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
percent of feedlots by size and marketings
majority of feedlots sized 1,000-8,000 but have a small marketing share
the minority of feedlots sized >32,000 have the majority of marketing share.
Packer Industry
harvest fed steers and heifers
1,100 to 1,400 pounds live weight
13-20 months old
concentrated in TX, KS, CO, NE
purchase options include: live, carcass, grid
Packer Segment
Packer
harvest fed steers and heifers
1,100 to 1,400 pounds live weight
13-20 months old
concentrated in TX, KS, CO, NE
purchase options include: live, carcass, grid
Packer Segment
706 plants harvest steers and heifers
97% of production is boxed beef
80% of harvest is controlled by 4 firms (Tyson, Cargill, JBS, National)
26 million head (fed) harvested
26 billion pounds of beef
800-850 lb average carcass weight
packing concentration
beef packers harvest greater than 1,000 head per day
packer concentration has been on a steady decrease in the last 50 years with the lowest concentration ever at the current time
Wheres the profit
margin is very small
in the long run, commodity business offer profit opportunities only to those that have lower than average cost of production, superior performance, or better than average returns.
industry goals
1) produce low-cost/high-profit cattle that yield competitively priced, highly palatable, lean products. (needs of consumers/market)
2) manage the available resources for maximum continuing net profit, while conserving and improving resources. (needs of land/ resources)
Beef and Dairy cow inventory
overall a general decrease in inventory
fluctuating peaks= price of calves high
fluctuating troughs= price pf calves low
Beef Cow inventory vs production
decrease in inventory but increase in production
Cattle price cycle
inventory and harvest numbers go up cattle prices go down
inventory and harvest numbers go down cattle prices go up
US beef cow cull rate
cyclical
cull rate is low when market is good for steer: one more cow mentality
US heifer slaughter
cyclical
slaughter rate is low when herd expansion is common
expansion= keeping of heifers to grow herd size
calf crop trend
calf crop has seen an uptick in recent years.
annual US average cattle prices
cattle prices have been on a decline in past years. expected to see an increase in recent years (2020-2025)
per capita net beef consumption
steady decline in per capita meat consumption
due to health concerns (healthier meat alternatives)
also concerns with sustainability and animal welfare
red meat and poultry consumption
poultry consumption steadily increasing, andhas seen the least percent increase in price
beef consumption steadily decreasing (expensive), and has seen the most percent increase in price
US Corn production
corn takes up the most planted acreage compared to other crops
corn for ethanol production has seen a steady increase in the last 20 years
corn yields have seen a steady increase in the last 20 years
Ag land values
cropland has seen the largest increase in land value
pasture has seen the smallest increase in land value
US hay production
total hay acres have seen a steady decrease in the past 20 years
hay prices have increased while hay production has increased in the last 10 years
hay price increase has caused an increase in cash cow costs. areas with less hay have an increased cost
hay is the number one determinant of profit on a cow/calf
recent changes in beef industry
1) beef cow inventory decrease and beef supply increase
2) prices of cattle increase and beef at retail increase
3) droughts nationwide (2011-2014, western US 2019-present)
4) beef purchasing demand is affected by: the economy (looming recession), pork/poultry availability and price, global trade (beef exports to asia)
5) elevated input costs (feed, labor, etc.)
future concerns in beef
1) beef cow inventory and beef supply: US cowherd shrinking, calf crop will be small 2023-2024, beef slaughter capacity is inadequate, future input costs (hay, labor, diesel, etc.)
2) strength of beef demand: competing meats are cheaper, sustainability concerns (plant-based meat)
3) stats of U.S (global) economy
4) export of U.S beef (trade)?
What on their minds (rancher)
how can I take advantage of increasing prices
how can I manage high prices of inputs
how can I survive a drought (and high feed prices), could i have planned better?
what’s on their minds (beef industry)
is there enough slaughter capacity
can we compete with cheap poultry/pork
can exports “save” the beef industry
Beef in Colonial times
first cattle to north america in 1500s
mid 1700s industrial revolution: cities develop, beef markets develop
split of beef and dairy industries
Beef in Pioneer era
1800s
crossing of Appalachians into Ohio valley
pioneers crossed the Mississippi
trans continental railroad: Chicago became hub of agriculture, industrialization of the east
beef in Empire days
1870s
longhorn from TX driven north and west
bison give way to cattle empires
barbed wire and farming
the American cowboy is born
beef industry begins
cattle driven to railheads
refrigerated rail car (1875) to ship chilled carcasses. HUGE for industry
beef industry transitional period
1900-1950s
genetic selection of cattle to reduce age at harvest (4yrs-18months)
cattle populate great plains and western mountains
large grain production in mid-west (cattle feed)
The modern beef industry born
feedlots (1960s) midwest and western US
cattle moved to grain, not grain to cattle
commercial packing plants: carcass beef (1970s) boxed beef (1980s)
annual cattle slaughter
total US harvest per year about 33 million cattle (1/3 of total inventory)
about 16.5 million steers (most beef, some dairy)
about 10 million heifers
about 6.5 million cull cows (half beef, half dairy)
about 500,000 cull bulls
cattle in colorado
11th in US about 2.5 million head
feedlot cattle: about 1 million cattle on feed, about 2 million sold for harvest
harvested: about 2-2.5 million per year.
producer numbers in CO
12-13 thousand cattle operations: 11-12 thousand beef cow, 500 dairy cow
about 200 feedlots: 3 feedlots greater than 100 thousand head, 10 greater than 32 thousand head, 10 about 16-32 thousand head, 180 feedlots less than 16 thousand head
use of technologies in beef production
1) growth hormone implants: to increase carcass weight by providing weight gain-feed efficiency, increase RE area-muscle yield
2)beta-agonist: stimulate beta receptor affecting muscle at the cell level to increase live weight (15-20 lbs), increase feed efficiency (15-20%), increase RE area-muscle yield 0.5in
3) antibiotics: fed to majority of cattle on feed, improves feed efficiency and gain (VFAs), reduces acidosis-bloat-conditions
Efficiency comparisons
The US leads other countries in beef production per cow thanks to tech and breeding
beef has not increased meat production per animal on the same level as pork
we have been able to increase growth genetics while keeping BW genetics small
large beef cattle challenges
plants cant keep up with modifications to accommodate larger beef carcasses
structural integrity suffers in cattle: more foot and leg problems
portions being sold become too big to eat.
grazing capacity
refers to the number of animals that can be grazed on a defined management unit without damaging the resource base over time
stocking rate
typically defined as the number of animal units (AU) per unit of land for a given period of time (month, year, grazing season)
can be expressed as animals/ac, AUs/ac , AUMs/ac or the inverse
supply calculation
variables needed: #acres, yield in lbs/ac, %harvest efficiency, lbs/AUM *always 800
solve: (#acres)(yield in lbs/acre)(% efficiency)/(800 lbs/AUM)
demand calculation
variables needed: #animals, AU equivalent, length of time months
solve: (#animals)(AU equivalent)(months)
stocking density
number of animals per unit of land at an instant in time
function of herd and pasture size
requires use of short grazing periods
used to attain more even forage utilization while limiting grazing of regrowth
typically expressed as AUs/acre
