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Heifer Or Bull — You Decide: More Commercial Cattleman Exploring Sexed Semen To Add Value To Calf Crop

Despite the price tag and lower conception rates, the popularity of using sexed semen in dairy and seedstock operations has grown in recent years. Now, thanks to advancements in accuracy and conception rates, commercial cow-calf producers are seeing it as a viable option to add value to their calf crop.

For Brent Mason, of Mason & Knox Ranch located in Frankfort, South Dakota the dollars and cents of using sexed semen in his commercial cow-calf and heifer development program just makes economic sense.

"We want to breed for replacement heifers, and with sexed semen, we can take our standout maternal cows and breed them for heifers," said Mason. "Then we can take our lower maternal cows and breed them with male semen and have feeder steers to sell. It's been quite beneficial in our heifer development program to be able to consistently breed for heifer calves that have lower birth weights and better maternal traits."

Sexed semen is created using a flow cytometer. Sperm cells are sorted based on differences in DNA content between X- and Y- chromosome-bearing sperm cells. Despite successfully being able to sort and freeze the sperm, the current technology has been plagued with issues of reduced viability and overall quality when thawing.

In an effort to improve sexed semen options for cattlemen, Mason & Knox Ranch has been involved in ongoing sexed semen studies with the University of Missouri (UM). In the most recent trial, UM evaluated 851 heifers at four locations, including Mason's ranch, comparing fixed-time artificial insemination (FTAI) with conventional semen verses SexedULTRA sex-sorted semen.

Developed by ST Genetics of Navasota, Texas, SexedUltra is the latest advancement in sexed semen technology. According to the UM researchers, "Pregnancy rates to AI following detected estrus are improved with SexedULTRA semen compared to sex-sorted semen produced using the previous generation XY technology. The improved speed and reduced sperm cell loss associated with the new technology facilitates use of higher sperm cell numbers per unit, above 2 million cells per unit concentration that has become standards for units of sex-sorted semen produced using the XY technology."

"We've been AI'ing for 32 years on our operation, and we currently AI all of our cows and offer two cycles of AI breeding to our heifers," said Mason, who put 500 heifers on the trial. "When we were approached to do this study, we were very interested in seeing how well our heifers would do on trial. I thought that there would probably be a big difference with conception rates between the conventional and sexed semen, but I was very pleased with how it turned out. In the last group of 100 head we pregnancy tested through ultrasound, there was a half percent difference between the sexed semen and conventional semen."

SexedULTRA had not yet been tested for FTAI, and researches wanted to look at efficacy rates following a 14-day CIDR-PG protocol using two of ST Genetics bull battery — Deer Valley Night Watchman and Gardiner Angus Ranch Predictor. Researchers recorded the pregnancy rates and discovered there was very little difference between heifers that received SexedULTRA semen at AI (52%; 218/422) and conventional semen at AI (60%; 257/429) and no difference in total pregnancy rate (89%) at the end of the 60 day breeding season.

"We were very pleased with how well SexedULTRA performed in the trial," said Aaron Arnett, ST Genetics director of beef genetics. "We are seeing huge improvements in conception rates over the previous versions of sexed semen technology. Our goal has been to determine how to make a product that is just about as fertile as conventional semen, and I think we are about there. This could be a potential game changer in the beef industry, and I think we are going to see more producers taking a second look at artificial insemination."

ST Genetics offers two outlets for producers to take advantage of sexed-semen technologies. First, the company has a bull lineup representing the industry's major breeds with conventional and sexed semen, both male and female, available for sale at http://www.stgen.com. Second, the company can sort and freeze semen on a rancher's own bull.

"We have a bull lineup with sorted semen that has four million cells per straw, and producers can choose which sex they want on most all of the bulls in our lineup," said Arnett. "We also have the option for custom collection of bulls, and any bull stud in the country can overnight ejaculates to ST Genetics and have that bull gender sorted."

Sexed-semen that is accurate, viable and affordable is opening up opportunities. Producers can expect to spend $10-20 more per straw than the typical conventional semen, but Arnett says the return on investment is worth considering the larger price tag.

"It's important to remember the potential return on investment," said Arnett. "Even with today's challenging market conditions, steer calves typically bring over $100 more per head than their heifer mates at weaning due to advantages in weight and price received per pound."

Embryologist Brett Tostenson works at Trans Ova Genetics at Yackley Ranches in Onida, South Dakota, where he sees both commercial and seedstock producers take advantage of sexed semen technology.

"Sexed semen is becoming more popular for commercial producers who are selling large groups of heifers," said Tostenson. "We have a client who will AI 800-1,000 heifers using sexed heifer semen and sells these females in the commercial market. His clients like to know there is a high likelihood of a heifer pregnancy, and there's a 95-95 percent accuracy rate for the correct sex using this sorted semen."

Tostenson said the ability for his clients, whether using in AI'ing a group of heifers or placing embryos in a donor cow, to consistently raise high-quality progeny is a valuable tool to advance the industry.

"The pros of this technology is consistency in the next generation," he said. "It's a beautiful thing if that's what you want, but there's always the risk of giving up genetic diversity and having a calf crop that doesn't work, too. Producers must weigh the associated risks as they make that choice."

