Exam 1 Flashcards
U.S Beef in the Economy
beef accounts for $50 billion of $150 billion in animal agriculture
beef cattle are the #1 use of land in agriculture 700 million acres compared to crops at 400 million acres
beef is expensive to produce and therefore buy
Number of Beef Cow Operations
ranch numbers have declined 25% since 1986
loss of about 9 thousand ranchers per year
Beef industry structure
commercial cow-calf (heifers) -> feed yard: 83%, culled cows 8% -> packer
commercial cow-calf/dairy (steer calves/ some heifers) -> backgrounder -> yearling/stocker-> grass finsiher <1% -> packer
dairy (culled cows) -> culled cows-> packer 6%
Beef Industry Segments
Hourglass structure with a bottleneck at the packing industry
packers have the smallest number of facilities with just 4 killing/packing 80% of the inventory
giving them a lot of power and influence in the industry
Cow/calf segment
725,000 beef herds
90% of beef cow herds with less than 100 head control 50% of cows
32 M beef cows, 9 M dairy cows, 25 M feeder calves
Location of Beef Cows
midwestern united states including the Dakotas, Nebraska, Kansas, Texas, Iowa, Missouri, Arkansas, Kentucky, Tennessee, Virginia, North Carolina,
concentrated in these places due to availability of cheap land with lush grass
Milk Cow locations
near population centers]
California, Idaho (dry milk), new Mexico, texas, Wisconsin, Minnesota, Philadelphia, New York
California dairy selling operations and moving to weld county CO
Cow calf production cycle
2/3 of operations utilize late winter/spring calving
winter feeding lasts Dec-Apr with calving in Mar/Apr: want a short calving season for a more uniform product
grazing season lasts May-Sept with breeding in May/June: 95% of operations use natural service to reduce costs
fall grazing lasts Oct/Nov with weaning in early October: sell newly weaned calves so you don’t have to feed them. cows graze on low-cost crop residues.
Challenges of Ranching
1) requires huge investment per cow, ranchers are asset rich but cash poor
2) high risk as many variables which are hard to control: weather, disease, prices, labor
3) mostly relies on family labor
4 often barely profitable and provides poor return on investment (ROI) -1% (vs %5)
5) requires expertise in management, health, marketing, repro, genetics, machinery, forages, human resources, finance
6) requires long-term commitment
7) often relies on off-ranch income
8) not appealing to young people (rural, hours)
Elevated input Costs
feed is the number one variable cost
input costs have risen steadily over the past couple of decades
can be attributed to hay costs, drought, and ethanol demand
Industry Profitability
currently, the packing industry is by far the most profitable
fed cattle see a lot of variability in profitability
stocker industry is relatively profitable
cow calf sees relative variability in profitability
estimated average cow-calf returns
return has seen an uptick recently with just under $100 per cow
past few years negative return
us average beef cow herd size
beef cow herd size has plateaued since 2010
Beef cow operation and inventory
majority of beef cow operations have 500-2,000 head,
beef cow operations with greater than 500 head concentrated in beef belt: texas, New Mexico, Nebraska, Oklahoma, Kansas, the Dakotas, Colorado, Wyoming, Montana
Average work time operator devotes to cow-calf operation
on average all operators devote 35.9% of their work time to their cow-calf operations.
cow-calf operators often have another source of income so the cow-calf operation is a part-time job
majority of operators are males over the age 45
Annual average cattle prices
have seen a decline in recent years expected to see an uptick soon.
heavily influenced by drought. drought will cause a lot of ranches to cull leaving little supply of beef cows and therefore increasing beef prices.
Seedstock segment
70,000 breeders, 10 AI companies
the goal is to identify elite sires to sell the best genetics
provide genetic information in the form of EPDs
provide “how to” info relative to mating systems: project how to use which bulls they determine you should buy
Marketing Feeder Calves
outright sale: sell at the sale barn, sell “in the country”, video/internet auction. (feedyard takes the risk)
retain ownership: go to a “custom” feedyard, paid at slaughter, finance feed. (rancher takes risk)
Fall Weaned Calf direct feedlot alternatives
weaned calf -> precondition (sometimes winter grazing) -> feedlot
weaned calf-> background -> feedlot
weaned calf-> dry lot winter -> summer grass -> feedlot
*alternatives exist because grain feeding is expensive
Finished on grass
finishing cattle on grass leads to smaller cattle at slaughter. It also takes longer so greater emissions footprint
Backgrounding
30-150 days on limited feed (forage)
about 0.5 to 1.0 pounds of ADG (at a low cost)
gain from 450 to 600 pounds
closely monitored health
train to bunks, waterers, etc.
Why background?
seasonality
you would background when feed prices are low
you would background when the market is flooded with calves (at weaning season)
Grass “yearling” operations
post weaning growth on grass
fast and low cost gain ($0.35/pound)
from 500-800 lbs then feedlot
most profitable industry segment
critical for US beef production?
Feedyard segment
2,000 companies with >1,000 head capacity
14 million bunk capacity with top 5 firms owning 14%
25 million fed cattle marketings
Feedlot
concentrated in the central plains (corn belt)
Northwestern US (potato based)
diet focused on high energy and high concentrate: Grain
90-200+ days on feed
ADG 3+ pounds
cattle from 800-1300/1450 pounds
sold directly to packer (“show list”)
% corn feed to beef
of the 39% of feed fed to cattle 27% is fed to beef, or 7-9% of the total amount of corn produced
Feedlot areas
heavily concentrate din great plains/corn belt: the presence of Ogallala aquifer and corn
also in the northwest: the presence of potato waste
some in California/Arizona: presence of Holstein steers
