Editor’s note: Second in a 4-part series
These are some of the toughest financial times that Kent Henderson, DVM, Northwest Veterinary Associates Inc., St. Albans, Vt. can remember in 35 years of dairy practice in the Northeast. “Most of my clients are just reducing sick cow calls and trying to keep current on their bill,” he says. “Some are postponing repro checks.”
Matt Iager, DVM, Mid Maryland Dairy Veterinarians (MMDV), Hagerstown, Md., says in general, the economic situation as had a moderate effect on his dairy clients. “The last six months and the next six months will be the most difficult,” he says. “The good supply of forage this year has helped keep feed prices lower. Dairies that began in the last two years buying most of their feed will be at the greatest risk financially. Hopefully by the end of 2009, dairy futures will be much brighter.”
Across the country, Bill Wavrin, DVM, veterinarian and owner of Sunny Dene Ranch, LLC, Mabton, Wash., sees the economic challenges from the practitioner and dairy producer side. One thing his producers are doing to cut costs is getting rid of voluntary culls earlier. “Animals that won’t calve in the herd again are leaving sooner due to the much higher production levels to reach positive cash flow,” he says.
The following feedlot, cow-calf and dairy veterinarians discuss how they are helping clients cope with these economic challenges while still maintaining herd health. For Bovine Veterinarian survey results, visit www.BovineVetOnline.com/Survey.
Feedlots drop numbers but hang tough
The economic impacts to Canadian feedlots in the last year or so have been less than their U.S. counterparts. Early in 2008, high feed grain prices and a widening cash-to-cash slaughter cattle basis hit Canadian producers harder than in the U.S. “However, as feed grain prices in Canada fell in the new crop year and the Canadian dollar value eased relative to the U.S. dollar, the effects of reduced slaughter cattle prices were buffered so that Canadian producers have lost less money per animal over the last year or so than their U.S. counterparts,” explains Calvin Booker, DVM, MS, Feedlot Health Management Services (FHMS), Okotoks, Alberta.
In the U.S., feedlot consultant Scott MacGregor, DVM, Livestock Consulting Services, Idaho Falls, Idaho, says the current economic situation has generated fewer cattle on feed in many of his feedlots. “There is much more risk management than before, if that is even possible, which in many current situations is not,” MacGregor says.
Feedlot: Treatment and labor
In recent years, in Booker’s province of Alberta, feedlots had a difficult time getting and keeping employees because of competition with the oil companies. With the sharp drop off in the price of oil, energy companies have dramatically backed off in their operations and expansion plans, says Booker. “As a result, the labor crunch is showing signs of easing up,” he says. “In the last few months, when feedlots advertise for job positions, they get a number of applicants compared to none or very few previously.”
That experience with a lack of labor may be a good lesson for U.S. feedlots who now might be cutting labor because times are tight. “When there was a lack of labor in 2007 and the first half of 2008, Canadian feedlots had to use alternative disease prevention and production enhancement strategies to bridge the gap,” Booker notes. “While these options were more expensive up front, they compensated for a lack of available labor to execute less expensive, more labor intensive options.”
Booker says as a result of dealing with the lack of labor, “Our role as veterinarians definitely increased as we assisted clients to develop strategies to deal with lower levels of available labor.” Because of that, Booker’s practice has seen a steady or increased demand for its services as its veterinarians help clients employ the most cost-effective production strategies available for their enterprises.
MacGregor adds that getting and keeping labor is still the No. 1 issue in his feedlots, but because of the low headcounts in some feedlots, there have also been some employee layoffs. To hold down feed costs, he says more potatoes are being fed in the Pacific Northwest feedlots.
MacGregor believes that new uses of technology will have to pick up some or most of the slack when there is less labor available in the future. He says single-drug treatment and return to the home pen have replaced the three-day treatments in most of his feedlots. “Metaphylaxis is used as a labor-management tool in yards with slim crews, and it can cut morbidity by 50 percent,” he adds.
Cow-calf producers ride a roller coaster
The Sandhills of Nebraska haven’t been as harsh to cow-calf producers during this economic downturn. Tom Furman, DVM, The Animal Center, Alliance, Neb., says the cattle market has been good for most of the last two to four years, but that doesn’t mean everything is perfect. “When the market is as good as it has been, the producers feel like they can do no wrong, and consequently seek very little advice,” he says.
