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Belt tightening in the cow business

Despite improving cattle markets, watching the bottom line in an operation is more important than ever in the cattle business, and there’s not much room for equipment-related purchases that aren’t absolutely necessary.

In today’s tough economy, improving efficiency on a ranch is the key to success.  

Despite improving cattle markets, watching the bottom line in an operation is more important than ever in the cattle business, and there’s not much room for equipment-related purchases that aren’t absolutely necessary, according to Dr. Ron Gill, AgriLife Extension beef cattle specialist and associate department head for the department of animal science at Texas A&M.

Recently at the 2010 Texas A&M Beef Cattle Short Course in College Station, ranchers were reminded not to get carried away with buying too much equipment to run an operation.

On average, cow-calf producers operate on something around a $40 per calf profit margin, said Gill.  The bottom line is to be practical, he said.

"A lot of people in the cattle business die of heavy metal disease," he told producers, meaning too many people buy too much equipment and don't pay enough attention to purchasing equipment that is essential for a ranch.  "What are the basic requirements for a ranching operation?" Gill asked. "If we really look at the ones who are making a lot of money in the cattle business, they don't have a lot of metal lying around."

The average herd size in Texas is between 30 and 40 head of cows, which produces half of the beef statewide. Gill said these small operators can easily get carried away with buying unnecessary equipment rather than making sound business decisions. A case in point is buying a trailer to haul cows and calves. "This is a big-ticket item," he said. "How many times a year are you going to use one of these?"

Gill showed the audience a photo of a Gooseneck-style cattle trailer. "It's nice to have one of them, but economically for a small cow-calf operator it's not feasible if you are using it once or twice a year," he said. "At $40 a head profit for that calf, how many would it take to pay for that trailer? Plenty of people haul cattle for a living and can be recommended at the auction barn. Give them a chance." Same goes for tractor and pickup purchases. He said some producers go overboard with these purchases and incur unnecessary expenses.

Gill spoke of a man in the stocker business with more than 1,000 head, but operated out of an S-10 pickup with two hammers and a set of panels.  "He's been successful for many years," Gill said. “I'm trying to get everybody to think how many calves it's going to take to pay for it. It’s very disturbing math. You can get in so deep sometimes it's very difficult to get out."

Currently there is a lot of optimism in the cattle business with fewer cattle across the United States; in fact, the U.S. cattle inventory is one of the smallest since 1959.

While rainfall this year has been welcomed by Texas cattle producers, ranchers should not get too carried away with overstocking pastures with cattle that have been through long periods of dry weather. Allowing ample time for recovery and managing new growth of forage can help protect further damage to a pasture.

Forage in pastures, whether improved grasses or native forage, needs to be monitored.

The old theory of “take half and leave half,” has some real merit.  If one sees that 50 percent of the available forage has been removed from a pasture, it is time to move those cattle into another pasture, allowing enough time for that pasture to recover.

Stocking rate decisions made before, during and after a drought will determine how your forage stand will survive and if it will remain productive.  Flexibility should be built into your stocking rates, especially in South Texas where droughts are common.  Here, you might consider a breeding herd of no more than 50 percent to 70 percent of the total carrying capacity of the ranch, while the remainder of your animal units is made up of yearlings or stocker animals.  If and when a drought returns, your initial stock reductions could come from the yearlings or stockers.

Bottom line, your forage supply must exceed the livestock demand, and that takes some planning.  If livestock consume that critical forage residue, resulting in plants and soils not being protected, long-term carrying capacity of the ranch can be severely reduced, even long after that drought has ended.

TAGS: Livestock
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