Consider Keeping and Feeding Open Cows Until Early 2008

Sep 24, 2007 9:40 AM

By Jason K. Ahola, University of Idaho

Take advantage of the seasonality of the cow market through creative management and marketing

Cattle producers are signaling that fall is here – the annual ritual of weaning and pregnancy checking has begun in most areas of the U.S. However, producers in some areas of the West and mid-Atlantic regions have already weaned their calves due to severe drought conditions.

Since beef cattle producers generate the majority of their annual income via the sale of calves (about 80%), typically a lot of effort is put into maximizing the price at which they are sold. Yet, practically no effort is spent to maximize the price on the other 20% of their income – which is acquired through the sale of cull cows (also known as “market cows”).

A producer once told me: “we spend all of our time fighting tooth-and-nail to get another dollar or two on our calves, and then we give away our culls.” I couldn’t agree more.

Creative Cow Marketing

Few price graphs show opportunity in the marketplace better than the seasonal slaughter cow price data reported by USDA (Figure 1). This graph shows the change in price for utility slaughter cows by month from 1997 through 2006.
These data indicate that the increase in price from November to March of the next year averaged about $6.00/cwt since 1997, equivalent to an increase of about 14%. This equates to about $72/head for a 1,200 lb cow.

Figure 1. Average seasonal price change for utility slaughter cows from 1997 through 2006 (USDA).

Interestingly, in the past 15 years, the month with the lowest average price for slaughter cows was November in 10 of those 15 years. December or January was the lowest month in another 4 of those years. Since most market cows in the U.S. are sold between October and January, the marketplace is flooded and prices are lowest at that time.

So, the obvious question would be: why do producers determine 20% of their income by selling animals when prices are consistently at their lowest for the year?

The answer seems obvious – when a cow is determined as non-pregnant by a veterinarian, we want to get rid of her as soon as possible. She is no longer considered a ‘money-maker,’ but rather a ‘money-taker.’ In our eyes, the quicker she can be sold the less money we throw away. This is a true and logical argument, but it completely ignores the inherent opportunity in the marketplace due to seasonal price patterns that have been documented over the past three decades.

An Opportunity in Cow Feeding

Cattle-Fax regularly reviews the profitability of waiting to sell market cows until prices approach their peak in March. They assume weight gains of about 1.5 lbs/day, a 95-day feeding period, limited death loss, and reasonable feed costs.

Based on these assumptions and their data, Cattle-Fax reported this year that it has been profitable to hold cows over until market prices improved in 27 of the last 27 years (since 1980). In fact, an average of $60 per head profit could have been generated each year. In just the past 5 years when market cow prices have been very strong, profit still averaged $59/head.

In 2003 Iowa State researchers reported similar results when market beef cows were fed for either 69 or 90 days. Cows gained an average of 294 lbs (3.87 lbs/day) at a cost of $0.85/lb of gain. On average, each cow returned a profit of $66.04/head.

Next Page: The White Cow Market

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