At Trans Ova, the price for semen sorting and freezing fresh ejaculates varies depending on the concentration of the straw. . It's generally accepted that the higher the concentration, the better chances of conception. At two million sperm per straw, the price range is $35-50. For three million, the price is $50-70. For five million, the cost is $80-120. The price goes down based on the volume of straws ordered

"We see clients sell sexed-semen for $250-2,500, so there's definitely a market for this product and people willing to pay for a specific gender for a specific bull," said Tostenson.

At Riverview Dairy in Morris, Minn., sexed semen technology is an important tool used to produce both heifers and bulls.

"We use sexed semen on both the cows and heifers, and our conception rate is 30 percent for the cows and 45 percent for the heifers," said Conrad Spangler, DVM, on-staff veterinarian at Riverview Dairy. "We use Limousin sexed semen in our program to raise feeder steers since Jersey bull calves have very little value as feedlot animals. A Jersey-Limousin cross can go through our calf system and into a feedlot and do very well."

At other times in the cows' cycles, sexed semen for Jersey heifers is used to raise replacement heifers. Riverview Dairy has utilized sexed semen since 2011.

"We are able to reduce the number of jersey bull calves that we would otherwise get with conventional semen, so that's a big value to us," he said. "We get the best of both worlds this way and are able to raise high-quality Jersey heifers and Limousin-cross steers. The quality of the sexed semen has improved greatly in the last five years, so I think the popularity of this technology will only continue to grow."

Mason added, "If we can keep the conception rate within 5-8 percent of conventional semen, it will be very beneficial to the commercial cattleman. At that rate, I think this technology is very user-friendly and very attractive to a producer wanting to add value to their herd."

Building Better Replacement Heifers

Managing heifers is a double-edged sword.

On one hand, as the future of the cowherd, heifers are an important investment. However, due to their management needs and the two-year delay before they put a check in the bank, managers need every tool possible to make sure the heifers they're choosing are going to be a cost-effective addition to the herd.

One of the shiny, new tools in the toolbox is genotyping. Companies like GeneSeek now offer relatively low-cost DNA testing for heifers, which can be helpful for both commercial and seedstock producers, said John Paterson, territory manager for GeneSeek and professor emeritus from Montana State University.

Genomic testing heifers can add more data to selection decisions that have historically been based on looks. Genomic testing adds predictions about calving ease, birthweight, average daily gain and several other traits, depending on which profile the producer selects, in addition to confirming parentage. "Now you go out into 100 heifers and you can say, 'What are my top 25 heifers based on genomic testing? Now, do those agree with my eye?' It gives you a lot more information than you've ever had," Paterson said. "When it's so expensive to develop heifers, and the price of cattle has come down, you only want to keep the heifers that will make money for you."

Paterson says the test he recommends for most commercial herds involves creating an index with about 65 percent of the emphasis on maternal traits and 35 percent on growth and carcass traits. "We get ourselves into trouble when we select for single traits," he said.

The parental validation offers producers the information they need to make bull selection and culling decisions, Paterson said. "Say you've got three to four bulls out there with the cows. You go out in the fall and say, 'Man, I really like those calves. Who's the father of those calves?' Or you go out and there's a bunch of hairballs and you say, 'Man, who's the father of THOSE calves?' With multiple sires in a pasture you can decide which bulls are really working for you."

Genomic testing allows producers to change the direction of their program more quickly. With traditional methods, it took four years to see the results of a breeding decision when developing heifers. Now, producers can have an educated prediction of the success of their heifer choices before the heifer even leaves the cow.

Eventually, those predictions could happen before a heifer is even born. "We're even talking about taking 10 cells off an embryo and predicting six years into the future," Paterson said. "That technology is being used now, they're just trying to validate it."

The technology has been around for a long time in the dairy industry, where most of the emphasis is on maternal traits. "It's really caught fire [in the beef industry] in the last five years," Paterson said.

Until recently, the testing has been fairly cost-prohibitive for commercial producers. Now, the testing starts at $15 for a parentage verification test, with a six-trait genomic prediction adding $10 to that figure. A full 13-trait panel costs $40, but Paterson said for most commercial producers the $25 test is sufficient. He recommends the 13-trait panel for only the heifers that look really outstanding on the six-panel test.

For seedstock producers, a full genomic-enhanced EPD is available. The genomic testing isn't designed to replace the existing EPDs, but the goal is to make them more accurate.

"We want more and more animals in the database," Paterson said. "The DNA is matched against actual data, so the more information we have, the more accurate we will be."

While the shiny, new tools offer some intriguing insight into what makes a heifer successful,

Bob Weaber, Associate Professor of Animal Sciences at Kansas State University, says when it comes to traits like cow longevity and fertility, genetics account for only 10 to 20 percent of variation in those traits, with management and environmental effects accounting for the vast majority.

That's why Matt Stockton, associate professor of agricultural economics at University of Nebraska Lincoln (UNL), says producers have to look beyond the numbers on a genetic profile, and consider the whole picture when making their heifer selections.

"You have to know the genotype relative to what you're managing and you've also got to understand the phenotype of what you're trying to manage as well." Stockton says.