Cow-calf producers are finding ways to cut back. Furman notes that as the fall markets went down, some producers wanted to start cheating their preconditioning programs. “They also started using generic macrocytic lactones or none at all,” he says. “We continue to counsel them with science and research justifying quality health care programs. This has proven beneficial to those retaining ownership through the feedyard. The point is that implanting correctly will always be profitable regardless of market price unless the market price is directly influenced by whether the cattle are implanted or not. Organic markets are the only place where implanting procedures do not always make the producer money versus not implanting. The same goes for deworming.”
In southwest Oklahoma, Tom Reece, DVM, MS, Food Animal Veterinary Consulting & Services, Tipton, Okla., says his cow-calf producers are struggling a bit more. One of his 350-head cow-calf clients believes that the next couple of years will be marginal for cow-calf producers and he intends to implement rigorous culling based on pregnancy status/age (age being prominent). Reece says that client’s replacements will be procured from his own heifers (depending on sale price) or purchases of replacements at very favorable sale prices. His client also intends to lease out farm land he owns to others. Fortunately, Reece says, “The basic services I provide such as pregnancy checking, breeding soundness exams for bulls, diagnosis and treatments, are not mentioned as items for reduction/elimination.”
Cow-calf: Genetics rule, but inputs can suffer
Many producers have kept older cows and are now finding that these cows need to be replaced with younger stock now that the market is dropping, explains Furman. “Producers who use artificial insemination continue to use it,” he says. “Good bulls continue to bring top dollar as our savvy producers know the value of good genetics.”
Some biosecurity programs, however, are taking a hit. “There are some producers who still continue not to do breeding soundness exams or trichomoniasis testing in the face of infection, and that is when problems creep in,” Furman notes. “Our job is to help remind producers that it makes economic sense to practice biosecurity and good health care in the form of trich testing, vaccinations, breeding soundness exams, etc., regardless of the market price or economic times. If the market does not support these tests, then the market doesn’t support any beef production practices.”
Reece says that one point of debate in his area is the mass use of low-cost generic dewormers versus a more expensive and effective product. “I suspect these decisions will become typical for cow-calf producers in my area,” he says.
On the feeding front, Furman adds that producers in his area are more aggressively seeking out corn stalks and cheap supplemental feed stuffs.
For those clients getting out of the business, Reece believes herd liquidations in his practice area will be mostly due to retirement, “Or those individuals who were doing such a poor job of management their operations were already in trouble.”
Furman adds that for a number of years his practice has seen many producers who do not understand the economic value of their animals. “Because of this, traditional mentality prevents a lot of veterinary services seeming to be very expensive from being practiced on individual animals in the past due to the perception of low return on investment. This is a mentality that has not left our area, but needs to in order for the beef industry to continue to progress in the future.”
Dairies struggle with feed costs
In the Bovine Veterinarian survey, dairy veterinarians indicated that the No. 1 area in which clients were reducing costs was feed, and Washington State’s Wavrin agrees that this is where the big changes in his herds (mostly >5,000 cows) are occurring.
“I also formulate rations and most of us have allowed milk price to dictate what kind of ingredients make sense in this environment,” Wavrin explains. “There is certainly a substitution effect on volume and components that can be predicted in some of the more robust nutritional models and current economics dictate what the optimal strategies should be. High nutrient-dense ingredients that command a premium due to this density get substituted out first.”
The Mid Maryland Dairy Veterinarians serve about 400 herds with an average herd size of 150 (and several over 1,000 cows) in a four-state area. MMDV’s Richard Doak, DVM, says they are encouraging clients to evaluate any additive that they are feeding. “If they are not necessary or have a questionable cost/benefit ratio, they should be removed from the ration. Going to a least-cost ration is not beneficial because the loss in milk revenue offsets the savings in feed cost.”
MMDV’s Cory Meyers, DVM, adds: “We have also seen several clients consider grouping options that would save on feed costs, such as a two-year-old or a stale, lower-production group.”
