Identifying beef production efficiencies to increase profitability

Increasing output is an important component of increasing farm profitability. But there are inherent issues in relying solely on increasing output as a driver of increased profitability. Most cow calf and backgrounder producers market cattle at pre-determined times of the year which are based on their production cycle, and as such, are generally dependant on the market price at that time with little ability to influence it. This price volatility means there is no guarantee that increasing the numbers of animals sold will lead to an increase in farm profitability. For many cow calf producers increasing the number of animals sold means increasing the number of breeding animals that must be retained. In addition to the natural increase in variable costs, there may also be a requirement to increase capital expenditure - more animals means more housing requirements, increased feed storage space, increased land to graze animals, more fencing, more water lines etc. However, unlike variable costs, capital costs as a rule increase by set amounts independent of actual production. This means that capital investments may lead to a temporary reduction in farm profitability and cash flow through higher interest and capital repayment requirements, until the resulting increase in output is sufficiently large enough to compensate for the increased costs.

Before considering an increase in herd size to generate higher farm income, producers should take a long hard look at their existing enterprise to determine if there is an opportunity to improve farm income through improved production efficiencies. Evidence from the 2017 Ontario-Cow Calf Production Survey suggests there is significant opportunity for Ontario Cow calf producers to improve production efficiencies, reduce costs, increase output and improve farm profitability without any change to herd size. Examining and improving production efficiencies enables produces to extract (a) more output per productive animal unit on the farm and (b) more output per productive acre on the farm. Examining farming output by these metrics will permit producers to identify areas in their production system where efficiencies can be improved (example outlined in Table 1).

Table 1. An illustration of the effect of improving production efficiency on farm output.

Number of cows in the herd 50 50 50
Weaning % 90% 93% 96%
Number of calves weaned 45 47 48
Value of calves weaned (600 lbs* steers at $210/cwt) $56,700 $59,220 $60,480
Output per animal unit (beef cow) $1,134.00 $1,184.40 $1,209.60

*The use of imperial represents the standard measurement used by the industry.

In this simple example we see that improving the percentage of calves weaned from 90% to 96% increased the value of calves sold by 6.5% and increased the productive economic value of each beef cow (the productive economic unit) by $75 per cow from $1,134 to $1,209.60 per cow. This, without any change to the number of breeding units in the herd.

The purpose of this article is to provide cow calf and backgrounder producers with pointers to areas in the production cycle where improvements in efficiency can have a significant impact on farm profitability.

Aim for compact calving and compact breeding

Compact breeding and compact calving are interrelated. Compact breeding and calving are defined as having a breeding season and calving season that takes place over a period of 63 days (9 weeks) or less. The major benefit of compact calving is to produce a larger group of calves that will be of uniform weight at the point of sale. Work by Van Schaik and Chaffe, (2019), demonstrated that feedlot buyers are prepared to pay a premium to purchase larger lots of uniform cattle. Research by Funston et al. (2012) showed that calves born from cows bred within the first 21 days of the breeding season had weaning weights 39 lbs heavier than later born calves. Having more calves born in the first 21 days of the calving season means producers have heavier, more uniform groups of cattle to sell earlier and therefore increase their profit potential. Producers should aim for a calving season with a 70:20:10 distribution where 70% calve within the first 21 days of the calving season, 20% by day 42 of the calving season and the remaining 10% by day 63 of the calving season. Producers should plan that first-calf heifers calve in the first 21 days of the calving season as they tend to take longer to rebreed than mature cows. This way producers can keep the breeding season to a target 63 days.

Aim for a target culling rate of between 10 - 20%

The 2017 Ontario-Cow Calf Production Survey showed that Ontario cow calf producers have an average culling rate of 9%, (recommended 10 - 20%). This means that there are a lot of older cows on many operations. As cows age their reproductive performance declines and with it, overall herd productivity (i.e. more open cows, longer time taken to go back in calf, longer calving season, etc.). Adopting higher rates of culling allows more heifers with greater reproductive performance and higher genetic merit to join the herd leading to quicker improvements in calf quality through the faster introduction of new genetics to the herd. Younger aged herds tend to have fewer health issues, reducing veterinary costs. Higher culling rates may also result in higher cull values as the culls will generally be younger and better quality. In addition, younger herds tend to have more cows that rebreed at the first estrus cycle making it easier to compact the breeding season and therefore the calving season.

Increase pregnancy checking and weaning %

The aim of all producers should be to have a calf per cow per year reared. The average weaning % in Ontario is 91% for cows and 75.5% for heifers. The average breeding season length in Ontario is 118 days, giving a 388-day breeding cycle, (i.e. number of days from the birth of a calf in one year one to the birth of a calf in the next year). A 50-cow herd with a weaning % at the provincial average, (i.e. 91%), could increase the number of calves available to sell by 3 per year, where the breeding season is reduced to 63 days and the breeding cycle to 365 days. More substantial gains can be achieved, (i.e. in the number of calves available for sale), where the % of calves weaned per cow is increased in addition to reducing the length of the breeding cycle closer to the target 365 day breeding cycle.

