The ups and downs of the cattle cycle may be devastating to your profitability, and the impact can also disrupt the genetic base of your herd. If you've been forced to cull your cowherd deeper than you'd like, rebuilding should be viewed as an opportunity to strengthen your business.
"Many factors can dictate what causes a producer to reduce numbers or to rebuild," says Tom Field, associate professor of animal science at Colorado State University. "They may reduce because of increases in output prices, overall profitability, strength of financial position with their lender and dramatic changes in weather." While you may not be able to control all of the factors that cause you to partial herd liquidation, you can build back stronger and protect future profits by rebuilding a higher quality herd.
The first step
"Before I'd rebuild a herd," Dr. Field says. "I'd assess very carefully my economic options. A producer needs to go through a pretty sustained planning process to avoid the days of saying, `Things are bound to get better so we'll just ride the cycle.' That's just not a good strategy."
Dr. Field suggests that when planning to rebuild you should assess the current position of your operation and ask yourself the following questions:
What kind of management am I willing to provide and what facilities do I have?
What are the labor resources and expertise available?
Take a long hard look at past performance. Try to understand what's been a limit to your profitability and what strategies have been effective.
Who are your customers and what do they want? This involves determining the needs of feeder cattle buyers and other segments on through to the consumer.
Are there other economic enterprises that are going to offer more return than a cow-calf herd? If you can't financially build back your herd numbers, consider a yearling or stocker program that offers less risk until you have enough equity or resources to rebuild.
What are your various marketing options? This is something you should ask yourself each year, whether or not you're rebuilding, to decide where you want to fit and which alternatives are best for your operation. If you're rebuilding, this question may spark a new goal or direction for your cowherd.
What are your resources? What forages are available? What is the least-cost feed that can be provided to meet animal requirements? These answers may dictate if you can rebuild after a drought.
Ron Gill, professor and extension livestock specialist at Texas A & M University agrees. "You should always make sure your grass is ahead of your cows. You have to make sure your management strategies are in place so that if you purchase cattle you won't be forced to sell them right away if something happens in the short term. Then you can get into the task of rebuilding with quality stock."
Time for change?
Asking yourself the previous questions will put you in a position to take advantage of the many opportunities that exist to rebuild wisely. And it may be time for a change.
"The industry is changing fast," says Dr. Gill. "There is a program out there for almost every kind of animal raised. And if you can maintain a cowherd that produces that product and stay profitable, you should consider them as an alternative."
Although coming out of financial hard times may not be the time to risk a new venture, it may be the easiest way to keep up with the industry's trend in building quality and returning a premium when you need it most.
"You can get into something new more quickly," says Dr. Gill. "With a specific goal in place, rebuilding with cattle that match the specs of the programs that are out there should save you time in the quest for quality."
That requires researching the various targets that exist. Focusing on industry targets can help you determine where your herd is and where it needs to be (see chart). You can hit those targets with your cattle by collecting carcass and production data and becoming involved in an alliance or other program as you rebuild.
"Many producers are reluctant to try something new because they may have lost a lot of equity so there's not a lot of room to gamble," says Dr. Gill. "But many programs can give you a known market outlet for your cattle while helping you increase quality so you won't be so open to fluctuations in the cash market. And there's some advantages to predictability."
There are numerous ways to build quality into your herd. When rebuilding most producers will either buy replacements or raise their own. While raising your own replacement females may have advantages in known genetics and production levels, you also must consider the cost involved and whether your genetics meet the most profitable target. Remember that by the time you rebuild from within your herd the upswing of the cattle cycle may be over.
"If you're going to rebuild out of your own herd, you've got to understand the time value of money and work through a heifer replacement budget," says Dr. Field. "If you're raising your own replacements you should consider past reproductive performance in your herd, carcass data, feedlot performance and cost of gains. Then you will know what you need to work towards. Some herds may not need to do anything different with genetics or biological types, but some may require dramatic changes. But in the industry today, you need information to make those decisions."
One way to achieve low-cost changes is through bull leasing. A lot of seedstock producers are offering this option along with a market outlet for the calves. This can raise genetic quality and offer profits. When breeding to rebuild with quality, Dr. Gill warns, "The quality you keep is dependent on the quality you breed."
With a big push toward quality carcasses you can't lose sight of other traits. "Sometimes producers strive to reach a specific goal so fast that they select for a single trait and give up some other production traits, like fertility," says Dr. Gill. "You should strive for balance in trait selection."
Those breeding principals also should be followed when purchasing replacements. Buying replacement females can help you rebuild your numbers back faster and can help you achieve dramatic quality changes if needed, but you also should be weary.
"When selecting replacements you should keep in mind that every good cow still has a home," Dr. Gill says. "Many ranchers in our area have or are reducing herd numbers. The cows being sold aren't the best ones they have and you don't want to buy other people's problems or overpay for low quality."
The best way to avoid a wreck is to research the source, set your limits on price and have biosecurity measures in place to protect your base herd.
"In any instance," says Dr. Gill. "as you purchase new herd sires or buy or raise replacement females, you need to keep the industry's direction in mind,"