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Managing feed cost challenges for the fall and winter

Stephen B. Blezinger for Progressive Cattleman Published on 24 September 2018

Beef production costs can be a moving target. With costs of transportation, feed and fertilizer varying as they do, most producers are compelled to do everything possible to manage these costs to maintain profits.

Feed decisions for cubes and supplements must be considered with not just price, but nutrient and energy impact.

While it is always important to keep input costs in check, producers may do this to their detriment.

Sometimes cost cutting can go beyond simply attempting to maintain profits and actually result in reduced performance. It is important to focus not on the “least cost” but the “best cost,” ensuring that investments in critical inputs are appropriate and will generate optimal returns.

A best cost may be, and often is, higher than a least cost at any given time. In many cases, the reason a given input is the lowest in price is because some key factor has been compromised. This is particularly true of nutrition.

Costs of cutting costs

One of the first things the producer asks in challenging situations is, “What are my options to reduce my costs?” For just about any producer, there is some threshold for how much they will pay for a given item (price point) such as hay or supplements.

After that threshold is exceeded, they begin looking for a cheaper source of the same item or what they perceive to be an identical or at least similar item. If something identical or similar cannot be purchased for what they consider an acceptable price, then they commonly start looking for alternatives. Consider an example:

1. XYZ Ranch has determined that given their forage base, the most effective manner of supplementation was feeding 4 pounds per day of an all-natural, 20 percent protein range cube. On average, the cost of the cube (bagged) has been around $340 per ton.

With this program, XYZ averaged a 92 percent calf crop (conception to weaning), and an average weaning weight for steers and heifers has been 525 pounds. Some numbers to make it easier to visualize:

  1. The cow herd is 100 head, which means that annually, his calf crop is 92 head: 46 steers and 46 heifers.

  2. His cube feeding period ran from Nov. 15 to March 1, or 105 days.

  3. At this feeding level, it would provide 400 pounds of cubes to the cows per day at a cost of 68 cents per head per day. For the feeding period, his cube cost is $71.40 per head or $7,140 for the group for the feeding period.

  4. His calf crop averages $1.48 per pound at sale day. With 92 head X 525 pounds average = 48,300 pounds X $1.48 per pound = $71,484 gross. This is equal to $714.84 per head average for all cows. Subtracting the cube cost, the return after supplementation = $643.44 per cow unit.

2. Now assume the market situation has changed and cube prices have gone up considerably (as they have). The same cube now costs $390 per ton. Everything else is the same. With this increase, the cost per cow is now 78 cents per head per day or $81.90 per cow per supplementation period for a total of $8,190 for the herd.

This, when subtracted from the gross sale price per cow, now provides a return after supplementation of $632.94 per cow unit. This is a reduction in revenues of about 1.6 percent.

After some research, let’s say that XYZ finds what is believed to be a replacement, “identical” cube that costs $365 per ton. This is $25 per ton cheaper and subsequently appears to save the producer a bunch of money (400 pounds X 105 days = 42,000 pounds X $25 per ton = $525). The tag looks the same as the original cube, so XYZ decides to go with the cheaper supplement.

What XYZ does not realize, is this cheaper cube is lower in energy than the first cube (hence the lower cost) fed previously. The result is that in making this change, conception rates and the calf crop drop from 92 to 90 percent (two calves). Also, the average weaning weight drops from 525 pounds to 500 pounds. This means the amount of sellable calf will now total 45,000 pounds (90 head X 500 pounds), a decrease of 3,300 pounds.

At the same market price, his sales total $66,600 (45,000 pounds X $1.48). This creates an average gross sale per cow unit of $666. Subtracting the new total cube cost of $76.65, the return after supplementation is $589.35, or a reduction in returns of 6.9 percent per head.

Ultimately, this is $4,359 less than his gross sales in the previous scenario with the more expensive cube. So while XYZ saved $525 on his cube price, the decision cost over $4,350 in performance in lower number of head and total pounds of calf to be sold.

A primary problem with this is the potential for loss may not be apparent until well after the decision is made. As such, what looks like a good decision now (saving $25 per ton on cubes) may be a bad decision farther down the line (conception rates are down, weaning weights are lower).

In many cases, given all the variables in a cattle operation there is no way to accurately foresee the implications of some decisions. It is very important to be extra careful when making decisions that can ultimately affect how the cow performs.

If performance has been good with an existing program, consider what the savings will be against the potential risk of lost production. Even small changes or compromises can have huge implications down the road. The decisions also apply to other performance-related components (hay quality, mineral program, fly control, etc.). Points to consider:

  1. Make changes very carefully. Consider as many factors as possible – costs, forage program status, current performance, potential effect on performance.

  2. Cheaper is not always better. When considering products or product types, and one appears considerably less expensive than the others but the labeling is very similar, ask yourself, “Why is one product so much cheaper?” Determine the reason for the difference.

  3. Changing to a lower-cost product or program comes with compromises. What is sacrificed? Breeding, gains, health?

  4. Do the research. In looking for ways to cut costs, put in the time to make sure changes made will affect you positively. It’s easier to lose ground than it is to gain it back.

  5. Do not compromise your mineral program. The mineral program is the foundation of your entire nutritional program.

Conclusions

While it is important to keep costs down, it is also critical to be sure your program is maintained. Even relatively small, incorrect choices can have dramatic effects. Recognize and evaluate where all production costs are derived. Then ask, “Is this something I can truly afford to compromise?”

In many cases, the answer will be no, and your overall profitability will be higher because you made what initially feels like a wrong decision.  end mark

PHOTO: Feed decisions for cubes and supplements must be considered with not just price, but nutrient and energy impact. Staff photo.

Dr. Steve Blezinger is a nutritional and management consultant with an office in Sulphur Springs, Texas. He can be reached at (903) 352-3475. Follow him on Facebook

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