Managing and Marketing Cull Cows
December 4, 2012
Cull cows are often looked upon as relatively unimportant to the bottom line, but they actually make up about 20 percent of gross income for a cow-calf enterprise. Most cull cows are sold in the fall. The typical plan is to market them as soon as they are identified, usually at the time of weaning or pregnancy checking. In the rest of this column, I will discuss some ideas to add value to them so they contribute a greater amount to ranch net income. Basically, this will cover 3 factors: seasonality of cow prices, price differences among cow carcass grades, and cost benefit of feeding cows.
Slaughter cow prices are driven by supply. Because supply of cows on the market is highest in the fall, prices typically fall to their lowest level in November and then rebound through early to mid-winter. In turn, prices are highest in late winter and early spring when the supply of cows is lowest. According to the Livestock Marketing Information Center, slaughter cow prices typically rebounded by about 15-20 percent from November to the March-May period during 2001 to 2010. However, in 2011 and 2012, there has been a remarkable increase in demand for lean ground beef, a principle product from slaughter cows. This has driven a huge increase in recent cull cow prices in general, but has also widened the spring price rebound for slaughter cows. In 2011, the April price was nearly double that of the price the previous November (2010). While not quite as strong in 2012, it was still a nearly 75 percent increase over November 2011. Based on these recent seasonal market patterns, holding on to cull cows into the spring appears to be a greater opportunity to add value than it ever has been.
If we choose to consider hanging on to cull cows through the winter to catch the expected spring price rebound, then we will need to feed them through the winter. A winter-feeding program for them that is designed to add weight and body condition provides further opportunity to increase their value. First, added weight obviously means more pounds to sell, but the value per pound can also be increased. We typically focus heavily on the early maturity quality grades of Prime, Choice, Select and Standard for feedlot cattle. However, we have quality grades that differ in market value among mature cattle as well. These are named Commercial, Utility (further subdivided into Breaker and Boner), and Cutter. Highest marbling and therefore highest value is Commercial with a decline in value through the remaining grades. As you know, we get premiums for prime and choice when selling on the rail in young cattle. The same is true with mature cattle, so a cow that has been fed to Commercial grade is worth more than a cow that is a Breaker or poorer grade, and so forth. A feeding program with adequate energy in the diet to add weight and condition while holding the cows through the winter will improve their grade.
All of this leads to evaluating option to feed cull cows into the winter to increase their value. Unfortunately, we all know that feed costs have skyrocketed so we need to find opportunities to minimize the cost of feeding these cows if we are going to capture additional net value. Feeding programs do not need to be exotic. Any opportunity to use underpriced local feeds will improve the economic prospect. Grazing corn stalks with an appropriate supplement works really well. A lot of silage was put up in the corn-growing parts of the region that could find added value as cull cow feed. Commercially available concentrate-based, self-fed rations with an intake limiter to control over-consumption are often available through local feed dealers. These may be economically attractive and provide the opportunity for cow-calf folks that are not comfortable with high-grain rations to feed a relatively safe product. Local by-product feeds or drought-stressed crops (e.g. low test weight) are another option. Finding a local niche alternative is each producer's opportunity to gain the greatest value from feeding his or her cull cows.
The economic bottom line is ultimately important. Pushing a pencil to determine if the projected added value exceeds the expected cost of feeding the cows is a valuable exercise. Conducting a partial budget analysis is a straightforward and very useful approach for this purpose. In brief, a partial budget is a tool to compare the income and expenses of a current practice (selling cull cows immediately in the fall) to an alternative practice (feeding cull cows and selling later in the winter). For example, maybe you can sell a 1200 pound cow now for 85 cents a pound. Alternatively, you may be able to feed her for 80 days at a cost of $1.50 a day and a gain of 2.5 pounds a day. If market projections suggest she will be worth $1.10 per pound after feeding, a partial budget analysis suggests a $380 increase in net return per cow.
Two cautions: this example is a very simplistic analysis and there are other costs to consider such as health care, possible use of implants, risk of death loss, etc. Second, I have based this example on some very average market values and expected levels of performance that can vary tremendously across the region and through time. It is imperative that each producer performs his or her own partial budget based on the best possible local, current information.
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Other considerations can also play a role: cash flow and tax implications are a couple. Each producer needs to consider his or her best option. Rely on local resources, whether that is a local market consultant, nutritional consultant, or extension personnel to help with gathering relevant information, performing a partial budget, and developing a plan.