Leaving Commodity Markets Behind

 A few weeks ago I wrote about the hypocrisy of current cattle markets and world hunger. Actually it is the hypocrisy of the commodities market and world hunger. Governments and organizations dealing with poverty, along with the media,  are constantly spreading the fear of not being able to produce enough food to feed the world. If all of these governments and organizations (which collectively collect and disperse hundreds of billions of dollars annually to fight the problem) are so dedicated then why were American dairy producers forced to dump forty three millions gallons of milk in the fist ten months of 2016 from "over production?"  Why is it that American produce farmers are forced to take "excess" produce to landfills while supermarkets have the identical produce on their shelves, from other countries? Last (but not least) why are American ranchers receiving less money for their calf crop than they did in 1979 (reportedly from "over production") while we are importing beef from other countries?

These are all fallacies caused by prices being set at the CME without any basis given to the cost of production, and the myth "we'" are in a global economy. If commodity prices would have kept track with inflation, $1.25 calves in 1979 should be $4.16 according to the CPI inflation calculator.  So is there a way to get out from under the CME so ranchers can start receiving a price which reflects the inflation over the last thirty seven years? Yes, in fact some ranchers already are.

Some use organizations like the Grass Fed Network or Homegrown Cow, while others do their own marketing locally, selling directly to the consumer. Others manage to sell their cattle locally at above market prices, with delivery to a local slaughterhouse. Some, such as White Oak Pastures, have gone the extra mile and actually built their own processing plant. However many cattle producers are too far removed from from dense enough populations to market directly to the consumer.

In order to enable all producers to circumvent the CME price fix, the NCBA needs to be abolished, or at the very least, restructured. For those thinking the NCBA is helping cattle producers, and that the beef checkoff program really adds $11 a head to the value of your cattle, why are you receiving less money now than in 1979? In fact, when you allow for inflation, the prices of two weeks ago producers were paid $2.95 a pound less than pre-checkoff prices.

The new organization would require both cattle and feed producers to file their cost of production. Farmers providing feed would be paid on the average cost of production plus a percentage of profits. The formula for cattle producers would need to be a bit more complex. There would be a base price of the average price of production, plus percentage for profit, with the option to retain part, or all of their calves all the way to wholesale, if not retail, and be paid on hide and offal as well.

The new association would need to lobby congress to assure that the packers cannot import beef unless there is an actual shortage of US produced beef.  Furthermore,  the tariff on imported beef would put the packers price on imported beef at a level to be even with beef produced in the USA.

This is just a bare bones proposal which beef producers need to discuss before we go the way of sheep producers...just think of when the last time you saw lamb in a store which wasn't a product of New Zealand.

Jervoise Station Introduction

I recently spent three months on Jervoise Station in Queensland, Australia. This integrated organic cattle/beef operation is an example of government and banking gone terribly wrong. The government owned power company decided it "needed" the land their abattoir (packing plant) was on and forced them off the property for pennies on the dollar. If this wasn't bad enough, their bank decided that their growing meat business was not worth reinvesting in, applied what little money they received against their loan and began a campaign to force them off the cattle station.

Last summer they acquired Rodger Savory as station manager, who has bought them some time, but they are still needing to build a new abattoir on the station to save their place.
Save Jervoise Organic Station from insight creative on Vimeo.


 

Calculating the cost/benefit of the Keyline Plow

Before visiting the link from the Circle Ranch on using the Keyline Plow, here are some things to think about in order to see the financial benefits as many people can see the benefits, but think it is too expensive. Yet these same people are busy making diversion dams and dirt tanks which help some, but basically are diverting water or holding it so it can water a few cow and evaporate.

The cost of sub soiling with the Keyline Plow runs $20 an acre, which does sound expensive, until you compare the results. $20,000 put into subsoiling 1,000 acres of ground with scattered grass and forbes will explode with the first one inch rain (remember, that 1,000 acres just received 27,154,000 gallons of water which would have run off). This explosion of grass and forbes will slow the water and make each subsequent rain be more effective.

Grazed properly this can amount to 7 to 9 days of feed for 1,000 cows, or 7,000 grazing days the first year. If one continues to graze properly, the feed will continue to improve for several years and continue to hold its feed value (not to mention the wildlife habitat it creates.) Now lets compare what that same $20,000 will bring with conventional uses.

Dirt Tanks- Will hold water for cattle without producing feed. They will also evaporate water (at a pan evaporation rate of 88” or 55 gallons per square foot) lose 2,395,800 per acre. Figuring the cost of water being .005 cents per gallon, one is basically throwing away $11,979 worth of water per every acre of water held in dirt tanks. If you have 100 acres of water in dirt tanks, you are basically throwing away $1,197,900 worth of water each year.