Stockton says that, theoretically, the return on investment on genetic testing is worth it for some operations, such as seedstock producers, but whether or not to genotype heifers is dependent on the individual operation and the value the operation places on their genetics.

"DNA gentoyping is an added cost," Weaber says. "If you're going to genotype, make sure you know how and when to use the information to make a profitable decision."

Paterson agrees with that. "We can run DNA, but the producer has to know how to use that technology to make his cowherd more efficient or more profitable."

When it comes to future fertility, some research conducted by Rick Funston, UNL West Central Beef Reproductive Physiologist, has shown that traits such as cow age and birth date can indicate future fertility. For example, calves born during the first 21 days of a calving season had better pregnancy and breed back rates later on in life.

Weaber says that this is because heifers born earlier in the calving season reach puberty sooner and are therefore more likely to breed as heifers.

"Heifers that conceive their first calf early in the breeding season have a much higher chance of being reproductively successful as cows as they'll have more chances to breed [more estrus cycles during breeding season] than cows that calve late in the breeding season."

This is where proper record keeping, such as birth date, when the cows calve every year, and cow size, really comes into play when identifying replacement heifers, Funston says.

Galen Fink, owner of Fink Beef Genetics in Randolph, Kansas, believes very strongly in retaining replacement females out of the earliest calving cows because they generally are the most fertile cows.

"We do not utilize late calving females in our program, unless there is some legitimate reason to retain her," Fink says.

Ranchers should also realize the genetic impact that sires have on heifers and the future of the herd.

Funston has conducted research that has shown that 85 percent of genetic change comes from the sire.

"Probably the most genetic change is made on the sire side and contribution of any one female to overall genetics in a cow herd is very minimal," Funston says.

According to Weaber, this genetic influence of the sire can be capitalized on through the use of artificial insemination.

"AI can enable the investment of semen from highly proven sires for fertility and stayability traits to ensure the most productive, long-lasting cows," Weaber says. "This focus on 'cow' [type] bulls allows producers to build environmentally-adapted cows that fit their production environment in terms of mature weight and lactation potential."

Weaber says AI can also enable very structured crossbreeding systems that can be more easily facilitated through using AI instead of natural service sires.

Stockton encourages the use of AI on ranches because typically the cost is the same, or in some cases, cheaper, than natural service sires, different sires can be selected for different dams with AI, and producers can know for certain which calves are out of which bull.

Fink says he uses AI on 99.5 percent of his herd and has been using AI for over 36 years.

Adding sexed semen to an AI program can benefit seedstock producers who want all heifers or commercial producers who are looking to produce bulls for future feed lot steers, Stockton says. "We probably use more sexed semen than anyone in the U.S.," Fink says. "We use it to create more bulls."

"One of the challenges with buying 'cow' or very maternally focused bulls is that these bulls produce steer mates to the desired heifers," Weaber says. "Often these steers give up a lot, due to the antagonisms between growth and mature weight, in terms of growth rate, composition and pay weight compared to either dual purpose or terminal sires."

Essentially, by using sexed semen, producers can dramatically reduce the number of bull calves sired by maternally focused bulls, reduce the number of cows needed to produce replacement heifers, and increase the number of cows allocated to producing terminally sired calves for the market.

According to Weaber, producers should also be conscious about their operation's goals when making breeding decisions and consider separating maternal and terminal sire selection decisions.

For maternal sires, producers should focus on calving ease direct, optimal (not maximum) genetic potential for growth, and moderate levels of milk, Weaber says. For terminal sires, producers should consider selecting for as much growth as possible in a reasonable calving ease package.

"All of these are viable options, the question is what is the cost versus the gain," Stockton says. "They need to match their management to their cow type."

Optimizing Cattle Performance On The Range & Rail

It's been said that cattle are much like employees; they work for the rancher, not the other way around. And the test of a good employee is whether or not the cow can thrive under the unique conditions a producer presents her with. Whether it's extremely hot temperatures, bitter cold and snowy conditions, rough forage spanning miles of rocky and hilly terrain — producers must find the cattle that thrive in the environment they live in.

Kendrick and Sharon Redland own Redland Angus, a black Angus seedstock operation located near Manderson, Wyoming. Through generations of tough selection criteria dictated by Mother Nature, the Redland cattle have adapted well to their surroundings, running on an entirely forage-based program.

"We try to develop genetics that work in extreme environments; we want cows that will go out and make a living for us," said Kendrick Redland. "We breed for a specific phenotype. We look for a moderate cow with depth of body, shape of rib and a deep flank; this is the type of cow that will thrive in our environment. With cows that weather year-round on the range, some things just don't work in a least cost environment. Other types will flourish in a grain-fed environment, but out here, we have to have a cow that will do well on rough terrain, who has the ability to calve on her own, who will mother the calf and raise one that has the vigor to get up and go, and who will maintain her body condition score in extreme weather conditions and rough terrain."

This laundry list of "must-haves" in their genetic program has served them, and their customers, well over the years. Both Kendrick and Sharon grew up on commercial ranching operations in the Big Horn Basin, so they have a firm understanding of what it takes for cattle to thrive in rough conditions.

