It's the best of times for cattle producers
The law of gravity dictates that “what goes up must come down.” Whether it applies to the cattle industry is the question of the day.
Cattlemen experience good times and bad times. Sometimes they lose money and sometimes they make money.
At current market prices, which all cattlemen agree are the highest they’ve ever seen, they are making a reasonable profit. They also are cautious and wonder if it is a bubble that will burst down the road.
John Hajek and his sons, Andrew and Alex, operate a medium-sized calf feeding operation on their farm east of Tampa. They buy calves from the local sale barn and through a cattle buyer in Missouri.
The number of cattle they buy and grow to feeder size (800 to 850 pounds) depends on how much feed is available, the purchase price, and the cost of grain. They grow most of their feed.
Hajek said they aim for a death loss of 2 percent or less, but sometimes it can be as much as 5 percent. Drugs used to keep cattle healthy are another cost factor. Hajek said cattle health issues vary throughout the year.
“Fall is the worst time because of fluctuating weather,” he said.
It can be 80 degrees one day and drop into the 40s by the next night.
“My biggest concern is the huge amount of money it takes to operate now compared to five years ago,” Hajek said. “We have to produce enough income to support three families.”
Although cattle are at record highs, Hajek wonders how long it will last and how much longer consumers will be willing to pay higher prices for beef.
He said the money the cattle operation is making now is making up for losses they were taking 18 months to two years ago.
The Hajeks have a large, grain-farming operation, as well. Grain prices are almost half of what they were last year, so they expect their farm income to be “way down.”
“I guess that’s why it pays to be diversified,” Hajek said. “One operation can balance out the other.”
Calf producers lead
Cattle industry experts say that ranchers are in the driver’s seat because they produce the calves that are in such high demand.
Van and Ryan Peters of Lehigh have a father-son partnership that runs a 500-head cow/calf operation. The cows are Angus or Angus-based composites that include Maine-Anjou and Simmental crosses.
Van Peters said having cows is like owning a factory, something that produces every year. The operation grows as much of its own feed as possible. Supplements bolster the cattle’s health.
The cows graze year-round on grass and on fields sown for grazing. Some pastureland is reserved strictly for summer grazing.
“Whenever you have cattle that are grazing rather than hauling hay to them, you cut costs,” Peters said.
About 100 of the cows are artificially inseminated. Some of the bulls that are used come from their own herd, and some are purchased to introduce new genetics.
Of the bull calves produced, 150-200 are fed and sold as fat steers, and some are sold as breeding stock.
The Peters make deep cuts in their cowherd every year, keeping back only the best performers. They keep some heifer calves as replacements, sell some to other cowmen as replacements, and market some as feeders.
“Prices have never been at this level,” Peters said. “It’s pretty scary. If one dies now, it hurts quite a bit.”
The increased profits they are making go back into the operation to make improvements, pay debt down, or grow it.
Eugene Just of Aulne has a herd of 100 cows. Every year, he keeps about 10 heifers (females) to replace cows that are culled out of the herd.
Just is in a good position financially because he has little debt. He owns grassland and raises his own feed.
“Cattle prices are out of this world,” he said. “Even small calves weighing 150 pounds brought up to $900 at a sale I attended last week, and 400 pound calves brought $1,200. Some cull cows brought $1,500.”
“But everything else is going up in price, too,” he said, speaking of costs.
He noted that low grain prices are keeping feedlots going, which makes the demand for feeder calves strong.
He acknowledged that his cattle profits are higher than usual.
“We are able to afford a few more luxuries, but there is going to be a blood bath sometime down the road,” he said.
Last modified Oct. 9, 2014