Diversion dams- These will create some feed growth but basically still divert billions of gallons of water off the ranch rather than into the ground. Many also have a tendency to wash out and need to be repaired after a few years.

Hay- At $230 A 1,000 pound cow eating 3.5% of her body weight will eat 35 pounds of hay a day. To feed 1,000 cows per day would take 17 bales per day. $20,000 will (almost) buy 87 bales of hay which would feed 1,000 cows five days.

This means that spending $20,000 to run a Keyline Plow in the proper areas your money produces nearly twice the actual benefit of hay. While it would be nearly impossible to calculate the true value of diversion dams, they are of minimal benefit as they are still diverting water off your ranch, rather than putting it into the ground. Dirt tanks have some benefit if you do not have pump-able water, but otherwise you are letting millions of dollars worth of water blow away in the wind.

Now that you have an idea of the cost/benefit ratio of the Keyline plow, take a look and see what they have done with it on the Circle Ranch in far west Texas!

The Bigger is More Profitable Myth

There is a commonly held opinion within the cattle industry that ranchers need to raise bigger calves to be profitable. Is this opinion fact, or is it a myth?

When I checked the market prices at Amarillo, Texas tonight, 700 pound steers were bringing $145 cwt while 500 pound steers were bringing $187 cwt. This meant (that at least on this day) a 500 pound steer was actually worth $65 more than a 700 pound steer. In reality, that 700 pound steer is costing you more than the $65 difference in market price per head.

The average amount of feed to maintain a cow (depending on whether or not she is lactating, and what trimester of pregnancy she is in) will ranch from 2.5% to 3.5% of her body weight. For the purpose of keeping the numbers round, I am going to use an even 3%.

A 1,250 pound cow will have a daily feed requirement (1250 X 0.03) of 37.5 pounds of feed. This comes out to 13350 pounds of feed per year to raise that 700 pound calf.

A 700 pound cow will have a daily feed requirement (700 X 0.03) of 21 pounds a day, which comes out to 7665 pounds of feed per year.

By dividing the difference in the amount of feed needed to maintain the 1,250 cow by the amount needed to maintain the 700 pound cow, we find that you can actually run 1.78 of the 700 pound cows on the same amount of forage as it takes to run one 1,250 pound cow. This equates to running 178 cows raising 500 pound calves on the same amount of forage as it takes to run 100 of those soggy 700 pound calves. So just how much more money can your ranch bring in with the more moderately framed cows?

Based on the above market prices, you will make $6,500 more per 100 calves on those 500 pound calves. However when you add the additional 78 calves you would raise, this adds another $72,930 which brings the total to $79,430. When you take into account the extra vaccines and wormers you will need, the total will drop a little, but you would still be putting more than $70,000 a year into your bank account on the same amount of feed and forage.

For information on my services, visit NaturalCattle Handling.com If you would enjoy a laugh or two, take a look at my cowboy humor and cookbooks at the 2lazy4U Livestock & Literary Co.

Exports Hurting US Economy

Cattle publications (and too often formal educators) try to convince us that the cattle and beef industries are one and the same. They are not. One difference is in the import export market. While some registered cattle producers may market a few animals to foreign markets, it is not something which the average producer does. On the other hand, every producer of boxed beef is after the premium they can receive from exports to other countries.

While exports can be a good thing for the economy, what is often forgotten is that the economy begins at home. There is a point at which exports benefit a few while making the economy bad for the rest of the economy. This is currently demonstrated by hay exports.

Much of the country has been ravaged by both drought and wildfire. Hay prices are through the roof. Many are paying $300 a ton per hay with it being forecast in some areas to top the $400 mark by the first of February. On the surface this would seem to be a simple matter of supply and demand. Between the drought and fires the demand for hay is higher which would automatically drive up the cost of hay. However there is another factor affecting our hay supply which is driving the cost up. A record amount of hay is being exported to China, partially because it is actually cheaper to ship it to China than to points within the United States.

While economists view this as a good thing for the trade imbalance, it is detrimental to our overall economy. This is driving up the cost of both beef and dairy products for consumers who are suffering enough in this down economy. While it would seem logical that trade agreements and export laws would take our own economy into consideration before allowing either exports or imports. Unfortunately economists too often consider the balance sheets between our country and others without looking at the effects upon our own general population.

That is the difference between the cattle and beef industries. The beef industry can benefit by premiums, either in actual price, or lower shipping costs. The relationship between the cattle industry and beef industry is similar to that between mining companies which supply iron ore and steel manufacturers. As cattle producers we are providing the “beef ore” for packing companies to turn into beef.

