Adjusting to a New Economic Reality

Rory Lewandowski, Extension Educator, Athens County

Unless they have been off vacationing on some remote tropical island the past 3 to 4 months, beef producers realize that they are operating with a whole new set of economic realities. Of course, that vacation scheme implies a different set of economic realities as well. Back to beef production economics. Surplus hay supplies are limited to non-existent; $120/ton sounded like a bargain this past winter and now into early spring. I guess it might be if some of the prices I have heard for small square hay bales are correct at $6-$9 /bale. If bales are 50 pounds, that figures out to $240 – $360 per ton! The cost of mineral, particularly phosphorus is also climbing rapidly. Remember $2.00/bushel corn? It’s fluctuating around the $5.00/bushel mark now. Are you ready to fertilize hay and pasture fields? How does $0.75 + per pound nitrogen sound? Phosphorus (P2O5) costs are similar and continuing to increase, potassium (K2O) is around $0.50 per pound. I had better date this (3-26-08) because prices are likely to be higher by time you read this. As if high feed and fertilizer costs were not enough of a challenge, fuel continues its climb into the record books. An important question to ask in the face of these high input costs is: Are these high prices an aberration, a temporary fluctuation, or are they here to stay? If the answer is that these prices reflect a new “normal” or “business as usual” model, then beef producers need to make some management adjustments to stay in step with these new economic realities.

A number of livestock owners attended the recently completed the two weeknight short courses that dealt with the topic of these new economic realities. I want to summarize here some of the management adjustments that were suggested by speakers and participants at these meetings. While all of these suggestions will not fit each and every cattle enterprise, they hopefully will stimulate some discussion and thinking that will lead to profitability on the farm. I’ll divide the suggestions into several broad topic areas: Pasture/Hay, Alternative Forages, Grain and By-Product Feeds, Cattle.

Pasture/Hay: The days of cheap forage are gone. Just looking at the nutrient removal costs in a ton of hay will push hay prices to over $70 /ton. By time machinery costs and labor are figured in $100/ton is about the breakeven price of producing hay. This has several management implications.

First, grazing management becomes more important. The forage produced in your pasture is not a cheap forage, it should be valued at least the equivalent of hay. Livestock harvesting of forage is much more economical than machine harvesting. Given these statements, what can be done to utilize this resource more effectively? Some suggestions include:

* Increase the number of paddocks on the farm. More paddocks on a given area means smaller paddock size. Putting the same number of animals into a smaller space increases stocking density. Increased stocking density results in more uniform grazing, better forage utilization and more uniform manure distribution. This can help to increase pasture organic matter content. Increasing the organic matter content by 1% adds 20,000 pounds of organic matter per acre to the soil. Organic matter can hold up to 90% of its weight in water. So a 1% increase in soil organic matter can result in an additional 2000+ gallons of water per acre. In addition, each percent of organic matter in the soil releases on a per acre basis 20 to 30 pounds of nitrogen, 4.5 to 6.6 pounds of P2O5, and 2 to 3 pounds of sulfur per year.

* Use soil sampling to make more effective and efficient use of purchased fertilizer. Grazing animals move nutrients and concentrate nutrients in pasture areas, particularly if paddock size is large and/or stocking density is low. Even if pastures are not divided into smaller paddock subdivisions, divide the pasture into smaller soil sampling units. The idea is to do some type of grid sampling that will permit variable rates of fertilizer to be spread across a pasture according to need. Soil sampling is cheaper than either over or under applying fertilizer over a large area.

* Add legumes to the pasture mix. A paddock containing 25 to 30% evenly distributed legumes, such as red or white clover will provide the nitrogen needs for the grass and eliminate the need for purchased nitrogen fertilizer.

* Develop a plan to protect the sod base during periods when soils are saturated with moisture. This could be either a heavy use-feeding pad or a specific sacrifice pasture paddock. The advantage of a heavy use-feeding pad is that it will allow you to move and spread manure to other areas of the farm.

Since hay is no longer a cheap feed, what can be done to reduce waste and loss of that feed source? How can hay be used more effectively? Some suggestions include:

* Look at how hay is being stored. The greatest loss occurs on hay stored in the open on the ground. A first step is to get it off the ground. Stone or pallets can be used. After that storage that provides some cover can further reduce losses. It may be economical to build a storage structure.

* Reduce feeding waste. Use hay savers in bale rings. Consider feeding on a heavy use pad. Feed smaller amounts of hay at one time.

* Make use of hay testing. When feed and mineral were less expensive, over supplementing had smaller economic consequences. Hay quality should be matched to animal nutrient requirements. A small investment in hay testing can pay some big returns.

* Feed low quality hay after weaning. For many spring calving herds that means September. During this time let your pastures stockpile. Stockpiled forage is typically higher quality than most of the first cutting grass hay in our area. Use this stockpiled forage in the winter.

