Looking at the year ahead, we know a few things about factors beyond control of the rancher. Cow herds are smaller and calf supplies will be tight. Calf and yearling prices likely will climb to new heights while production costs will challenge profit margins.
So given this mixed hand of a market outlook, what can cow-calf producers do to beat the averages? More than ever, ranchers with the best control of production costs have an “ace in the hole,” but investments in adding value also can provide a winning hand at sale time.
Over the next few years, marketing won’t be the main concern for most producers, says Oklahoma State University Extension livestock marketing specialist Derrell Peel, PhD. The biggest questions for ranchers are whether they will have any cattle to market and whether they can manage their production costs.
When calf prices and production costs are high, Peel notes, there is some tendency for producers to back away from some “value-added” practices. But due to their large investment in cattle and inputs, any death loss hits feeder or stocker margins harder than ever. That high level of investment provides incentives for buyers to manage risk by paying premiums for some assurance calves will stay healthy.
Know your customer
Research has consistently shown documentation of attributes such as health practices, age, origin, breeding and other details can add value to calves (see sidebar). Securing those premiums, however, requires some planning.
Sometimes we tend to “put the tail ahead of the horse” in pursuing value-added premiums, says Chris Reinhardt, PhD, Kansas State University feedyard specialist. Producers hear that if they do certain things, they will add value to their calves. So they do them, take their calves to their local auction and they sell for the same price as all the other calves.
Reinhardt encourages producers to identify their market first, then select the management systems and documentation that fit that market. Some feedyards or order buyers will pay for attributes such as verified preconditioning; age, source or process verification; natural production; or others. Some auction facilities hold special value-added sales that attract buyers who are willing to pay extra for calves that meet their specifications, especially if they can put together load lots of similar cattle. Ranchers, Reinhardt says, should seek out these market channels, confirm what they want and what they will pay for it, then produce calves with those specifications, assuming the premiums justify any added production costs.