We can not depend on them for our individual economic situation to be better, nor can we expect the government to protect our interests. As such, our only formula for success is to keep our outputs low enough that our inputs cover the costs with enough left over for a livable profit. We need to manage our forage so that we are planning ahead for the times of drought an/or low prices. We cannot avoid all outputs, but we need to manage them so that what outputs we do have benefit our output to input ratios. This includes everything from handling our cattle in a way which reduces shrink, to making our infrastructure less costly to maintain to how we manage our household purchases.

This last has been made a bit more simple by the internet. We can now purchase everything from vaccines and tools, to clothing, and even some foods and have it delivered without the expense of driving a couple of hundred miles to town. One such opportunity is provided by Country Outfitters. A few weeks back I was approached by them to do a product review in exchange for whatever I wanted to order. I browsed through their products and was surprised at their variety and prices. As it is winter, I chose the Carthart^® arctic lined coat. It had the quality you know is going to be there, including a long lasting brass zipper rather than the cheap plastic ones used by other manufacturers. The prices are comparable to what you find at stores in town, yet you don't have to make the trip. With calving season upon us Country Outfitters an be your own on ranch store if you find yourself in need of extra winter wear or a new hat to wear to the stock show.

Are You Managing Wildlife, Livestock, Or Forage ?

Look at nearly any help wanted ad looking for ranch management and it is fairly obvious that every ranch has it's management priorities. The problem in developing management programs which focus on a certain species of animal is that they are so focused on developing a program for your particular niche that we develop tunnel vision. When we hire a manager with a specific degree to manage for our specific management niche we are often focusing our tunnel vision even more. More often than not we are like a drug addict too stoned to notice we are shooting ourselves in the foot. This is especially true in wildlife managers who have been taught that livestock competing for forage is detrimental to wildlife populations.

The tunnel vision developed by an educational system which focuses on niche management tends to overlook the bigger picture. Environmentalists and wildlife managers want to remove livestock from the land to protect it. However this is often counter productive to forage development and diversity. Many of us have, for one reason or another, come to the conclusion that if we leave the land to nature, that nature will heal the land on it's own. The only problem with this theory is that nature today is not what nature was even a hundred years ago. We  have removed the tool nature used to develop forage and plant diversity. This tool of nature was large herds of free roaming grazers that grazed through an area and were gone for a period of time, letting the land and plants rest. This grazing pattern loosened the top of the soil allowing rain to soak into the ground rather than run off, removed the top two thirds of plants allowing light to reach the base of plants speeding up photosynthesis while fertilizing the ground from feces and urine.

 When we took away the tools nature has provided to take care of itself, we minimized our chances of real improvement or even sustaining what forage we have. The only way we can viably sustain and improve the forage and environment for wildlife is to find a substitution for the tools of nature which are no longer available. 

The substitution for the large herds of grazing animals is controlled rotational grazing of  livestock. The most effective method is by training a herd of stock to act as a herd and place them in a different area to graze on a daily basis. This does not mean having a person with the herd all day, but simply training your stock to act as a herd and place them on a daily, or near daily basis. To find out more of how easy it is to train livestock to act as a herd, and how this kind of grazing system can improve conditions for your game animals and birds, visit the following websites:

• Natural Cattle Handling
• Holistic Management International
• Savory Institute
• Dan Dagget

By using these methods you will not only be helping improve the ecology of your ranch, but also providing food for the world.

Reducing Input Expenses

In my last two posts, I discussed how much money you can be throwing away through poor cattle handling procedures and the true worth of your cattle after inflation is taken into consideration. While changing your cattle handling methods is an easy fix, trying to cut other inputs can seem to be insurmountable. However it can be easier than you can imagine.

Labor

If you have more than one full time employee for every thousand head of cows, or two thousand head of yearlings, you are over staffed. If you practice reduced stress cattle handling methods, and get through your cattle once or twice a week, the only time you should need extra help is when you are branding, weaning, shipping, or preconditioning.

Fuel Mechanical Maintenance

Nearly everyone spends more time in their pickup or on four wheelers than they do a horse. In many cases (especially if your ranch is in rough country) you really can't go any faster in a pickup than you can on a horse. Even if your roads are in good enough shape to go faster, why burn the fuel and tear up an expensive truck or ATV? I recently talked with one rancher who runs 1,500 pairs, plus a few hundred yearling heifers. He is running three employees and burns up over 1,000 gallons of gas and diesel each month in three pickups checking waterlines. That is an expense of nearly $4,000 in fuel before you figure in wear and tear on the trucks, flat tires and an extra full time employee.

I have run 2,200 yearlings plus an additional 150 pairs on 50,000 acres with no help and burned less than 45 gallons of fuel a month (with the exception of running to town for mineral or other supplies every other month.) The amount of fuel NOT burned amounts to 820 gallons a month. At $3.40 gas this amounts a reduction in input amounts of over $30,000 a year in fuel expenses alone.

