Take Your Cows to the Feedlot?
Oct 17, 2011
It gets more difficult by the day to not get giddy-bullish on the outlook for beef cow prices. Seems like the only question is how much meat money that 99% we keep hearing about is able to come up with.
But, happy day, with the supply outlook, it looks like we may find out just how much they WILL pay next year. That’s one reason there are a lot of cows in commercial feedlots in Texas. It is not cheap to keep cows in commercial feedlots, mind you. But if the alternative is selling perfectly good cows, gambling a few bucks this fall and winter might be worth it.
Last week’s news provided several reasons to talk about this. One is last week’s approval by both houses of Congress of the free trade agreements with South Korea, Panama and Colombia. National Cattlemen’s Beef Association President Bill Donald of Montana said Friday the Korean deal alone could eventually be worth $2 billion to the beef industry.
Then there was the WASDE report, calling for historically tight supplies of beef next year—almost 5% under this year, for goodness’ sake—and suggesting that "cattle prices are forecast higher for the remainder of 2011 and through 2012. Demand remains stronger than expected and the strength is expected to carry into 2012."
The WASDE wizards expect strong international demand will also—despite those higher prices in the U.S.—reduce imports into the U.S. and increase exports from the U.S.
Like I say, it’s hard not to get all giddy with the smart guys saying things like that. Assuming you still have some cows, of course. Lots of folks in Texas, Oklahoma and parts of New Mexico, Kansas and Louisiana don’t. They had to sell them because of the drought.
But not everybody that ran out of grass and/or water sold.
I visited last week with Paul Colman and Jeff Matsler at Frontera Feedyard in Muleshoe, Texas. They have several pens full of mama cows and bred heifers and others full of early-weaned calves. There are a lot of similar deals around the feeding belt.
Paul was nice enough to share some of the math his cow customers are looking at. He says they can maintain cows on a high-roughage ration with 16% corn for around $2 a day. For poorer cows needing some upgrade, he said that as of last week a 45%-50% corn ration calculated to raise body score one point in six weeks would run $2.50 to $2.70.
In normal (at least what we old folks consider "normal") times, that would seem awful high. Guys hereabouts think $15-$20 a month should keep a cow on grass.
But these are not normal times, no matter how old you are. Nobody knows yet how deep this drought cut into the cowherd, but there’s no doubt it’s historic. A lot of folks are concerned about the accuracy of official cow counts.
But USDA says cow and bull slaughter ran well ahead of year-earlier levels all summer, shooting to records—despite this small herd—in September, and whether its counts are right or not, however many cows we used to have, we don’t have that many anymore.
I’m not sure the precise numbers matter. Many cows have died. Thousands of others have found nice—probably permanent— homes in places like Nebraska. There is no reason to assume they will be for sale next spring.
So, the way Colman figured it last summer at the height of the drought sell-off, a rancher had the choice between selling a cow and planning to replace her next spring. He says that some figured that, given the 2011 value of cows versus the presumed 2012 value of cows, they might need to spend $500 to $750 more to replace cows than they’d get for cows now.
I don’t know whose pencil is that sharp, of course. Who can guess at cow prices next year? I don’t see how they could be much lower, given the situation, but how can you guess how much demand there will be? Sure, I’ve heard guys who think any cow with four legs and one or more good eyes will be worth $1,500 or $2,000 when the rains come.
If it rains in the drought area, that is. (And that is a pretty "iffy if" given the talk about another La Niña.) But even if it doesn’t rain, you have to figure that it’s worth something just to avoid selling in the midst of the worst drought sell-off in history. And I see Allendale’s Rich Nelson predicting that fed cattle could get to $1.36 next spring.
I’m not sure consumers are going to pay that much for beef in the economy projected for 2012, but I’m also not sure they won’t. I mean, hey, if that’s what it costs, that’s what I’ll pay. How about you?
If so, there is no telling what a fertile cow would be worth. But certainly more than the $700 or so my neighbors were getting last summer.
Some of the same ranchers—and without dropping names, some of these are pretty savvy, experienced guys—who sent Colman their cows also sent him their early weaned, 300 lb. and 400 lb. calves to go onto growing rations. He expects to grow them to the 650 lb. to 700 lb. feeder weight for perhaps 85 or 90 cents.
Given my druthers, I’d have calves that size on wheat pasture this time of year. The gain would be cheaper. But even with the rains much of the drought area’s wheat belt got last week, the prospect for wheat grazing isn’t good. There will be some, but without more rain there won’t be much.
So maybe, even with the price of feedstuffs, everybody should be looking at feedyards. This looks to be an ascending market for a while. A guy looking at what to do at weaning and cow culling time should keep that in mind.