value substantially above the commodity price, then it is unlikely they
can afford to purchase any nitrogen fertilizer, much less phosphorus. It
may be justified in the short run to apply fertilizer to allow for an
orderly plan of partial destocking of the breeding herd rather than have
a fire sale. Otherwise, cow-calf producers need to consider running
fewer cows and fertilizing less, if at all.
Another potential area to add profitability is to grow calves to heavier
weights. Historically, value of gain has been in the range of 50¢ to 60¢
per pound. Today's market is roughly paying $1 per pound. High cost of
gain in feed yards is causing them to place heavier calves. This has
driven up the price of 800- to 900-pound calves relative to 500- to
700-pound calves. The market is giving cow-calf producers a strong
signal to add weight to calves with grass. In many situations, the added
value of gain will even justify the use of fertilizer.
Many choices exist for cow-calf producers to incorporate new or
different production practices in order to survive the next five years.
Necessity is a huge motivator for creativity and invention. Agricultural
producers are among the best at facing change and I am optimistic about
the future. You can find this and past articles on the web at for your reference. Extension
programs serve of all ages regardless of socioeconomic color, sex, religion, disability, or national origin. The Texas A&M
University System, U.S. Department of Agriculture, and the County
Commissioners Courts of Texas Cooperating serve of all ages regardless
of socioeconomic level, race, color, sex, religion, disability, or
national origin. The Texas A&M University System, U.S. Department of
Agriculture, and the County Commissioners Courts of Texas Cooperating

Thank you,

Tommy Neyland
County Extension Agent
Texas Agrilife Extension Service
P.O. Box 188
Centerville, Texas 75833
903.536.2531 phone
903.536.3804 fax