The USDA mid-year cattle inventory report in 2015 suggests that the beef cow herd expansion is currently underway. When compared to the same period a year ago, beef cow numbers have increased by 2.5% and heifer retention rate is up by 6.5% nationally. In South Dakota, beef replacement heifers experienced a 12% over year increase. South Dakota has the third largest increase in absolute numbers of beef replacement heifers in the nation, behind only Oklahoma and Texas. The expansion of beef cow herds is strongly supported by the historically high cow calf returns in the most recent years (Figure 1), which will very likely continue in the near future.


Data Source: USDA & LMIC, compiled by LMIC.

To make the cow-calf herd expansion decision more profitable, there are things for ranchers to consider. This article will focus on advanced grazing management practices which may reduce production expenses on a per cow basis.

Management Intensive Grazing

Management-intensive Grazing (MIG) refers to a grazing strategy where the pasture is fenced into smaller units called paddocks. Animals are allowed to graze only one of multiple paddocks at a time, allowing other paddocks to recover. Compared to continuous season long grazing, MIG can greatly improve harvest efficiency, the proportion of forage consumed by livestock compared to the forage produced. Meanwhile, selective and repetitive grazing, which is typical of continuous grazing, is minimized with MIG. This is because stock density is high on a small paddock being grazed, limiting selectivity and improving use of all available forage. In addition, MIG allows periods of re-growth and recovery for highly desirable grass species.

Cost Reduction Estimation

Pasture costs have a great impact on cow-calf returns. With improved harvest efficiency, MIG may allow a higher stocking rate, which might alleviate the need to rent or purchase more pasture if the MIG system is managed well. Research studies have demonstrated that, under certain circumstances, MIG may satisfactorily support increased stocking rates compared to continuous grazing.

Take a herd with 194 cows and 6 bulls for example. Given the initial stocking rate is 4 acres of pasture per cow (or 1 cow per 4 acres) for a 6-month grazing season, with continuous grazing an 800-acre pasture is required. For easy illustration purposes, assume that pasture rent is $75/acre. Typically, continuous grazing has a harvest efficiency of approximately 25 percent, while MIG can have a harvest efficiency of 35 percent. By increasing harvest efficiency, MIG allows more cattle to be fed on the same size pasture without reducing intake of individual cows. Given the same available forage quantity, this means cattle stocking rate can increase by (35-25) / 25 x 100% = 40%.

Suppose the rancher decides to expand the cow herd size by 10%. If the same stocking rate is to be maintained, 80 more acres will need to be rented to provide grazing for the additional 20 cattle under the same grazing system. If pasture rent is $75/acre, a total of $66,000 will be incurred to rent 880 acres for the expanded herd of 220 cattle. For the same cattle herd, a greater stocking rate means that less grazing land will be required. For example, if the stocking rate increases by 100%, then only half of the total acres would be required to graze the same herd, which is 880/(1+100%) = 440 acres. Similarly, in our case, stocking rate under MIG system can increase by 40% without reducing individual cow intake. Therefore only 880/ (1+40%) = 629 acres are needed to graze the expanded herd due to the higher carrying capacity of the new system.

MIG system involves additional costs as producers need to put up additional fences and install new water systems. The initial investment to incorporate MIG could range from $10 to $70 per acre, depending on the unique characteristics of each ranch. Most of the extra investments for MIG should last at least10 years with some maintenance costs after the initial investment.

Table 1 gives a simple illustration of the partial cost comparison between continuous grazing and MIG practice using a cow herd expansion example. Note that it is constructed for comparison purposes, therefore the common costs incurred by both grazing systems such as replacement heifers purchase costs are not included.

Table 1. A partial cost comparison for cow herd expansion under continuous grazing vs. MIG

Continuous Grazing Costs MIG Costs
Pasture rental cost $75/ac Pasture rental cost $75/ac
    MIG extra cost, amortized for
10 years at 7%
$2.00/ac -
$13.80/ac
Total # of acres 880 Total # of acres 629
Total Cost $66,000 Total Cost $48,433-$55,855
 

Ecological Benefit and Policy Support

In addition to the cost reductions shown in Table 1, MIG has the advantage of increasing vegetative cover and reducing bare ground. This enhances infiltration, reduces soil erosion risk and negative impacts on water quality. Compared to continuous grazing, research also shows that if managed well, MIG also has the potential to increase carbon sequestration in the soil over the long term.

Adoption of MIG strategy can be a win-win situation for the ranch operator and society. Starting September 1, 2015, CRP-grassland offers cost-share assistance of up to 50% for fence and watering systems to enhance planned grazing, including MIG (USDA). This is definitely good news for ranchers who are considering expanding their cow herd and adopting MIG as a way to improve their operation.