"We both learned at an early age what types of cows work on the range, and that's why we gravitated toward the Angus breed because of how well they do in this type of environment," said Redland. "We want to raise Angus bulls that will help the commercial cow-calf operator source genetics that will work in a true range situation. It's a balancing act because we want to have light birthweight calves, and the cows are expected to calve unassisted. At the same time, we realize that calves are sold by the pound, so we have not lost sight of the performance side."

For anyone who has run cattle on the beautiful, yet harsh, western terrain, it's a big priority to match the best cow to the tough conditions she will face.

"The cattle have to be able to adapt to extreme weather conditions," said Redland. "Whether it's really hot, really cold, dry, windy or snowy, they have to work for the rancher. She has to harvest what's available on whatever country they are put in. If they can do that and wean off a heavy calf, that's what everyone hopes to achieve. We never want to buy genetics that will require extra inputs to get them to produce."

Redland said they have been breeding the same type of cow for decades, and they have no plans to change in the future.

"I tell people, when you see deer or elk running on this land, they never change their type, so why should cattle?" he asked. "The cattle that fit the environment naturally are what works best around here, so don't try to reinvent the wheel as trends change in the cattle industry. We have found early on that there is a specific type that fits the western range land, and that's what we've focused on and stacked up on in order to achieve predictability for us and our customers."

Just like every breed has its own merits, every operation has its own demands. For producers facing extremely cold and harsh winter conditions, genetics and management play a huge role in the success or failure of the brood cow herd.

"In this part of the country, we have to have cattle that are pretty versatile because we have the extreme weather conditions that ranchers along the coasts don't have to contend with," said Terry Mader, University of Nebraska-Lincoln professor emeritus, ruminant nutrition. "Traditional British breeds are probably the animals that have most adapted to these conditions; however, it takes a hybrid to make the best animal today. A Hereford, Angus cross cow is one of the best crosses that can maintain thriftiness and stayability under difficult conditions and can be crossed with a continental bull for higher levels of productivity."

Although Mader said every breed has its own benefits and selling points, the British crosses have historically worked well in cold winters and hot, dry summers as they adapted to extreme conditions in Europe where they could efficiently grow a thick hair coat for the cold months and slick it off quickly as temperatures rose.

"If we go back in history, English breeds spent the majority of their time out on the hills where they needed to be able to endure hot and cold temperatures; this helped them develop the hair coat that worked well in both extremes," said Mader. "Continental breeds tended to be raised in more close, intensive management operations near family farms, so they may be less adapted to the extreme conditions. However, as our gene pools have changed and various breeds have adapted, a lot of cattle have come closer to the middle."

Mader said as the industry has doubled its productivity in the last 30 years thanks to high-efficiency feed and protein supplements, input costs have also increased. This presents a challenge when selecting cattle for a least-cost environment on the range.

"The industry is doing amazing research in understanding the various genes and gene pools of beef cattle," said Mader. "In the next 10 years, we will learn a lot about what animals and what genes are needed to thrive in different environments. It's a matter of gene manipulation to achieve the 70-pound birth weight and 700-pound weaning weight and have them grade USDA Choice at 1,300 pounds consistently. I don't think we'll achieve that with one breed; it will take a compilation of breeds to do that. However, I do think we are on the verge of improving our understanding of the ways to manipulate animals to thrive under adverse conditions."

Moving from the extreme hot and cold swings of the western range to the always hot environment of the south, depending on which region a producer lives in, his priorities for the ideal cow changes dramatically.

"Everybody knows that Brahma-influenced cattle are more heat tolerant," said Joe Paschal, Texas A&M (TAMU) AgriLife Research and Extension Center meat science professor and Extension livestock specialist.

"The Bos indicus breeds of cattle have a firm handle on fertility, growth and milk, and now breeders are focused on carcass traits," said Paschal, who has worked with and studied Brahman-influenced breeds for 30 years. "I never expect Brahman or Brahma-influenced cattle to marble as well as Angus or Red Angus, nor to be a muscular as Charolais, nor to give as much milk as a Holstein. I do expect that in addition to the traits they are noted for (hot, humid climate adaptability, some disease and parasite resistance or tolerance, longevity, increase energy efficiency, etc.) these cattle do have some level of those other desirable attributes to be competitive in today's beef production systems."

Paschal noted that there are several ongoing carcass merit projects taking place in cooperation with Kane Beef, the tenth largest packer in the United States. Paschal has collected carcass data and evaluated steaks for marbling and tenderness to help producers make the best selections not only in the cattle that are best adapted to thrive in the hot climate, but to also help the breed compete with Bos taurus breeds of cattle in the feedlot and on the rail.

"Brahman were one of the first breeds with a tenderness EPD, and they led the way in carcass work and EPD development," said Paschal. "All of the Brahma-influenced breeds are interested in carcass merit and are actively working to improve it either with feed-out programs, ultrasound data or both. Almost all of these results are used in their EPDs."

Whether it's extremely hot or bitter cold, ranchers must not only find cattle that match the environment, but they also must focus on producing cattle in these least-cost environments that will go on to perform well in feedlots and on the rail. With advancements in genetic testing, greater understanding of fetal programming, and identifying the perfect combination of breeds for optimal performance, cattlemen may soon have the answers they need to achieve their goals on the range and the rail.

