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Heifer vs. stocker: What to keep, what to sell and when?

Jim Gransbery Published on 08 December 2014
Melissa and Scott Zentner

Sitting around the kitchen table on a sunny fall afternoon – 3 to 4 inches of new snow on the pasture – Melissa and Scott Zentner reviewed decisions they made this year.

The same decisions that every cow-calf producer faced in 2014 because prices for all classes of beef cattle are at or near record levels.

December fed cattle futures at $170 a hundredweight (cwt)? Bred heifers at $2,500 to $3,000 a head? Feeder steers at $250 cwt? Cull cows at $1.25 headed for burger? What’s the tax ax gonna hack come April? Pencils are getting rubbed to the nub figuring revenue and investment options available.

Although cattle producers face financial decisions every year, 2014 presented some unusual challenges because there is so much money involved. Small calf crops, a shortage of beef cattle in the U.S. and the world exacerbated by drought and forage deficiencies in major cattle production areas of this country, coupled with increased demand, has put the cowboys and cowgirls in a rather comfortable saddle.

“All the heifers that were going to be sold are gone – 117,” Melissa says. “We kept 73 which will be bred next spring.” The sold heifers and all the steer calves were forward-contracted in July, Scott adds.

They were shipped the weekend of Oct 25. The heifers are slated for another’s herd replacement. The couple is buying a ranch and leases ground on which to run 400 mother cows. They began purchasing land north of Billings in 2001.

No sentimentality governs their decisions. After preg testing, 42 mother cows were open. “An open cow absolutely went to burger,” Scott says. “We got rid of anything with an issue,” Melissa adds.

The reason for that is the threat of trichomoniasis and ridding the herd of open cows, and using A.I. is a prophylaxis for trich. The 73 retained heifers will be bred I.A. Twenty-three of them will get the semen of the same bull as their mothers to continue a breeding line of heifers which other ranchers buy. “We choose mothers as well as heifers,” Scott notes.

The couple feels that because they have managed debt when prices were bad, they are more than able to handle the influx of cash.

“We paid off debt early,” Melissa says. Only seven more payments on the present place that belonged to Scott’s dad.

“Some of the money made in 2014 will be moved over to next year, as we don’t want to overextend,” Scott says, and the IRS doesn’t need more, either. “We are within striking distance of expanding” the land base, Scott adds.

U.S. cow herd expansion is on everyone’s mind these days. The Cattle-on-Feed report of Oct. 24 indicated that heifer placements were down 3 percent from a year earlier. That’s a hint that U.S. herd expansion is getting started.

Bryan Okragly, a cattle buyer for Cargill, thinks the expansion began a year ago, but availability of grass limits acreage for more animals “so it will take a few years to catch up.” The 2014 calf crop is the smallest since 1951, and in 2013 it was the smallest since 1949. Okragly echoes the vision of others, saying “We won’t see a bad calf market for several years.”

Another factor in the herd inventory is that prices for cull cows and bulls have been bullish. “In the past eight months, we could not get enough of them,” Okragly says. That adds explanation to why super-lean hamburger at the meat counter is running $5.49 a pound. Of course, chicken and pork provide some restraint on higher beef prices.

A Billings-area commodities broker notes that fast-food burger franchises are losing money on every one they sell nowadays. “Beef costs are eating their margins. They make it up elsewhere on the short term – one to two years – but over the long run cannot do it.”

Cow slaughter is way down as cows are being kept longer to get one or maybe two more calves because of the marginal cost for the calf factory, he says.

Alan Hooker and his son run 600 to 700 head of cows north of Ryegate, Montana. The steers have been sold, but they are holding off on taking the heifers to town until after the first of the year. That’s the IRS option.

“We’ll sort off the replacements which will be A.I.’d in May,” he says. “We try to keep a relatively young herd.” To max out the value of cows 6 to 7 years old, the Hookers send the cows to another rancher who keeps them for one to two years for a share of the calf crop and then sells the cows for salvage value.

“It works out pretty good,” Hooker says. Heifers, bred heifers, stock cows and cull rotation have been a successful program for the ranch.

The Yegen family has been in this Yellowstone River valley for decades. On Nov. 14, they brought 16 heifer calves to market along with 28 steer calves.

Charlie Yegan

“We are traditionalists,” says Charlie Yegen, who along with his father, Peter Yegen III, and brother, Peter IV, kept a close eye on the sale ring action. “We retain 10 percent of our heifers.” Their open cows also go to burger.

“We preg test twice a year,” Charlie says. “We calve twice a year. That allows us to use our bulls better, and we get two paydays.” The family has fall calved now for more than 15 years. The early, sharp cold this November gave pause to the idea, but for their program, it has worked.

The heifer calves averaged 449 pounds and brought $291 a hundredweight, while the steers averaged 497 and brought $304 a hundred. A time frame for these prices?

“I have no clue as to how long it will last, “ Charlie says.  end mark

Jim Gransbery covered agriculture and politics for the Billings (Mont.) Gazette for 24 years.

PHOTOS
TOP: Scott and Melissa Zentner, who ranch north of Billings, Montana, haul their own animals with their semi-tractor cattle truck.

BOTTOM: Charlie Yegen, whose family calves twice a year, at his office in downtown Billings. He moved cattle Monday to winter quarters west of Park City, Montana. Photos courtesy Jim Gransbery.

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