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Two Strategies to Cut Costs, Increase Profits

December 7, 2013
 
 
Jared Wareham

Jared Wareham
Flying H Genetics Lowry City, Mo.


Everyone wants to cut costs and increase profits. Going against the grain can sometimes help achieve both but also brings great risk.

Before making major operational changes, be sure you conduct as much research as possible. I have outlined four highly marketed, promoted and published topics that are popular coffee-shop talk among cattle producers. We’ll examine two strategies this month and two next month.

1. Are smaller cows better because you can run more per acre?

I am not denouncing smaller cows or the role they play in agriculture, specifically in environments where they have functional advantages.

However, beware of marketing fads that suggest cows have to be small to be efficient, regardless of environment. If you have average-sized cows (1,200 to 1,400 lb.) and plan to downsize, there are two factors to consider:

More units of production per acre is the main benefit in the smaller-sized cow philosophy. Bringing your average cow size down will take years to achieve at a normal female replacement rate, so you need to pencil out the long-term conversion plan of using 3- and 4-frame bulls on big cows. As a result, you will have smaller calves to sell down the road.

It takes about 10 years to turn over the average herd. Therefore, you should plan on losing money for the first decade. As you make the transition, you can’t run more cows per acre because you still have bigger cows. If you truly need smaller cows, perhaps you should sell your larger cows and buy smaller cows to stock your operation at an efficient level. Raising little calves from big cows will leave you in a giant hole.

Second, don’t overlook the biggest challenge—there is very little market demand for small-frame feeder calves. Can you get enough growth from your feeder calves to retain marketability? Backgrounders and cattle feeders know calves from super moderate stock take longer to grow and finish with super light carcass weights. In other words, they’re a money-losing proposition.

2. Managed grazing systems are a must.


Read More

Read Part 2: Reasearch is Key


A well-managed grazing system is key to better forage utilization, higher stocking rates, drought management and reducing overhead costs. However, you must research every aspect associated with the installation of a management intensive grazing (MIG) system, especially the labor and financial investment. I am a big proponent of managed grazing, but consider this:

If you are in the cattle business as a long-term investment, a well-designed MIG system is crucial. The operational efficiencies you gain far outweigh a continuous grazing model. However, if you are in the cattle business with short-term goals in mind, you can be overly burdened by the costs of installing the necessary equipment to reach a level of production that is efficient.

If your cattle business has a 10-year plan or less, you are better off to keep expenditures in line with your other short-term goals. Instead, make a few improvements to improve grass utilization, etc., and keep your bottom line in the black. Going full-tilt on a grazing system can be just as painful as owning more tractors and equipment than the cows can pay for.

Next month I will share the rewards of vaccinations and parasite control.

Jared Wareham devotes much of his time to bull development, marketing and strategic planning for Flying H Genetics, which markets 450 bulls annually from two ranch locations in Arapahoe, Neb., and Lowry City, Mo. Wareham and his wife, Jill, have three young daughters and reside on the Missouri ranch. Contact Jared: 

E-mail: jared@flyinghgenetics.com

Website: www.flyinghgenetics.com

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FEATURED IN: Beef Today - December 2013
RELATED TOPICS: Farm Business, Livestock

 
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