Early Weaning Calves During Drought Conditions

Drought conditions are nothing new for western cattle ranchers, but it makes it tough to keep cows fed and run a profitable ranch without enough grass.

Controlling the rain and subsequent grass growth is not something any farmer or rancher can control. However, ranchers can control how they manage their herds and pastures to maximize the efficiency of their resources.

By utilizing a management tool known as early weaning, some ranchers, such as Dean Peterson of Judith Gap, Montana, have figured out a way to make it work while still staying profitable.

Peterson has been utilizing early weaning as a management tool for over 20 years on his ranch and says he currently weans his calves at around 170 days of age, which is about 60 days sooner than other ranchers in the area.

From 2005 through 2006, Peterson worked with Richard Waterman, a rangeland beef cattle nutritionist at the Agricultural Research Service's Fort Keogh Livestock and Range Research Laboratory (LARRL) in Miles City, Montana, to research and test the benefits of early weaning.

Waterman defines early weaning as weaning before 205 days post calving, but his study tested the benefits of ranchers weaning their calves at 80 days of age.

He says the earliest most studies have looked at weaning has been between 70 and 80 days of age, but what age works best for a producer will depend on the operation, their available resources, and environmental influences, such as drought.

One of the main concerns with drought is limited grass and maintaining cows at an adequate weight and body condition score. Without adequate grass, producers typically have to reduce the size of their cow herd.

"In our study we looked at it as if we were in a prolonged drought [following a drought in 2004], so it was more of an opportunity to provide [cattle ranchers] with an alternative to liquidating their cow herd," Waterman says.

Specifically, the study Waterman conducted evaluated the effects early weaning had on cow, heifer, and steer performance.

According to Waterman, removing the calves earlier allows the cows to redistribute nutrients towards increasing body weight and condition instead of producing milk so that they transition into winter in a better body condition score and maintain that condition over the cold winter months.

Additionally, Waterman says that early weaning allows for the opportunity of quicker rebreeding, allowing cows to calve sooner in the following season, and subsequently shortens the producer's calving season.

That's why the benefits of early weaning are intensified during drought conditions where grass resources are limited, Waterman says.

Through early weaning protocols, some ranchers may even be able to graze more cows on their pastures and increase their herd size, he says. This is because research shows that lactating cows require more energy than gestating cows.

Peterson says early weaning has freed up a lot of grass for his cows to consume instead of the calves consuming it, allowing him to run substantially more cows on the same amount of acreage.

According to Waterman, the benefits for first calf heifers are even greater than for mature cows.

This is because cows do not reach mature weight until they are around 5 years old, so anytime ranchers can reduce the demand of lactation on their first calf heifers and allow nutrients to go back towards growth and development, it improves the opportunity to increase pregnancy rates and retain that first calf heifer in the herd, Waterman says.

The benefits of early weaning also continue once calves are shipped to the feedlot.

Waterman says that when it comes to steers, early weaning makes it a little more difficult to manage them, but the benefits outweigh the costs when properly managed.

He says that by starting them earlier on a more concentrated ration, calf growth is accelerated and can essentially surpass the backgrounding that normal weaned calves go through before being sent to the feedlot.

Early weaned calves reach a mature weight sooner than normal weaned calves and it is important that the feed yard recognizes that and harvests them earlier than normal weaned calves, Waterman says. If this isn't recognized and they're harvested as a group, often times the early weaned calves are discounted because they are over-mature.

However, Peterson says that this is not an issue for his ranch because all of his calves are early weaned as a group and that they retain 100 percent ownership of the calves through the feedlot process.

He says that after weaning, he feeds his calves a concentrated ration for about two months they are shipped to the feed lot or sold.

"The feedback from the feedlot was that they fed better, they marbled better, and they moved them ahead in the slaughter process," Peterson says.

Waterman says that even though drought years are unpredictable, early weaning is still a tool that producer's can use during non-drought years to increase pregnancy rates, improve cow body condition scores, and shorten their calving season.

According to Waterman, early weaning also has a positive impact on pasture health and the environment.

"You can extend the use of a pasture for a longer period of time by early weaning," he says.

Additionally, Waterman says it is a lot easier to move cows without calves and it allows for the opportunity to move cattle to different locations because they don't have to worry about the calves.

"We're saving grass because that's really what we're doing…we're harvesting grass in the long run," Peterson says. "Grass is a premium."

 

 

The Cattle Journal – Beef & Business 2017

Welcome to The Cattle Journal – Beef & Business 2017. Our 300+ page “big book” features advertisements from major seedstock producers in the business and includes stories about research, management, animal health and producers who are constantly striving to improve the cattle industry. Read and share the entire publication online here, or read and share individual stories from the links below.

 

Ready Or Not: 2017 Will Bring Changes To VFD

5L Ranch pushes the limits in Big Sky country – Larry & Lisa Melhoff

Jamison Ranch aims for performance in horses, Herefords

Ball Ranch rolls with efficiency – Leonard and Tammie Ball

Fair Shares: Making a Share Agreement Work

Cattle need grass, and grass, well, it needs cattle.

But sometimes a person finds himself or herself in a pickle with grass but not cattle, or cattle but no grass.

An individual in this situation could consider seeking a share agreement.

Many in the cattle business have heard horror stories about share agreements gone wrong.

