Grinding Through Fed Cattle Supplies

Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist

The latest USDA Cattle on Feed report showed a June 1 feedlot inventory of 11.699 million head, almost unchanged year over year from 11.671 million head in 2020; and fractionally lower than the June 1, 2019 level of 11.728 million head.  May marketings were 1.87 million head, up 23.4 percent year over year and down 9.7 percent from the May 2019 level.  Feedlot placements in May were 1.911 million head, down 6.9 percent year over year and down 7.4 percent from 2019 levels.  The placement number was slightly smaller than expected but within the range of pre-report estimates, while the marketings and on-feed totals were very close to expectations.

The big question is whether the feedlot situation is improving to a point where the fed cattle market can emerge from the capacity cap that has limited the market in 2021.  The answer is that, yes, the situation is improving but we are not quite there yet.  The February 1 on-feed total was the highest of any month since February 2006 and reflected the buildup of feedlot inventories carried over from pandemic disruptions last year.  Feedlot inventories have dropped by 3.4 percent from February to June, the largest decrease in that period since 2012.  The average change in feedlot inventories from February to June in the five years from 2016-2020 has been a slight increase of 0.3 percent.

Figure 1 shows the twelve-month moving average of feedlot inventories.  This provides a longer-term view of the feedlot situation by removing seasonal variation and allowing month-to-month comparisons of average feedlot inventories for the previous 12 months.  Since March of this year, the twelve-month moving average has been at record levels, increasing each month.  The most recent value for June 2021 is higher again at another record level.  This shows that the feedlot industry has not yet turned the corner to begin reducing average feedlot inventories.  I expect this will happen in the next month or two.  The decline in monthly feedlot inventories since February is encouraging and represents progress in moving to cyclically smaller feedlot production.

The current fed cattle market will show improvement faster than the moving average in Figure 1 (which takes time to reflect changing conditions) and that appears to be happening.  Cash fed cattle prices last week averaged $122/cwt., the highest level in eight weeks.  Barring some new disruption, feedlot inventories should drop below 2020 (and 2019) levels in the next month or two and remain there going forward.   However, the ongoing drought could represent such a disruption if dry conditions force feeder cattle into feedlots sooner than usual.  Drought could slow down the process of tightening beef supplies in 2021 but increased cowherd liquidation would lead to even smaller supplies in the coming years.

Management Practices to Add Value -Part 1

Mark Z. Johnson, Oklahoma State University Extension Beef Cattle Breeding Specialist

Cow-Calf production represents a long-term investment in land and cattle.  Accordingly, there is considerable economic value in correctly managing the genetics, calving seasons, weaning and marketing program.  Historically, the commercial cow-calf sector of beef production has marketed calves as a commodity.  Yet in a rapidly evolving beef industry, the needs of the market have become more specific over the past 20 years which has greatly increased the opportunity for cow-calf producers to market through value added programs most of which require specific genetics, production focus and management commitment.  This week we focus on preconditioning and marketing practices which can be used by commercial cow-calf producers to add value to weaned calves.

Preconditioning Calves

Preconditioning typically bundles the management practices of castration, dehorning, deworming, feed bunk training with a nutritional program to accommodate a 45-day on ranch weaning period, and two rounds of vaccinations (e.g. respiratory, blackleg) which can be documented and used as a marketing tool.  Preconditioning programs with varying names and management requirements are sponsored by cattle organizations, livestock markets and pharmaceutical companies.  One such program is the Oklahoma Quality Beef Network (OQBN), which provides producers the opportunity to certify calves and participate in special sales.  Information about the OQBN, which is sponsored by the Oklahoma Cattlemen’s Association and Oklahoma Cooperative Extension Service, is available at http://www.oqbn.okstate.edu.  The value of preconditioning management practices implemented on the ranch is well documented and leads to potential price premiums.  After preconditioning, calves are marketed with added weight and a stronger immune system which enables them to better cope with the stress of transportation, handling, commingling, new diet and new surroundings.  Research shows preconditioned calves perform better as stockers, through finishing and in carcass form.  Through preconditioning, cow-calf operators can influence the market value of their calves by following industry accepted management practices.

Preconditioning calves does come with additional expense of time, vaccines, feed, facilities, etc. and should be weighed against the potential added benefits.  A budgeting tool is available at http://www.agecon.okstate.edu/faculty/publications/3943.xlsx.  In regard to capturing the added value of preconditioned calves, producers should also consider the possibility of retained ownership and marketing them later as yearlings or fed cattle.

A producer’s final decision regarding adopting preconditioning practices and marketing strategies is based on many things, including time, tradition, labor availability, accessibility to marketing options and upfront cost like facilities versus the potential premiums.  That being said, research at OSU and other universities has shown preconditioning is not only beneficial to animal health and performance, but also returns more dollars when sold at market.

Mixed Species Grazing, A Potential Win-Win Situation

Courtney Bir, Oklahoma State University Extension Livestock Economist

You’ve likely heard the importance of diversifying your investment portfolio, but have you thought about diversifying your ranch enterprises? What if you could diversify while controlling for red cedar and other woody plants? This line of questioning lead us to analyze the potential for mixed species grazing, specifically grazing goats alongside your cow-calf herd. Woody plant encroachment is a serious problem, resulting in less profitable rangeland due to the need to decrease stocking rates. The land becomes less productive due to water being diverted to woody plants, and shading. Common ways to control woody plant encroachment includes grazing management, herbicides, and prescribed fire.

In our analysis, we compared cattle grazing with herbicidal control, prescribed fire, prescribed fire with stocker goats, and prescribed fire with breeding goats. The full paper is available here: https://doi.org/10.3390/ani11051226. Using cost-benefit analysis, with our assumptions, we were able to determine that the most profitable option was cattle grazing with breeding goats and prescribed fire (positive NPV 99.9% of the time). In our analysis, we assumed that you could have two does per cow. Goats consume primarily browse (woody perennials) making their diet different from cattle. This allows goats to graze alongside cattle with little competition for forage. We purchased does in August of year 1, we assumed a kidding rate of 125%, and sold kids in June. All prices were simulated based on historical prices. Prescribed fire was conducted twice a year, using a rotating patch system.

Before you consider adding goats to your operation, there are a few considerations. The main benefits of adding goats, is the sale of the kids, and woody plant control. Currently, there are experiments underway to determine more accurately how much woody plant control goats provide. The ongoing results look promising, but we used a conservative assumption in our analysis. Goat meat is increasing in popularity as American tastes change, resulting in strong meat goat prices. Despite these benefits, adding goats to the operation may not be for everyone. One of the highest expenses is the additional fencing required to keep goats on your property. We analyzed building a complete fence, depending on your current fencing you may only need to make modifications. An additional issue for goat production is predation. We included the cost for a livestock guardian dog to decrease predation loss, in addition to expected expenses such as feed and medication.

The control of woody cedar greatly impacts the long-term productivity of your rangeland, and ultimately your profitability. Mixed species grazing is just one option for improving your rangeland through woody plant control, while providing an additional revenue stream. We are continuing to analyze this scenario as more results from the real life experiment come out over time. Although these preliminary results are promising, depending on labor constraints and fencing ability, mixed species grazing may only be a profitable option for some cow-calf operations.