Pity the cull cow. Her becoming one
always signifies a failure of sorts, never a victory.
That could be one reason culls are
often viewed as a byproduct of production management rather than
a financial asset that can be exploited or sacrificed.
Depending on who’s running the abacus, cull cows typically
represent 10-20% of a cow-calf operation’s annual gross revenue.
As cattle prices have risen over time, so have the prices of
cull cows and bulls.
In fact, Tim Petry, Livestock
Marketing Economist at North Dakota State University (NDSU)
notes that cull cow prices last year were record high, despite
the fact that beef cow slaughter was up significantly.
At least part of that has to do with
the global economic recession. As per capita income has
declined, consumers have spent more for end meats and trim than
for middle meats. That’s still true today, although Petry points
out through June of this year cull cow prices averaged about
$5/cwt. less than last year. As of mid-July cull cow prices had
increased to last year’s levels.
Among the reasons for the decline,
Petry explains, “Although beef cow slaughter has been lower,
total cow slaughter has averaged about 3 percent higher than in
2008.”
Black and White Exodus
You’re likely aware of the dairy herd retirement program
undertaken by Cooperatives Working Together (CWT). Managed by
the National Milk Producer’s Federation (NMPF), the self-help
program is aimed at reducing milk supplies in order to stabilize
milk prices. The program is funded by dairy cooperatives and
individual dairy farmers, who are contributing $0.10/cwt. on
their milk production through December 2010.
On July 2 CWT announced the first of
three dairy herd retirement programs scheduled for this year had
removed 101,040 dairy cows—mostly from the western part of the
nation—and almost 2 billion lbs. of annual milk production from
the national inventory.
Just a few days later, CWT announced
the second retirement program. In August, CWT said it had
tentatively accepted bids to retire another 86,710 dairy cows
accounting for 1.8 billion lbs. of milk production.
“These two summer 2009 herd
retirements, combined with the USDA’s recent price support
increases, should result in very positive movement in dairy
farmers’ milk prices,” said Jerry Kozak, President and CEO of
the National Milk Producers Federation, which administers CWT.
This latest round of retirement is
also removing 3,104 bred heifers.
“CWT stands ready to conduct yet
additional herd retirements later this year in order to help
address the severe supply-demand imbalance that has depressed
farm-level milk prices. We intend to use all the resources at
our disposal to help farmers deal with this severe economic
crunch that they’re confronting,” said Kozak.
There’s no word on how many cows CWT
is looking to cull overall. When CWT first announced its plans
for 2009, Jim Tillison, CWT Chief Operating Officer said, “Given
the economic stresses on the farm today, we anticipate CWT will
remove a significant number of dairy animals, but that depends
on our members and the level of the bids submitted, given
current cow prices.” As with other herd retirement rounds in
recent years, he explained CWT had no set target for the volume
of milk or the number of cows to be removed.
Early projections from beef industry
analysts suggested CWT would be looking to clear 250,000-300,000
cows from the herd this year.
So far, reduced beef cow slaughter
on a year-to-year basis has helped negate price pressure from
the increased harvest of dairy cows.
For perspective, according to the
Livestock Marketing Information Center (LMIC), total federally
inspected cow slaughter was approximately 3% higher than last
year on a weekly basis through the middle of June, though 16%
higher than the five-year average. Beef cow slaughter was down
about 6% compared to last year, while dairy cow slaughter was up
15% (20% more than the five-year average).
Likewise, USDA’s recent mid-year
cattle inventory report indicates the beef cow inventory is 1%
less than last year (32.2 million), while the inventory of dairy
cows is 2% less than the previous year (9.2 million head).
The inventory of all cows and calves
on inventory is 101.8 million, 1% less than a year earlier.
Looking ahead, keep in mind that the
mid-year inventory report also says the number of beef heifers
retained for replacement this year is 2% less than a year ago,
while the number of dairy heifers retained for replacement is
unchanged from a year ago.
Atypical seasonal cull cow prices
are also due to beef cows, though.
“Cow prices did decline
contra-seasonally about $6 per hundredweight in May during the
early stages of the buyout. But the lower prices were not
entirely due to the additional dairy cow sales,” Petry says. He
explains there was additional beef cow slaughter during that
time frame as Northern Plains producers liquidated cows that
lost calves in last year’s blizzards.
Beat the Rush
“Although prices in mid- July were similar to last year’s
levels, cow prices likely will not increase to the high levels
reached last August,” Petry says. “Instead, prices likely will
level off for the rest of the summer. The typical seasonal price
pattern for cows shows a sharp decline in October and November,
when heavy beef cow culling occurs. That scenario likely is to
occur again this year.”
That’s one reason identifying and
getting rid of culls sooner than later always pays dividends.
Just consider the heifers.
“Lifetime cow studies from Montana
indicate that properly developed heifers that were exposed to
fertile bulls, but did not become pregnant were often
sub-fertile compared to the heifers that did conceive,” explains
Glenn Selk, extension reproduction specialist at Oklahoma State
University (OSU).
In a recent issue of OSU’s Cow-Calf
Corner, Selk explains, “In fact, when the heifers that failed to
breed in the first breeding season were followed throughout
their lifetimes, they averaged a 55% yearly calf crop. Despite
the fact that reproduction is not a highly heritable trait, it
also makes sense to remove this genetic material from the herd
so as to not proliferate females that are difficult to get
bred.”
With that in mind, Selk recommends
preg-checking replacement heifers about 60 days after bulls are
removed.
Obviously, fewer days spent feeding
money down the proverbial rat hole with an open cows and heifers
makes sense, too. And that’s before you consider lost marketing
opportunities associated with age.
“The grand total expense for not
culling open replacement heifers in today’s market is about $285
per head,” Selk explains. “Therefore, it is imperative to send
heifers to the market or the feedlot while they are young enough
to be fed for 4-5 months and not be near the B-maturity age
group (carcasses estimated to be 30 months of age or older).
Feedlot order buyers will be especially leery of heifers that
may be near 20 months of age, because of the risk of B-maturity
beef that receives a considerable discount when harvested at the
packing plant or because of the potential loss of the Japanese
market.”
Back to the seasonality of cull cow
prices, though. In 28 out of 28 years, according to Cattle-Fax,
folks made an average of $54 per head buying cull cows in
November (when prices hit bottom) and putting 1.5 lbs. average
daily gain on them and then marketing them in February (when
prices are significantly higher, seasonally).
Bottom line, Petry says, “If
possible, marketing cows before October or after December
usually is a prudent marketing strategy. That very well could be
the case again this year.”
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