"He didn't take care of the cows and we lost too many calves."

Or, "I fed and cared for those cattle like they were my own but I didn't get paid enough to make it worthwhile."

Keeping an open mind when developing the agreement and covering as many details as possible in the contract are important to keeping both sides happy, said Wibaux, Mont., rancher Craig Helvik.

When his grandfather died, Helvik had the opportunity to run the family ranch, but after buying some of his grandfather's cows and equipment, he couldn't borrow the money to buy enough cows to finish stocking the place. A share deal with a long-time friend seemed to make sense. He is working toward building up his own cow herd and after a few three-year leases, he will probably be done taking in share cows after the current lease expires.

Helvik keeps his own cows and the share cows separate and calves them at separate facilities. He doesn't retain any heifers from the share cows, and neither does the cow owner, so every calf from the share cows goes to town in the fall, and the check is split 70-30 with Helvik getting 70 percent.

The cow owner replaces any sold cull cows with bred heifers, to keep the number of cows consistent with the contract.

Helvik provides all of the inputs, including feed, labor, vaccine, medication, mineral, salt, etc. The cow owner buys the bulls. Helvik does winter the bulls but that is a separate arrangement.

The number of pounds of hay that will be fed per day, free-choice mineral and salt being provided year round, the type of vaccines that will be administered – all of these are points covered in his share contract, said Helvik.

He and his business partner have known each other for years and have always had a good working relationship, Helvik said. If there are questions that arise or items that need to be changed on the contract, the two of them meet and agree to new terms, although that is rare.

Helvik puts his brand on the calves and then pays the cow owner when the calves are sold. All cows bear the cow owner's brand.

One year the grass was particularly good and Helvik told the cow owner he could bring another semi-load of cows in, so he did and those calves were sold with the original calves, with the check being split accordingly.

The cow owner is available to help with cattle work when needed, but Helvik doesn't take advantage of him. "He'll come and help if we need him to, but he's not required to. We've done business long enough that I trust him and he trusts me. If we're short of labor, he's here."

Helvik said he won't take just any old cow – he wants healthy cows that are in good shape, and he culls any opens or those who develop chronic health problems.

"Whoever you are getting into it with, make sure you can talk to them. Keep communication lines open," he stressed.

"The main point is if the two parties can agree to it, it should work. You need to be a little flexible and adjust when necessary.

"It sure has helped me get rolling here the last few years," he added.

As with any business arrangement there is room for error, and honesty from both parties is priority number one, said Dustin LePlatt, Trinidad, Colorado.

But LePlatt said a share arrangement can be the perfect way to turn a profit on pasture without borrowing money to buy cattle.

"The reason I got in the share deal was to rebuild without borrowing a bunch of money," he said. LePlatt had sold his own herd down due to drought and was down to just 50 cows, with pasture for a lot more, when the rain finally came.

So he took in cows for an acquaintance and gradually built up his own cowherd again.

LePlatt said the first share agreement ended amicably and then he then took in cattle for another individual and is now on his third share deal.

He likes to make year-to-year agreements, and said a 60/40 split has worked well for him, with LePlatt getting 60 percent of the calf crop at weaning time. He splits the cost of bulls with the cow owner.

The cow owner's brand is on all of the cows as well as the calves.

LePlatt and the cow owner both like to keep replacement heifers out of the cows, so after the two of them sort the replacement-quality heifers out, they gate cut 60 percent of them for LePlatt and 40 percent for the cow owner, then LePlatt re-brands his heifers.

The rest of the calves are sold private treaty or at the salebarn, and LePlatt and the cow owner split the check 60-40.

The cows all bear the brand of the owner, and the cow owner gets all the salvage value for the cows.

"Thank God we've never had a bad wreck," LePlatt said, adding that there are the usual calving issues of bad weather and such but that he grafts calves whenever possible and will even put one of his own calves on a share cow if the situation calls for it.

A share agreement can work well for a young producer without the equity to borrow money to buy cows, or any producer who doesn't want debt on cows, he said.

Even with a one-year contract, though, LePlatt said the situation can become challenging because of unpredictable circumstances like weather. One year the weather turned dry and he had to drylot a bunch of cows in order to fulfill a contract. "I kept my end of the bargain but I didn't make any money. There are pros and cons to the idea, just like with most things," he said.

Both Helvik and LePlatt said with today's low cattle market and the continued increase in input costs, profitability for either party becomes more difficult.

"It's getting tougher and tougher. I'm thankful I've been able to grow my own herd," said Helvik.

South Dakota’s only animal health lab seeks to renovate & expand

When the avian influenza and porcine epidemic diarrhea virus hit the poultry and pork industries in recent years, researchers at the South Dakota Animal Disease Research and Diagnostic Laboratory (ADRDL), located in Brookings, S.D., worked to quickly respond to these contagious diseases, limit the spread of the outbreaks and secure human and animal health as swiftly and effectively as possible.

Even though it was successful in managing these outbreaks, researchers, agricultural leaders and the state's commodity groups are exploring ways to upgrade and enhance the state's only animal health laboratory in an effort to better serve the community in the event of a future outbreak.

