Noble Foundation agricultural economist Fred Schmedt says that through the combination of high prices and ample grass, the nation’s cow herds have truly become “cash cows.” In the business world, cash cows are products that generate a steady, dependable flow of cash. With that added cash, producers need to carefully consider where they put that money.

“The temptation will be great to purchase a new pickup or upgrade to a better line of farm equipment,” he says. “These types of purchases will no doubt make life easier, but will they ensure profits next year and the year after?”

Better choices might be to identify key areas of the operation where investments will lead to lower future production costs or increased quality and quantity of production. Here are some of Mr. Schmedt’s suggestions.

  • Cattle genetics: Now is the time for producers to assess the type and quality of calves they are producing. Do they fit the market? Do you need more muscle or more growth?
  • Working facilities: With more emphasis on backgrounding programs, working facilities are needed to enable producers to easily perform routine health-management procedures. Investments in facilities should focus on items that will make cattle working faster, easier and safer for both humans and animals.
  • Grazing facilities: Fencing and water systems can make grazing more efficient, leading to increased production. Grazing cows can cost half as much as producing and feeding hay. Every county has different priorities, but some counties have EQUIP funds for fencing and water systems available through the NRCS.
  • Feed storage: Bulk storage is a long-term investment that immediately saves $20 to $30 per ton over sacked supplements. In many areas, hay storage sheds offer long-term feed savings. As the availability of alternative feeds such as brewers grains (a byproduct of expanding ethanol production) increases, a good investment might be building a commodity shed to receive and store truckload lots of the cheaper byproduct feeds.
  • Pasture acquisition: In the long term, all businesses need to grow to survive. Now would be a good time to consider adding additional grazing capacity. Leased land is usually more economical than purchasing, but now is a good time to evaluate all possible alternatives.