Producers are finding ways to save on feeding calves, but still maintain health. Meyers says some of their clients previously using colostrum replacers have switched back to colostrum. “With proper management protocols in place, no calf health problems have been recorded,” he says. “We have seen problems develop just after switching to cheaper milk-based milk replacers and especially after switching to milk replacers containing plant-based protein. Health problems were corrected after switching back to a higher-quality milk replacer. As the old adage goes, ‘you get what you pay for’.”
Two of Wavrin’s clients are in the unique situation of facing significant excesses of replacement heifers. “The market for those is barely over half of one year ago so we have a different problem —selling heifers well below cost or milking them below breakeven on marginal or additional animals,” he says.
Iager works to make sure milk quality doesn’t suffer when costs are cut. “Quality premiums are attainable goals for most of our producers and really help in poorer economic times. “We really try to keep efficiency the key to milk quality, from records to surveillance, procedures to management; each has to complement each other in a positive manner.” Fortunately, milking parlor procedures and inputs have not been cut.” Bedding has been an expensive area and one where some dairymen have cut corners.
Dairy: Reproduction and culling
In Henderson’s area of Vermont, some clients delay reproductive checks to save money, and he says this means missing open cows and delayed entry into timed AI programs. “This has not been a problem on herds with a commitment to excellent repro, but it has been a cost reduction strategy for farms that use us on an occasional basis,” Henderson explains.
Meyers’ clients have changed a few reproduction basics. “We’ve had more cherry picking and heat detection aids. Presynch and other programs continue to be a major drive in timed insemination, with some herds starting protocols later. Dairymen are continuing to use sexed semen and embryo transfer is still a large part of our dairy practice, even in tough times.”
Meyers has clients who are in a good business position to sell good-quality cull cows and replace them with high-quality lactating cows that in today’s market are substantially cheaper. Iager adds that the economy has definitely impacted culling rates, but it can vary. His goal is to maximize productivity per stall, but says many smaller dairies have been reluctant to sell stale, lower milk producers, and even some open cows. “This may even get worse with a future drop in cull cow prices,” he says. “The lesson here is that it takes time and money to milk and feed these unprofitable cows.” He notes that some clients with better finances have taken advantage of devalued cows ready to milk as long as biosecurity measures were in place.
Wavrin is lobbying for his producers to look very hard at projected needs for replacements and to make sure that they are not feeding any extra replacement females. “Given the adoption rates of sexed semen, I do not project that raising excess heifers will be a useful business strategy any time soon,” he says.
Dairy: Treatment and labor
Henderson enters treatment protocols on the on-farm computers and discusses least-cost treatments. “Many drug prices went up since year end and milk withholding loss has declined due to low milk price, so there has been a big shift to lower-cost medicines,” he notes. “We have been reviewing vaccination protocols to reduce them to non-repeating and having the most efficiency.”
The economy is making Henderson’s clients more self-sufficient. “For years, our practice has given instruction on simple diagnostics and treatment protocols, so it has been natural for the farms to take on more of this work as financials decline,” he says. “We have not tracked morbidity or mortality rates and have not seen an increase in welfare issues. If anything, producers are requesting merciful euthanasia for cases with poor prognosis, instead of prolonged treatments on hopeless cases, so there may have been a slight improvement in welfare issues.”
Doak notes that one risk-lowering strategy for clients is to compare vaccinations to buying insurance. “You can carry liability only or you can carry comprehensive coverage depending on your risk tolerance. It is the same way for vaccinations. We have a basic set of vaccinations we believe are required to protect every herd. They are cost-effective in any financial environment. After that we let the dairymen choose additional vaccinations according to their personal risk tolerance. We try to point out the pros and cons as well as the cost and let them choose where they feel comfortable.”
“When animal health inputs are reduced this creates a welfare concern, but also affects future production and reproduction which affects profitability,” adds Meyers.
Lager says most of his clients realize the management decisions that they make today affect their bottom line tomorrow. “We try to investigate herd problems early and find logical solutions fast. Most of our clients are able to treat their animals effectively; hopefully because we taught them well, but also they find challenge in that they fixed the problem rather than calling the veterinarian.”
