Salvaging a Profit in the Current Cattle Market
By Gabe Brown and Shane New, Understanding Ag, LLC
The continuing downward slide in the cattle market has left many with knots in their stomachs. Should one “jump ship” and sell at what is most likely a loss, or does one hang on for a while longer? Instead of making a quick decision based on emotion, let’s slow down and look at the big picture. This is where the power of being adaptive needs to be applied.
First, one needs to look at their financial obligations. When does money need to come in to service existing debt? If we can add margin to the cattle, would the banker allow us to do that before requesting payment?
Second, take inventories. Whether processed feed or forage available for grazing, how much feed is available? Do we have enough of it to take us to early May?
Third, where can we use these livestock as a tool to address any resource concerns we may have? Do we have a cropland field that would benefit from having a diverse cover crop grazed by animals?
Why not consider taking that crop field, which, with today’s commodity prices, projects little if any profit and instead grow a cover crop? This will not only advance soil health but will give us the opportunity to put considerable low-cost gain on these animals.
So, let’s look at the math. We will use eastern Kansas in this example. Average non-irrigated cropland rents for $100/acre, for which we will have the following expenses:
We will start grazing this mix when it is approximately 14” tall. Realize that this will be growing rapidly, hence the reason we start grazing at that short height.
At that time there will only be about 490# of dry matter per acre. If our calves weigh an average of 700# each, they will eat 21#/day. This means one acre will provide enough forage for 23 head for one day. Depending on the health of your soil, and animal genetics, these stockers should be able to gain over 2# per day, resulting in a 46# per-acre in gain for this one grazing.
At today’s depressed prices, these 7 weight calves would bring $1.30/#.
Forty-six pounds times $1.30 equals $59.80/acre.
After ample recovery time there should be 24 inches of growth when we graze the second time. This would equate to 840# of dry matter per acre.
Those calves will now be at 780# and need 23.4#/day. This means we can now graze 36 head on an acre for one day.
Their gain will increase as the forage quality increases, leading to an 81#/per-acre gain. So 81 x $1.25 equals $101.25/acre.
Add the $101.25 to the $59.80 and we get $161.05/acre. So, $161.05 minus $120.24 equals a net profit of $40.81/acre.
AND, we are not done yet. It is only mid June. We could easily seed a diverse cover crop to address resource concerns and provide us with stockpiled winter forage.
Another option would be to double crop soybeans, sunflowers, sorghum, buckwheat, millet, or a myriad of other crops which have the potential to add profitability.
Importantly, these practices significantly improve soil health, which adds further value into the equation and provides...
1.Increased water infiltration.
2.Armor on the soil surface.
3.Improved nutrient cycle.
4.Improved scavenge and cycle nutrients for the following cash crop.
5.Increased organic matter.
7.Home for predator and pollinator insects.
8.Positive disruption, which advances soil biota.
9.Increased mycorrhizal fungi population.
10.Improved quality of life.
We realize that the markets look bleak today but it’s important to slow down, think the situation through AND consider the big picture. Using regenerative principles, we can make a profit while improving soil and ecosystem function— while also enjoying an improved quality of life.