Feed costs play a significant role in determining the profitability of a beef operation, no matter how it is structured. The Northeast region has a wide variety of beef producers, from small to large, including cow/calf, stocker and feeding operations. Whether grass-finished on pasture, fed in the feedlot, or under any other management plan, putting gain on cattle profitably means keeping feed costs well below your resulting income. No matter the scope of the operation, feeding those animals economically, while priming them for the end-market, is the goal.
But economically feeding beef cattle isn’t a one-size-fits-all proposition.
“So much of this depends upon the type of operation, and whether or not the producer is growing their own feed, ” said Dr. Tara Felix, beef Extension specialist, assistant professor of Animal Science, Penn State University.
The cost of feeding beef cattle is a variable cost and plays a major role in the overall cost of production and the profitability of the enterprise. No matter whether that feed is homegrown or purchased, grazed or fed, grass or grain, the cost of purchasing the feed, plus that of storage, feed equipment, and the time and labor of feeding the animals are all a part of the equation. Any inputs needed to grow feed – whether that feed is grazed by the herd or harvested and fed – also are a part of your cost of production. Changes in the pricing of purchased feed, the amount of feed needed, the nutritional composition of the feed and the availability of pasture forages change seasonally.
Although all of this variability lends a resiliency to the region’s beef production, it also makes it difficult to generalize what impact the price of any given feed will have on the region’s beef producers. Typical responses to changes in feed costs include buying or selling cows, changing feed ingredients, changing weaning protocol, pasturing cows or even selling some of the feed produced on the farm, and purchasing alternative feeds, Felix said.
Weaning strategies are impacted by the price of feed. When corn pricing is high, beef producers have intense discussions about weaning, Felix said. Wean calves early, and the cost of production of that calf increases. If opting to wean late, keeping that lactating cow healthy means an increased feed cost.
“It may not just be the weaning, but the decision to keep calves after weaning, on a grass pasture as opposed to putting them in a feedlot,” Felix said.
For calves born in the spring, the cost of feeding them over the winter can be a challenge when feed prices are high. Producers might opt to sell the weaned calves, rather than raising them when pasture is scarce.
“I think that the bigger challenge is the feeder calf market itself,” Felix said. “Calf prices don’t always reflect other commodity prices.”
For stocker operations, the cost of calves, as well as whether or not the operation is supplementing pasture with other feeds, will play a role in determining how many head will lead to a profitable enterprise each season. Depending on individual circumstances, producers can opt to change herd size, grow their own feeds, rely more on pasture forages or explore alternative feedstocks.
Producers opting to pasture cattle, perhaps as a result of higher feed pricing, can optimize pasture forages and reduce their reliance on purchased feed. Grass farmers use strategies such as creep grazing, where calves graze pasture ahead of the cows; rotational grazing; grazing corn crops after harvest; stockpiling pasture; and grazing alternative forages by incorporating brassicas and annuals into grass pastures. These strategies are used to increase pasture forages and optimize nutrition and average daily grain.
Producers raising a specialty niche meat product – such as direct-market, 100 percent grass-fed beef – may not be as impacted by changing domestic and international grain and beef markets as are those selling to finishers or to packers, where commodity markets play a much larger role in decision-making. But feed pricing typically plays some role on most beef operations in the region.
Smaller, hobby-type operations may not be as cognizant of cost of production of their beef, Felix said, and there are many such operations in the Northeast.
“Almost all grass-fed producers are going to have to buy hay” in the Northeast region, Felix said, and those not 100 percent grass, but finishing with corn silage, may be impacted directly by commodity corn pricing if purchasing feed.
For those raising pastured beef, whether fully grass-fed and finished, or finished with the addition of corn silage or grain, decisions on when to feed stored crops versus grazing crops can depend not only on the weather today, but also on the expected weather.
Should the pasture be grazed now, or should hay be fed and the pasture forages stockpiled to extend the grazing season? What is the nutritional value of that pasture if grazed now versus later? If hay is baled and sold when pricing is high, can other feeds be purchased at a lower cost if needed?
