Cull feeding scenario changed

Cattle Market & Farm Reports, Editorials
Sep 4, 2006
by WLJ
— Higher costs may have reduced value of feeding cull cattle.

Producers have a variety of differing philosophies when it comes to handling cull cows. Numerous studies have shown that selling unproductive cows contributes a substantial amount of money to an operation’s bottom line.

According to the 1999 National Beef Quality Audit, cull cow marketing creates an average of 16 percent of ranch income. In some cases, it could be much more. Feeding culls is normally a proposition which is both risky and potentially rewarding, however, with this year's drought and high fuel costs translating into increased feeding costs, the picture may have changed somewhat.

Jim Robb, director of the Livestock Marketing Information Center, said right now, the market indicators show that producers ought to sell their culls as soon as possible to avoid the price decline in the fall. However, he does expect some seasonal price rally through next year up to April 2007.

According to USDA data, cow slaughter has been running 15 percent above the prior year for the first six months. R. Curt Lacy, extension economist for University of Georgia, said cow numbers are essentially the same this year as in 2001 and compared to the last severe drought year in 1993, there are one million fewer cows in the U.S. herd.

Lacy said he expects this will contribute to a slight price decline in the next several weeks and months of approximately $7-10 per cwt. However, he said depending on drought conditions and available feed resources, it is likely more profitable to sell cattle now rather than further depleting feed resources.

“The bottom line is, in all likelihood it is more profitable to market a cull cow in better condition and save the feed than to deplete feed resources and sell a thin cow for less money,” Lacy said.

He said the consequences of marketing during the fall run of cull cattle would be less of a factor this year as a result of the early shipment of cows.

“Cattlemen should not let concerns about the large numbers of cows being marketed keep them from making the correct culling decision,” he said.

Of course, the major question any operation will need to consider is can feeding be done efficiently and at a profit. This year, that particular question is a more important consideration as a result of feed costs and lack of available grass.

Darrell Busby, livestock field specialist for Iowa Beef Center (IBC), has been involved in feeding cull cows for the premium white fat market for several years and said IBC intends to feed another group of cull cows from November to February again this year. He said although he hadn't yet completed projections, it has been profitable in most of the previous trials. However, finding a buyer could be the biggest challenge for anyone considering feeding cull cattle.

In the areas with good quality winter forage or inexpensive feed, the practice of feeding culls may represent a feasible opportunity. Although purchasing culls for the purpose of feeding is a risky proposition at best, it can benefit a ranch that feeds out their own cows. In order to take advantage of high cow beef values, it is important to carefully select the animals placed on feed, specifically avoiding over-conditioned cows which gain poorly, and unsound or sick cattle, which can result in higher loss rates as well as a discounting of the carcasses that end up in the processing chain.

At current market levels, a “high dressing utility” cow can bring in excess of $45 per cwt. while a lower yielding cutter in poorer body condition may bring $40 per cwt. or less.
That analysis shows even at a high rate of gain, feed cost this year could make feeding cull cows more risky. The expiration of Mandatory Price Reporting has eliminated the price discovery and with the amount of consolidation among cow processors, it is important to evaluate the buyer market before undertaking the venture.

Market conditions
Prior to the occurrence of bovine spongiform encephalopathy in North America, cow plants slaughtered an average of 7.2 million head of cows each year. Now, annual cow slaughter could drop to 4.8 million head this year. That's a number some believe is barely keeping up with current demand for cow beef cuts, a market which, by most accounts, is expanding and increasing in value.

Although the cow beef market is expanding, fewer cattle in the processing chain is leading to rapid consolidation among cow processors. This consolidation is decreasing the number of plants and buyers, driving the price down in communities which don't have a nearby packer. In addition, it means that cattle that do find a buyer—although recent auction barn prices have still been above the five-year average—are having to be shipped farther for processing, increasing costs and adding uncertainty to the practice of feeding culls. — John Robinson, WLJ Editor