– Stan Smith, OSU Extension PA, Fairfield County (originally published in Ohio Farmer on-line)
This old project book prompted a fresh look at ROI
Each year as I work through the pile on my farm desk at tax time, I come across the first SOE project book I completed when I began Freshman ag. Considering what we’ve sold cattle for this past year, it really caught my eye when I recently glanced at it again.
That old Livestock Production Enterprise record book showed that I purchased two Hereford crossed steers in November of 1965 for less than a quarter a pound, totaling just over $100 each. I sold them 8 months later for about $260 each. As I think about some fed cattle in Ohio auction barns recently selling for $3000 each, and quality feeder calves commonly bringing $1000 plus, I wonder if perhaps it’s time to take a fresh look at return on investment in the beef cattle industry and the value it represents during this time in the cattle price cycle.
Return on investment, or what we might commonly know as ROI, has always been at the forefront of any purchase decision made by profitable and forward-thinking businesses. Agriculture is no different. If the investment isn’t going to return more than its cost, why do it?
The consideration that might make those ROI decisions unique for agriculture is it takes additional labor to turn many new investments into profit, and finding underutilized labor standing around the farm might not be realistic. That said, in this time when fed cattle are at or approaching historically high values, perhaps it’s time to look again at ROI and the value the investment in some of the labor-intensive management practices that quickly come to mind can return to the operation.
With breeding season upon us, the first one I think of is a breeding soundness exam (BSE) for the herd bull. When the virtues of a BSE are mentioned, countless times over the years the response has been, “he got them bred last year.” Hearing that, I must ask . . . last year did your bull stand through windchills that were minus double digits the end of December or drag through mud much of the Winter?
Depending on when, where and how many you have performed, a BSE might cost $50 to $150 dollars per bull. But as we look at ROI today, consider that for every cow the bull might not get settled on the first service we’ll have a calf that’s 21 days younger at weaning time. It’s likely gained ~40 pounds less than contemporaries born from the first service, at a value of $2+ dollars for each of those pounds. ROI on a BSE might be at an all-time high today!
While we’re on the topic of getting calves born in a timely fashion and optimizing total weaning weight, let’s talk about the cost of estrus management or synchronization. Any time estrus synchronization is mentioned, thoughts immediately turn to artificial insemination. While the opportunities afforded by individually creating matings to the best bulls in the world through an artificial insemination program are undeniable, it is not something all cattlemen choose to do. Regardless, perhaps the greatest benefit to estrus synchronization is the ability to maintain a tighter calving season regardless of using artificial insemination or the natural service of a bull. The financial benefits of maintaining a tighter calving season come in multiple forms.
Each management decision alone could return what these steers did in 1966!
First and foremost, as alluded to earlier a tighter calving season that gets more calves on the ground earlier results in additional total pounds at weaning. Each calf born a 21-day cycle earlier likely results in an additional 30 to 50 pounds of marketable calf weight . . . at a value these days of $2+ per pound.
The second opportunity a tighter calving season affords is greater numbers of similar weight calves to market in groups. Data shared by University of Kentucky economist Kenny Burdine has showed an $11 per hundred weight advantage when calves could be marketed in groups of at least 5 as opposed to singles. When that group of calves grows to 10 head, the advantage becomes $15/hundred weight. As Burdine goes on to point out, combining the advantages of the extra weight realized by calving a cycle earlier with the additional value gained when selling in a larger group can easily exceed $100 per calf. All things considered, ROI on a $12 CIDR and a couple trips through the chute might be at an all-time high today!
Considering the value of cull cows, the cost of feed, the opportunity to pregnancy check cows and the potential cost savings of timely culling the opens present another ROI benefit that shouldn’t go unnoticed. The costs of keeping each open cow can easily range from $400 to perhaps $800 per cow held in the herd, and not culled. At the same time culls are commonly bringing 90+/- cents a pound. Depending on the method of confirming pregnancy that’s employed, pregnancy checking comes at a cost ranging from only $4 to $35 per head. ROI on confirming a pregnancy might also be at an all-time high today!
I’ve only touched on a few of the potential practices that could likely show a positive ROI. We could also talk about the ROI on a good mineral program, proper nutrition, quality genetics, more intense pasture management, castrating bull calves or incorporating a vaccination program into the calf marketing plan.
Considering the value of cattle now, and the values projected for the foreseeable future, it might be a good time to take fresh new look at ROI on some of those practices that in the past we didn’t recognize as a valuable investment.