"The lab was originally built nearly 50 years ago, and it hasn't been updated since 1993," said Daniel Scholl, interim Dean for the South Dakota State University (SDSU) College of Agricultural and Biological Science. "Since then, the volume of samples that are being sent to the laboratory has grown dramatically, and the methods for testing have changed, as well. This puts a lot of demand on laboratory space and personnel. On top of that, the building is old, and no longer has the very specific needs for environmental controls to do certain tests."

The state's $7.3 billion livestock industry is safeguarded by the ADRDL, and several commodity groups — South Dakota Cattlemen's Association, South Dakota Farm Bureau, Ag Unity Group, and South Dakota Pork Producers Council — have joined together to help lobby support for the renovation and expansion of the animal health facility.

"The need to remodel and expand the lab has been an ongoing topic of discussion for the last decade, and we will be going to the legislature this year to discuss ways to fund this project," said Jodie Anderson, South Dakota Cattlemen's Association executive director. "We are currently in negotiations with industry groups and the governor's office and administration to determine where the funding will come from and how much would come from the industry."

During the 1993 expansion of the lab, funding came in part from the removal of the sales tax exemption of parasiticide drugs (wormers), and the revenue from that was directed to the ADRDL. The parasiticide tax was voted in the 1995 Legislative Session to continue indefinitely to help support veterinary student tuition grants and the continued operation of the ADRDL.

Currently, the ADRDL hosts several lab sections dedicated to the following: Serology, Bacteriology, Histopathology, Clinical Pathology, Virology, Food Safety, Molecular Diagnostics, DNA Sequencing, and Specialized Research Testing. However, without infrastructure updates to the lab, Jane Christopher-Hennings, DVM, MS, Veterinary & Biomedical Sciences Department professor head and director of the ADRDL, fears the lab won't be able to continue to function and handle the most dangerous and infectious outbreaks, should they occur.

"Unless we renovate the current building, we will not be able to properly function in the near future," said Christopher-Hennings. "We have a number of issues that we are dealing with now that limit our ability to handle infectious diseases and maintain biosecurity and safety for our employees."

The new and improved laboratory is currently in the design phase and calls for a complete renovation of the existing 36,000 sq. ft. lab space and building a new 74,500 sq. ft. lab, complete with a Biosafety Level 3 lab space.

"The Biosafety Level Three Lab allows for high risk pathogens like anthrax, rabies, foot and mouth disease, etc. to be present," she explained. "Some argue that in the event of an emergency, we could just send samples to labs in Minnesota, North Dakota or Iowa; however, in a crisis situation, we wouldn't be a top priority in another state. It's important to have animal health labs in locations where there are a lot of livestock, like South Dakota, so we can respond quickly in these situations."

The ADRDL is a qualified lab in the federal government's Food Emergency Response Network and plays a key role in offering timely diagnostic tests, development of vaccinations and protection for people and livestock in case of an outbreak.

"Global concerns over livestock infectious diseases have increased in recent years due to growth in global trade, which opens the door to disease movement between countries," said Scholl. "If foot and mouth disease were to hit the U.S., you can imagine the impact it would have on the livestock industry. With the current state of the laboratory, we would be severely limited in the services we could provide to South Dakota and regional producers to swiftly resolve the outbreak."

The projected cost of the project is an estimated $65-70 million. More than $2 million has already been spent on the architecture and engineering component, which was funded by ADRDL fees and the Livestock Disease Emergency (LDE) fund.

While discussions are still underway about funding, it's likely that the financing package will include an investment from the state of South Dakota, as well as support from the agricultural industry and community donations.

"We are currently at the end of the design development phase in which we will have a more accurate estimated cost of the project," said Scholl. "Assuming the proposal for funding is passed in the 2017 legislative session, construction could begin by the end of 2017 or early 2018. Phase one of the project, which includes the new building, would be complete by the summer of 2019, and phase two, which is the renovation of the old facility, is expected to be completed by the spring of 2020."

"I don't think there is a single livestock industry group who has not shown support of this project," added Scholl. "Virtually all livestock groups are represented as members of the advisory board for the ADRDL and have been involved in conversations to address the needs of this lab."

"We are here to serve the region's livestock producers," said Christopher-Hennings. "I encourage producers to talk to their legislators about the importance of this lab. The work the lab does in helping to create a rapid test, a vaccine or a solution to an outbreak is instrumental. We want South Dakota livestock producers to take precedence in the event of an outbreak, so we need the resources to stay within the state."

For more information on the ADRDL, visit http://www.sdstate.edu/vs.adrdl/.

A Hand Up: Programs help youth get started in agriculture

The livestock industry is a capital intensive business. Seldom does any rancher leap headfirst into buying a sustainably-sized cattle herd; most are built over time. With a little hard work, research and creativity, young people can get a jump start on their own herd at an early age, and learn to become cattle managers as they grow with their own herds.

Project launch pads

Heifer projects are often the launching point of many young producers' herds. 4-H, FFA, breed associations, and livestock shows create a venue for raising and showing a quality female year after year. Often times project heifers are loaned, bought or gifted from family. Some programs also offer scholarship heifers to qualified applicants to give them a hand up in ownership.