Alternative Forages: Annual forages can provide options to help get pasture paddocks re-seeded and can fill in cool season pasture production gaps. The downside to annual forage use is that they require some type of soil preparation, there is an annual seed cost, and to take full advantage of their production some additional management skills often have to be practiced. In Athens County the biggest hurdle on that list is finding some level ground where they can be planted. Some suggestions to consider include:

* Brown mid-rib (BMR) sorghum x sudangrass or sudangrass forages planted in late May can be ready for grazing in early to mid-July. In one on-farm trial in Athens County in 2007, BMR sudangrass that was grazed beginning mid-July through the end of August yielded approximately 3000 lbs of dry matter in each of two grazing passes. Forage quality was 20% Crude Protein with a TDN value of 68. With more intensive strip grazing, it should be possible to get 3 to 4 grazing passes. It fills in the cool season grass summer slump. Surplus forage could be chopped and put into silage bags or baled and wrapped as baleage.

* Forage turnips can be planted in April or through early May and will provide a source of grazing about 6 weeks after germination. Frequent, short duration grazing can be used to provide several grazing passes, again helping to fill in the summer slump period.

* Annual ryegrass can be planted in areas that have been tore up to provide some quick cover and allow grazing about 4 weeks after germination. Once again, frequent, short duration grazing is the way to manage.

* Corn silage is a high quality feedstuff that is often cheaper than hay with a better energy content. The best situation is to contract with a crop producer to grow some silage corn, chop it and then bag it in a silage bag on your farm. Bunk feeding is the best method to get good feed utilization.

* Six years of work with summer planted oats in Fairfield County have demonstrated that oats may be the most productive alternative forage option available; under the right conditions. Oats work very well doubled cropped after wheat. When planted in the late July through late August time frame, oats put growth into leaves and do not produce seed. Oats can be grazed through the winter months, or, some producers are harvesting oat forage for hay or cutting and wrapping as a baleage product. Quality analysis has shown that oats hold on to the quality they had at the point when growth is stopped due to freezing weather. It does not appear that oats can be no tilled seeded into an existing pasture sod and expected to produce the same tonnage as oats after wheat. So, at this point, unless oats can be planted under a tillage situation or no-tilled into a field where there will not be sod competition it may be best to look at other options.

Grain and By-product Feeds: In times of short forage supplies and expensive hay, grains and by-product feeds such as distiller’s grains, soy hulls and wheat midds may provide more economical options to feed beef cattle. However, even these by-product feeds fluctuate in price and availability. In order to make best use of grain and by-product feeds; the following suggestions need to be considered:

* Corn grain, even at $5.00 per bushel is often the most economical feed choice to stretch limited hay supplies and a better buy than purchased hay. Corn contains about twice the energy as hay, so when nutrients are compared on a cost/lb of dry matter basis, corn is more economical. Thought needs to be given about how to feed corn. Feeding underneath an electric wire is an effective means of reducing waste to virtually zero. Another option is bunk feeding.

* If by-product feeds are going to be an option in the feeding program, then they must be bought when they are at a low point in their price cycle. This low price point may not be when the extra feed is needed in the beef producer’s calendar. Therefore, to take advantage of the price and time of availability, the producer must have a way to store the by-product feed. Stan Smith in the new economic realities meetings, talked about hay sheds that could also be used as commodity structures to store other feed products.

* Is it time to think about bunk feeders? Bunk feeders will allow more feeding options as ways to feed grain, by product feeds, corn silage and chopped forages. If a beef producer is committed to feeding the lowest cost ration during times when grazing isn’t possible and/or hay supplies are limited, then bunk feeders allow many different kinds of alternative feeds to be fed with the greatest efficiency and least amount of waste.

Cattle: Much attention has been focused on alternatives and options within a conventional spring cow/calf operation. Are there some changes that could be made from the animal side of the enterprise that should be examined in light of these new economic realities? Some suggestions to consider include:

* Fall calving. Could moving to fall calving increase productivity and profitability? John Grimes, Extension Educator in Highland County, provided some reasons for this management practice. Some of those reasons include: generally more favorable weather conditions such as less mud, and warmer temperatures, more favorable temperature conditions to re-breed cows/ higher conception rates, and good use of stockpiled forages.

* Forage-based genetics. Make sure your cows have the genetics/are adapted to growing and being productive on a forage base without needing supplementation. Frame scores should be moderate. Large animals have higher maintenance requirements compared to smaller animals.

There are probably other suggestions that came up at the meetings that I am not recalling at this time, but the point is that there are management adjustments that can be made to cope and survive in these new economic realities. For more information about any of the suggestions presented here, contact your County Extension office.