Fortunately for Wavrin’s area, there is a great dairy labor supply. “To the extent that it will be feasible, the standard of care of our staff is no more negotiable than the standard of care of the cows,” he says. “Both represent our future.” He has not seen any lay offs yet and says year-end bonuses remained intact. “Periodic raises seem to be happening, but probably a little less aggressively,” he says.
Doak says most of their clients are owner-operated and the few with employees are maintaining current staffs. “The herds that cut staff have the owners assuming more responsibilities,” Doak says. Meyers adds that many of the herds that cut staff were overstaffed and therefore, efficiency has actually improved. “The best employees are remaining on the dairy which helps to minimize shortcuts and inefficiencies,” he says.
Wavrin says for those who are more inclined and adept toward managing input and output price risk, the economy will have a moderate affect, and for those less risk-averse it will have a severe effect. “Only one is at significant risk of not surviving,” he says. “Our own farm is extremely risk adverse, not having grown up in agriculture. This year will look very similar to the last two which were very good on this farm.”
Feedlot Health Management Services maintain their principles with clients in both good and bad economic times. “Essentially, our clients produce more profitably when times are good and bad — they make more when things are good and lose less when things are bad,” says Booker.
Dairy veterinarian Wavrin has a similar philosophy: “My argument relative to health care and genetics and management schemes is that if our decisions six months ago were rational to long term profitability, then they probably still are. If we get forced to make decisions on cash flow rather than profit, then we were probably not making good decisions prior to this period. We are not there yet and think we can avoid that behavior depending on the length of this cycle.”
MMDV’s Iager says, “We constantly strive for greater communication among ourselves as a viable business in the veterinary industry, but more importantly to the dairies we serve. We recommend scheduled team meetings with dairy producers and their management team advisors including veterinarian, nutritionist, accountant, banker, nutrient planner, extension agent, herdsman, crop specialist and any others who are valuable assets to the dairy. As we determine the strengths, weaknesses, opportunities and threats, we can challenge each other to identify problems early and find solutions, create benchmark goals and implement ways to achieve these, and continue to implement plans to increase future profitability. Working closely together as a team gives tremendous support to dairymen that is both productive and profitable.”
The role of veterinary medicine is to promote good production medicine backed by science and research that makes good economic sense, regardless of market price, to help improve and promote the industry, adds Furman. “Every day of every year is the optimum time for veterinarians to work with their producers for mutual success.”
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Cost-effectiveness vs. cost-cutting
Clients are scrutinizing every expenditure on their operations, and sometimes the wrong things may get cut in order to save money, including arrival programs for feedlot cattle, timely vaccinations or even biosecurity tests such as for PI BVDV or trichomoniasis.
Calvin Booker, DVM, MS, says his Canadian feedlot clients believe in maximizing the net cost-benefit as opposed to just minimizing costs. “If the net benefit is positive, our clients are likely to continue doing the things that make them more money than they cost,” he says. “With this strategy, they will continue to get a leg up on their competitors who are forced to cut out cost-effective procedures because of cash flow issues.”
Booker says a lot of that goes back to the way programs were designed by veterinarians in the first place. “Due to the fact that the programs we developed for our clients were cost-effective management decisions to start with, we haven’t really seen cost-effective programs being cut. The disease control and treatment strategies used by our clients were developed based on field trials to define the most cost-effective strategies for each situation.”
Scott MacGregor, DVM, agrees and says he has not seen his feedlot clients cutting back on essential programs. “The feedyards recognize value in receiving programs. They are looking more toward saving feed costs. Health programs really have not changed their focus or direction much in our practice.” His clients realize where money is spent and saved. “Health programs don’t cost much compared to feed by-products and grain, and good health is needed for good growth.”
Maryland dairy veterinarian Richard Doak, DVM, says he and his colleagues are all advocates for healthy cows. Their role is critical to decrease loss of income without compromising production and future viability. “We are uniquely positioned to discuss and help evaluate the pros and cons of different cost-cutting proposals. It is unwise to save money today at the cost of herd health only to fail in the future.”
“We have seen the train wrecks that occur when herds fail to implement biosecurity measures,” says Doak’s colleague Cory Meyers, DVM. “Therefore, it is easy to motivate clients to continue to test for BVDV, Johne’s, and contagious mastitis.”
Next issue: Cutting costs in bovine practice