For producers feeding cattle in the feedlot setting, the price of grain plays an important role. Following the commodity grain markets, and planning a year ahead, are the recommended strategies to managing feed costs, Felix said. The goal is to keep the cost of production low, while maximizing gain, and ultimately having cattle that grade USDA Choice or above.
Although the income over feed cost (IOFC) margin is important, other factors that need to be considered include the price of the feeder cattle and the market price of the finished cattle.
The commodity grain market plays a significant role in determining what those feed costs might be. Grain markets are impacted by both domestic and international influences. These commodity markets often run in a cyclical pattern, both in the long and short term. Speculation over future yields, pricing and demand can help farmers decide what feed pricing will be in the future and make management decisions based on these expectations.
Growing your own crops to feed or to sell, making changes in herd size, selling cattle at higher or lower finished weights, or locking into cattle forward contracts with beef processors are some ways of managing the risks and variables inherent in both the grain and beef markets. Tools are available to assist producers with enterprise budgets under various circumstances. The U.S. Department of Agriculture has regularly updated information on both cattle and grain markets. See the livestock, poultry and grain listing.
Putting on the most gain, while incurring the least expense, has led producers to explore alternative feeds. When the cost to purchase or produce traditional feedstuffs – hay, corn silage, grains – increases, or these are in short supply, finding alternatives can help to keep the feed budget from eating away at the profits.
As a region, the Northeast has a variety of alternative feed ingredients, which vary depending on specific location, Felix said. In southeastern Pennsylvania, bakery and candy manufacturing waste is readily available. Distillers grains may be common in some parts of the region. Vegetable waste, from large retailers who are attempting to “go green,” is becoming increasingly available to feedlot producers.
These feeds need to be carefully incorporated into the ration, while maintaining nutrition levels and digestibility. One concern is that these feeds “vary batch to batch, plant by plant, day by day,” Felix said. “Always get an analysis” of each batch of feed.
Because cows like consistency, changing any more than 5 or 10 percent of a ration’s ingredients, relative to the amount fed, is not recommended. Younger animals are more susceptible to problems from changes in their ration. Working closely with a nutritionist is the best plan when changing feed ingredients.
Increasing forages in the ration will slow the average daily gain, but being flexible in balancing slower gain with high grain prices, and altering feeding strategies to adjust to the market, might offer producers a means of keeping feed pricing in check, while still maintaining profit margins and meeting quality criteria for your end-market.
Making the grade
Keeping feed costs in check becomes counterproductive if the final product is compromised. For producers finishing cattle for the conventional beef market, the quality of the carcass determines the final pricing. Search for information on USDA carcass grades.
According to Joe Emenheiser, University of Vermont Extension livestock specialist, finishing cattle, no matter the system, doesn’t simply mean reaching a given weight. Emenheiser, along with Dan Hudson, UVM agronomist, worked together on developing alternative plans for beef production in the Northeast.
“Finished isn’t just a weight. It describes body composition, fatness, muscle size, marbling, that is needed to be desirable from a quality standpoint and a profitable yield standpoint at a given market weight,” he said, speaking at a the 2014 Vermont Grazing and Livestock Conference.
The beef market is complex, as is the grain market. When making strategic decisions, beef producers should keep a few things in mind.
Increased days on feed – any feed – means an increase in the cost of production. And increasing the average daily gain means decreasing your cost, said Cheryl Fairbairn, Penn State Extension livestock educator.
Beef producers need to “catch the highs and the lows of the market” and remain profitable overall, she said. “It’s all about what you can do and how creative you can get. You can’t go in and out of business. Buying or selling can just make or break you here.”
No matter how your beef operation is organized, making the best decisions to keep feed costs down, average daily gain up and quality high will impact your bottom line. Flexible feeding or marketing strategies offer ways to manage risk. Commodity pricing of cattle and grains, including the cyclical cycle of both grain and beef production numbers, mean that costs and income are always fluctuating. For producers who direct-market, raise their own young stock and primarily utilize homegrown feeds, these commodity markets will have less impact on management decisions. Either way, strategies to keep your feed costs low, while providing the nutrition needed to maximize daily gain, all while producing a high-quality meat, is the challenge.