Your wheels are turning, and you are thinking of all of the longer hours you will be putting in without your pickup or ATV. When running the above ranch, I ran the waterlines on a motorcycle Saturday morning and was off the ranch by noon. I would do a quick run on Monday morning just to make sure there were no new leaks. During the week, I was seldom home later than 5 or 5:30.

Additional Benefits

The first benefit is one you may not have thought of, your health and stress level. You, or your employee will remain healthier, both physically and emotionally, riding a horse than bouncing around in a pickup. Second, your cattle see you and will be calmer when you go to gather. This also means you see your cattle and know where they are, reducing or eliminating going back out to gather remnants at shipping time. If you plan your riding carefully, you will be checking your fences regularly and keep them in a better state of repair.

Direct Cattle Management

As I have pointed out before, using reduced stress cattle handling methods can increase ADG's with no added input. If you are running pairs, time your calving season to coincide with green grass. If you are in an area of cold and snow, this can cut your feed bill by two-thirds. You can either sell your excess hay or adjust your herd size to make up for the difference. Once again, this goes with the principle of reducing inputs while increasing income.

If you have any questions, feel free to leave a comment or email me.

Adjusting Today's Prices

Nearly everyone is happy about record high cattle prices. A lot of investors are looking at cattle as a "good investment" right now. However when you really look at input costs, you are receiving less for calves today than you were in the late 1970's

In 1979, I worked for a rancher who sold his calves for $125cwt. At the time, a new four wheel drive pickup was about $10,000 and a "high paid" cowboy made $500 a month and beef. Day work was expensive at $50 a day. Hay was roughly $45 a ton and gas was well under $2 per gallon.

Today's calves are bringing roughly $58 per cwt more, less than a 50% increase. Many cowboys are now starting out at $1,500 a month, or three times higher. Day labor has doubled at $100 a day. That four wheel drive pickup now costs $40,000, or four times as much. Hay costs over a $100 a ton (more than double) and gas is getting close to $4 a gallon and in many places, diesel is already over $4 a gallon (again, doubled). This does not take into account not only higher land prices, but higher property taxes as well. This means, after figuring input costs, your cattle are actually worth less than they were in 1979. If cattle were even keeping up with labor costs, today's calves should be bringing $3.75 cwt.

I can think of a number of things that 90% of cattle operations today could do to lower input costs. Most of these ranches could do to increase stocking capacity and the total pounds of cattle shipped from their ranch while lowering input costs. What are you doing to increase the efficiency of your cattle operation without increasing your input costs?

Can You Afford To Burn Money?

I know of very few people who can afford to burn hundred dollar bills ten at a time, but many ranches tend to do just that every time they work cattle. This seems to be especially true on desert ranches where time is spent, not in the cattle, but constantly checking waterlines.

This past week I day worked on a local ranch which I've worked on before. Cattle are scattered out in groups of a hundred to two hundred per pasture, with the average pasture size around two thousand acres. If the cattle were ridden through even once a week, and handled with reduced stress methods one person could gather the cattle into the pens with no help, and a crew of four or five could get done with the sorting, branding, vaccinating and castrating fairly easily.

As these cattle only see people horseback when they are going to the pens to get worked, they are not only trotty, they have no intention of going into the pens. Since it is a known "fact" that the cattle are going to be hard to handle the crew grows to nine people, or an extra four or five hundred dollars a day.

Finding cowboys to work for day wages is hard. Finding cowboys that work for day wages who also work cattle in a reduced stress manner is next to impossible. As a result, when the cattle start getting leery of the pens, rather than back off and keep them quiet, the charge is on to get them into the pens as fast as possible. The pressured cattle wind up running off and in the ensuing stampede, calves have more stress related shrink, which winds up in higher than necessary morbidity and mortality rates. It also results in having to go back out to the pasture and roping calves that got away. At today's cattle prices this is costing in the neighborhood of thirty dollars per calf, or burning thirty one hundred dollar bills for every hundred calves you wean.

This week the ranch I worked on, between having to hire extra help, and their methods basically burned two hundred and five, one hundred dollar bills. If this isn't burning enough money, the cattle we worked this week is only one third of their herd, so between weaning the three groups, they are burning six hundred and fifteen of those one hundred dollar bills a year on weaning alone. Add a third that much shrink loss during branding and you are looking at over eighty thousand dollars a year going up in smoke.
Even including all related expenses, paying a cowboy thirty thousand dollars a year would save this ranch a minimum of forty thousand dollars a year. However the mentality seems to be that if a person is horseback in the cattle they are not "getting anything accomplished."

If you are tired of burning hundred dollar bills, and would like to learn more about reduced stress cattle handling, click here.