Only about 66% of Ontario cow calf producers have indicated that they pregnancy check at the end of the breeding season. Identifying open cows, which should be selected for culling, will help reduce winter maintenance costs. The costs of keeping an open cow include the holding costs of feeding and maintaining for 12 months plus the lost income from having no calf to sell, which could amount up to $2,400 or more per open cow. Maintaining open cows on the farm is a substantial cost to any farm business. Breeding females only generate income through the sale of their calves. It's unlikely a commercial beef cow will produce a calf of such quality to compensate for the cost of keeping her open for 12 months. Pregnancy checking heifers is equally critical. Open heifers should be identified early and can then be either sold or transferred from the breeding herd to the feedlot.

Get more from your pasture

The ability to grow and utilize pasture in an efficient and profitable manner is widely considered to be a critical driver of low-cost animal production systems (Hurtado-Uria et al., 2013) and grazed pasture is the most cost-effective feed available to all ruminant livestock, (Finneran et al. 2010). Research by Shalloo et al. (2011), highlighted pasture management as the single biggest influence on pasture yield and utilization. Regular pasture measuring and budgeting provides significant benefits including optimum utilization of spring grass, early identification of pasture surpluses and deficits and the achievement of higher livestock performances from pasture-based systems, (O'Donovan and Dillon, 1999).

Increasing pasture utilization rates, (i.e. getting more of the pasture DM that is grown consumed by the animal), is critical to increase animal performance, although the effect is small, but more significantly, increase the output per unit area. While there is little research available from Ontario cow-calf farms to show the average pasture utilization rates, anecdotally, it's estimated to be less than 50%, (Byrne & Van Camp, 2019, O'Reilly & Menegotto, 2019). Increasing utilization rates allows for (a) more animals to be grazed per unit area or (b) a smaller area to be dedicated to grazing thereby permitting an alternative economic use for the additional land.

Effective management strategies to improve output from pasture include adoption of rotational or other controlled grazing systems, adoption of strategies that permit early spring/late fall grazing (where conditions allow) identifying paddocks with surpluses that can be saved for winter forage, identifying potential deficits early and taking corrective action etc.

Adopt extended grazing practises

The longer livestock can be maintained in the grazing state, the lower the cost of production will be, through reduced requirement for supplementary forage, bedding etc. Extended grazing also presents labour cost/time saving opportunities. Extended grazing practises include grazing alternative crops such as cover crops in the fall and grazing stockpiled pasture or warm season grasses such as Sorghum-Sudan during the summer slump.

If we assume a hay price of $0.22 per kgs, ($0.10 per lb), every extra day spent grazing by a beef cow saves on average $3.75 per cow per day in hay costs. Extending the grazing by 1 month can save up 476.27 kgs, (1,050 lbs), of hay per cow or $105 per cow per month in purchased hay costs. The hay not consumed in the fall can either (a) go towards the hay inventory to protect feed levels in the event of a late spring the following year thereby saving the requirement to purchase hay in such a circumstance or (b) where adequate forage is available the area required to grow the additional 476.27 kgs, (1,050 lbs), of hay per cow can be put to an alternative productive economic use.

Conclusion

Critical analyses of farm output performance can help producers identify areas in the production system where performance can be improved and should be the first approach to improving farm output, gross farm revenue, reducing costs and increasing profitability. Once production efficiency has been satisfactorily achieved producers can look to increase output through increasing herd size.

References

Beef Farmers of Ontario., 2019. Weekly Market Information Report.

Byrne, J. and Van Camp, M. 2019. Calculation of pasture utilization rates by beef cattle grazing two Ontario Community Pastures, (unpublished), Ontario Ministry of Agriculture.

Finneran, E., Crosson, P., O'Kiely, P., Shalloo, L., Forristal, D., and Wallace, M. 2010. Simulation modelling of the cost of producing and utilising feeds for ruminants. J. Farm Manage., 14, pp. 95-116

Funston, R.N., Musgrave, J.A, Meyer, T.L. and Larson, D.M. 2012. Effect of calving distribution on beef cattle progeny performance. J. Anim. Sci. 2012.90:5118-5121. doi:10.2527/jas2012-5263

Gorden, J., 2019. 2017 Cow Calf Production Survey, OMAFRA Virtual Beef

Hurtado-Uria, C., Hennessy, D., Shalloo, L., Schulte, R.P.O, Delaby, L. and O'Connor, D. 2013. Evaluation of three grass growth models to predict grass growth. J. Agric. Sci., 151, pp. 91-104

Molenhuis, J., 2020. Beef Cow Cost of Production Calculator, Budgeting Tools, Ontario Ministry of Agriculture, Food and Rural Affairs

O'Reilly, C. and Menegotto, M. 2019. Calibration of a rising plate meter to estimate pasture dry matter yield on Ontario beef and sheep farms, (unpublished), Ontario Ministry of Agriculture.

O'Donovan, M., Dillon, P., 1999. Measurement of Grassland Management Practice on Commercial Dairy Farms, End of Project Reports, URI: http://hdl.handle.net/11019/1433

Shalloo, L., Creighton, P. and O'Donovan, M. (2011). The economics of reseeding on a dairy farm. Irish Journal of Agricultural & Food Research 50: 113-122

Van Schaik, M. and Chaffe, E., 2019. The Value of Special Calf Sales, OMAFRA Virtual Beef


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