Time for livestock owners to make the decision—sell or not sell

Extension Agent

From the calls that I have been receiving, livestock producers are in dire straits, with no end in sight. The drought, which seems to have no desire to loosen its grip on our area, is creating a great uncertainty among producers. Finding forage, of any kind, is becoming difficult and is commanding a high price.

Freight is expensive, due to the cost of fuel. Hay stores are running low for those who generally trade hay, and many are scraping the bottom of the barrel. Hay is being bought at “I’ll take whatever and all that you have” pace.

I would invite you to take a step back and evaluate what is certain to come without appreciable and voluminous rainfall in the next few weeks. Hay stores are all but gone, feed grain is rising, and water levels in ponds and wells are dropping or drying up. And cow prices are strong. Is it worth holding on?

No one made any hay this year. If they did, it is most likely already gone. The price of grain and cotton is high, and scarce locally due to the drought, and will subsequently cause prices to be high on supplemental feeding sources such as range cubes and cottonseed. Feeding out of a bag will assist in the short term, but is it an option long-term?

I will grant you the argument that when cow numbers drop, buying back in will be tough and expensive, due to the decreased number of cows and subsequent replacement heifers available for sale. Prices are predicted to remain strong and perhaps strengthen over the coming years. Holding on may appear to be an option. We faced a drought two years ago, not of this magnitude, but devastating economically nonetheless. Many herds were culled to counter the expense of feeding through the drought, and some remained at reduced levels through last year.

The other arguments against deep culling or liquidation are the tangibles of developing a herd to suit your needs. Sometimes a lifetime of production reflects the herd you possess. You have cows that are familiar with your pasture. They respect the fences, and stay inside them. They are easy calvers and come to a bucket. Some may even have names rather than numbers. Rebuilding this herd may be impossible if all are sold. However, when you can no longer economically sustain the herd, some tough decisions must be made.

A long, hard look at the dollars and cents must be taken to determine, is it worth it? Let’s look at two scenarios. The examples will use lower quality 4-percent protein hay at $60 per roll weighing 1,200 pounds each and a breeder cube at $300 per ton fed at six pounds a head per day. This scenario will meet a dry, early gestation cows dietary need to hold condition.

I will tell you the tale of two farmers. Today, Farmer Jones has 20 head of 1200 pound cows. His cows are being limit fed hay and cubes. All calves have been weaned from cows. Farmer Jones understands that cows require 50 percent roughage to maintain rumen function and that he needs to hold a Body Condition Score, or BCS, of five to keep from losing reproductive efficiency. He expects 15-25 percent animal refusal of the hay, which includes large stalks that are not palatable to the livestock.

Accounting for 25 percent animal refusal, a 1,200 pound bale leaves 300 pounds on the ground, and raises the actual realized cost per roll to $80.40. Feeding cows at the current price accounting for hay waste will come to $2.01 per head per day, or the herd for $40.20 per day. Or figure $281.40 per week for the herd. To feed all of August, $1,246.20. Assuming we hold on to the cows, and water holds out and have a 100 percent calf crop, and based upon average prices reported for last week’s sale, weaning 20 -400 pound calves next spring will net $11,000.

How much has Farmer Jones spent already this year? How long will the drought last? How many months can he continue paying $1,246.20, plus fuel, time, and wear and tear to feed daily?

With this scenario, and all assumptions and prices remaining static, next years calf crop can be expected to pay for 9 months of feeding. Leaving a little behind to make repairs, replant pastures, vaccinate, etc. The above scenario assumes much. Prices of all will remain the same throughout. It does not account for freight, fuel to feed, other necessities such as mineral, vaccinations, repairs, replacement, etc.

It also assumes a 100 percent calf crop born alive and weaned at 400 pounds. Farmer Jones may be eternally the optimist and he will be the only one of his neighbors left and will sell calves to a market full of demand for a premium, and that rain and winter pastures is just around the corner.

Scenario 2 Farmer Smith does not like the taste of Maalox and his wife does not fancy the bank account dwindling. He sells his 20 head of 1,200 pound cows for an average of 63 cents per pound and goes directly to the bank and deposits $15,120. He goes to the deer lease.

A stark comparison I know, but hard math will show us that we will be dipping into potential profits for a long time, and incurring a lot of risk by holding out. This decision is made based upon your personal situation, and a long, hard look must be made with a pencil to determine whether you can afford to hang on. Or if it is economically right to hang on. There are many variables, and I would encourage each livestock producer to sit down and explore them all. Liquidate 25 percent, 50 percent, 100 percent— determine a level of risk you are comfortable with.

I would add one more level of uncertainty to factor into producers’ management decision. Most of our pastures are exhausted, and with the prolonged drought making irreversible negative impact on them, will result in, at best, decreased stands and vigor among perennial pastures, and at worst, vegetation death resulting in replant. To replant pastures, either to an improved bermudagrass variety, or a native forage, will cost money. And time. You can expect to lose at best one season of grazing, up to five seasons for replanted pastures. In the spring, if the rain comes, how much pasture will be left after the great drought of 2011? Will it be enough to sustain your current stocking level? Will you be continuing to feed next spring because your pastures died this summer? My Magic 8 Ball says “reply hazy, ask again.”

Remember a drop in a BCS from a5toa4resultsina20%dropin calving rate. Drop to a BCS 3 and a cow’s reproductive cycling will shut down, resulting in even less conception rate, not to mention enough condition to carry a full term pregnancy and the stored energy to milk and wean a heavy calf.

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