The NILE Merit Heifer program at the Northern International Livestock Exposition in Billings, Mont., is one such program. Applicants ages 12-16 can compete for one of 20-25 purebred heifers donated each year by regional ranchers. Applicants submit a personal essay, reference letters, and a 3-5 minute YouTube video.

Heifer winners are required to maintain records, submit monthly reports, have the heifer bred, and bring her back to show at the following NILE. Shelby Shaw of Worden, Mont., is the livestock manager and director of youth education for the NILE. She was also a heifer recipient in 2008, and still has her Merit Heifer in her herd today. Shaw says her cow is coming on 10 years old, and has not disappointed with the progeny she's had year after year. "By being a recipient in the past and now being coordinator of the program, I feel like I've seen the program go full circle."

Shaw says the program is designed to help youth get a start in the beef cattle business by awarding heifer calves to recipients based on merit, future goals and ability to care for the animal.

The Cattlemen's Family Legacy Heifer Scholarship is a similar program sponsored by the Western Junior Livestock Show and the Central States Fair Foundation. A cattle producer at the Black Hills Stock Show in Rapid City, South Dakota donates a heifer and a recipient is chosen from a pool of applicants through an application and interview process. Similar to the NILE program, the recipient is asked to bring the heifer back to show in the Western Junior Livestock Show futurity the next year, and must submit routine reports and train the heifer.

Nebraska College of Technical Agriculture in Curtis offers a heifer donation program to junior college students. The NCTA Heifer Link program launched in January 2015, as a supplement to the college's noted 100 Beef Cow Ownership Advantage. Through Heifer Link, students have the opportunity to be assigned a breeding heifer during their fourth semester and leave campus with a bred heifer upon graduation.
"This innovative program requiring student management, hands-on sweat equity, a sound business plan and commitment to the Nebraska cattle industry allows the student to get a jump start into the cattle business," says Dr. Douglas Smith, division chair and assistant professor of animal science and agricultural education at NCTA. "Students are able to become owner of a heifer to call their own and begin their herd."

To be awarded a heifer, students must be enrolled in the NCTA 100 Beef Cow Ownership Advantage program and go through a rigorous interview process. Heifers are donated either by contributions of $2,000 to the Nebraska Foundation, with the heifer coming from the NCTA cowherd, or as live donations that must meet certain criteria from sponsoring cattle breeders.

Growing knowledge

A donated heifer might launch a dream, and also serve as great collateral. But continual herd building requires additional knowledge and most of all, financing.

Animal science and agribusiness management programs provide solid backgrounds for ranch management, but specialized programs, such as the 100 Beef Cow Ownership Advantage at NCTA, recognize the need for practical experience targeted at financing and managing a small cow herd.

The 100 Beef Cow program has been in existence for decades, long before the donation heifer aspect was added, with the goal of helping college students launch their own herd. Through the four-semester curriculum, which is an add-on option for ag majors, students receive training in lending.

"We want them to create a business plan, be prepared to get a loan, and be successful in the management of their cowherd," says Smith, who oversees the 100 Beef Cow program. He brings in guest speakers such as bankers, lawyers and accountants to share real-world considerations with students. In the capstone course, students create an actual loan application package.

"Our goal is for students to be able to start their own 100 cow program – some are even funded before they graduate," says Smith. Although students are not required to pursue ownership, and those that do are free to bank anywhere they choose, most obtain financing through their local USDA Farm Service Agency program with a Beginning Farmer and Rancher Loan.

Norm Bellows is a lending officer with FSA in Miles City, Montana, and has worked with many young farmers and ranchers.

FSA offers low-interest loans, currently at 2.25 percent and up to $300,000, on livestock purchases and operating lines. Bellows says the advantage of their program is they are able to lend to more high-risk applicants who don't have a credit history or strong collateral.

"FSA wants a 150 percent security margin if it's available, but we only have to have 100 percent," he says. "A lot of people have a pickup and horse trailer – that's all they have."

He views his job as not only lending, but training and working with youth to create a successful plan.

"We are pretty detailed on cash flows, we want them pretty well put together so we know we're going to have a successful operation" says Bellows. "By far we're going to stress operational management too, to allow someone to move forward."

His ultimate goal is to help producers successfully "graduate" from their beginning loan, and transition to bigger lending.

"We want to help them save their money and get in a position to work with a commercial lender down the road."

Bellows says his job is very rewarding, as it offers him an opportunity to see youth or beginning ranchers build something successful and help educate them in the process.

"If the projection they put together doesn't work, we try to point out alternatives, or opportunities of something different. We can't expect our borrowers to come in here and be master's level finance gurus."

Bellows adds that although his borrowers are considered higher risk and operate with tighter cash margins and lower collateral than commercial lenders, FSA's delinquency rate and losses are much lower than commercial bankers. FSA also offers loan servicing to help during tough times.

"We're not just here to get people in the business, we're there to keep them in the business," he says.

Although it may seem like an end goal, purchasing cattle is really just the start of the work. Decisions such as nutrition, health care, breeding, financial planning and tax accounting require continual management and learning. Resources such as Extension, state and national trade association, lending institutions, conferences, or online classes offer additional outlets for education.

Starting a herd "opens the doors to ownership and gives [young producers] an opportunity," says Smith. "It really comes back to helping each other and paying it forward."