Look at the long term – Reinvest while cattle prices are strong

By Dean Kreager, Extension Educator – Agriculture and Natural Resources, Licking County

Many parts of Ohio are under development pressure, and communities are trying to act to prevent the loss of agricultural land. I bring this up because a planning group reached out while searching for local statistics and numbers related to “prime farmland.”  This got me thinking about what makes farmland “prime.” Is it defined by specific soil types, historical yields, lay of the land, or proximity to markets? I won’t argue these are all important and are used to determine value, but what type of land is currently providing the largest net income per acre? The marginal land once considered a byproduct of farmland ownership is likely producing your highest net income per acre, thanks to current cattle market conditions. Instead of producing a little extra income, the cattle enterprise may be a big contributor to the bottom line.

We know cattle markets cycle up and down, and the current market has been high for longer than expected based on historical cycles. Indications are that the high prices are not expected to drop soon unless an unforeseen event happens. Re-investing profits into the cattle enterprise now can put a farm in a better position to be profitable when markets soften in the future.

First, improve herd genetics. High-quality bulls will cost more up front but can build the herd’s genetic base. Traits such as improved weaning weights and improved carcass characteristics can be selected to match the needs of the marketing program for the herd. In addition, selecting replacement heifers from top-performing cows can improve herd productivity. The use of DNA testing to aid in finding the best replacement females continues to develop and become more cost-effective. These tests increase the likelihood of improved performance when used for selecting replacement females. Ohio State is currently working on a research trial involving collection and evaluation of DNA data in their herd.

The other way to improve herd genetics is through selective culling. While cull prices are high, removing cows that perform poorly, are open, have bad dispositions, or have health issues will improve overall herd productivity. While a problem cow producing a live calf may produce a small profit now, those problem animals will not provide the income per cow that can be expected with an improved genetic base.

Second, invest in equipment that makes the job safer and easier. A functional chute, a set of scales, and some gates and panels are a great place to start. Put safety first. Like all farmers, cattle producers are not getting younger. Reflexes, mobility, and recovery times all slow down with age. Invest in equipment and make facility improvements that reduce risk. Sometimes opportunities for added income are missed because of a lack of equipment. Missed vaccinations, castrations, and pregnancy checks are a few prime examples. The availability of facilities for a veterinarian to work on an animal or for a producer to do routine vaccinations and castrations can improve profits and improve safety over trying to get by with poor handling equipment.

Third, improve infrastructure to improve efficiency. Often pastures are not used to their full potential. Lack of fencing and limited water sources are often the two biggest obstacles. Look for opportunities to add water sources, which will allow for more division of pastures. Research continues to show that extended pasture rest improve both the quality and quantity of available forage. This can allow a greater number of cows in each area, increasing potential profit. Land value continues to climb rapidly, and underutilizing it is a missed opportunity cost.

In addition to water and fences, have the pastures been soil tested and deficiencies in pH or nutrients addressed? Once again, an underperforming pasture is a missed income opportunity.

Beef prices will change by the time this is published. As I write this, feeder and finished cattle have dropped nearly $30 cwt in just over a month, and Mexican feeders are scheduled to cross the border in August. I am not suggesting that we have seen an end to the record cattle markets, but this last month is a reminder that we don’t have complete control over when things will change. Making good investments in your beef operation while the money is available will help profits continue when the markets soften.