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The Cattle Business -- Profit Opportunities
Livestock Update, December 1999
Bill R. McKinnon, Extension Animal Scientist, Marketing, Virginia Tech
The current feed and cattle situation in Virginia continues to offer astute operators some apparent excellent profit opportunities over the next six to twelve months. The drought of 1999 has left the state short of forage supplies for the winter. Low feed supplies have caused cow/calf operators to ship huge numbers of cows to town and reduce their normal replacement heifer retention plans. Stocker cattle operators have passed on stockpiling lightweight calves this fall because of short feed.
The current conditions set in motion the scenario for a hot strain of "grass fever" in the spring of 2000. It is hard to imagine many quality grass weight steers below $1 per pound next spring. The excellent manager who can handle three-weight and four-weight calves through the winter should be well rewarded for his effort.
It is unfortunate that so many Virginia cow/calf operators had to trim back their females at the dawn of the high price phase of the current cattle cycle. When the grass greens next spring, there should be strong demand for cow/calf pairs, bred heifers, and quality open heifers. There appears to be the opportunity to add several hundred dollars to the value of bred cows by wintering and calving them out. The holder of replacement quality heifers should be well paid for his effort and management by producing bred heifers for sale in the spring or fall of 2000.
Obviously, the limiting factor for many operations is feed and primarily energy. If there is a bright side to the current feed situation, it is that most grains are at their lowest prices in over 10 years. The relative prices of grains and byproduct feeds compared to forages means that the cheapest sources of energy will most likely come from alternative feeds.
In most situations, energy will be the most limiting nutrient. To compare the cost effectiveness of alternative feeds, operators should compare the relative costs on a cost per pound of energy or TDN (Total Digestible Nutrients) basis. To make a fair comparison, the producer must have three pieces of information: cost per unit of feed, percent dry matter of the feed, and percent TDN. To calculate for cost per pound of TDN, there are three steps.
| Example: Corn $90/ton, 87% Dry Matter, 88% TDN | |||||||||
| Step 1: | Calculate cost per pound of feed (divide cost/unit by pounds/unit) | $90 / 2000 lb. = $.045/lb. | |||||||
| Step 2: | Calculate cost per pound of dry matter (divide cost/lb. by %D.M.) | $.045 / .87(dry matter %) = $.052/lb | |||||||
| Step 3: | Calculate cost per pound of TDN (divide cost/lb. DM by %TDN) | $.052 / .88(TDN%) = $.059/lb. | |||||||
Example: Grass Hay
| | $70/ton, 90% Dry Matter, 52% TDN | $70 / 2000 lb = $.035/lb. $.035 / .90 = $.039/lb. Dry matter $.039 / .52 = $.075/lb. TDN |