by Lynsey McAnally, associate editor

Collaboration and cooperation are often two sides of the same coin. When it comes to those who raise cattle and those who feed them, coming together to share challenges on both sides of the production system can be a valuable tool to gain insight and manage potential risk.

Regardless of size, location or management style, feeders across the country are experiencing challenges related to a number of variables, including procurement, input costs and labor shortages. However, when producers can sit at the same metaphorical table with the yards readying their cattle for market, we can foster a better understanding of the market as a whole.

Market volatility

It comes as no secret that media can influence consumer perceptions regarding where their food comes from and how it is produced. Case in point: recent coverage of bovine influenza A virus (BIAV). But the recent news of BIAV is just one piece of the larger cattle cycle puzzle.

“We all know about the volatility of the overall cattle cycle, and we all know we’ve got less cows than we’ve had since 1952,” says Dale Moore, owner operator of Cattleman’s Choice Feedyard in Gage, Okla. “Though we seem to have crossed that threshold quite a bit over the years, the market is going to do what the market’s going to do. We’re always going to have something jump out like [BIAV].”

At any time, but especially during exceptionally volatile markets, producers are at the mercy of consumers and demand. That doesn’t mean they have to sit back and wait for what comes, says Moore. As the owner of a yard feeding a near constant 10,000 head of primarily retained-ownership cattle, Moore encourages his producers to explore risk management options.

Producers can control the health of their cattle and the genetics they use, but many things are outside of our control.

“Sixty days ago, it seemed as though there was never another bad day coming. Gravy. Just rake it in. Then here comes [BIAV],” cautions Moore. “I would almost say that 90% of this yard — with 50 or 60 customers — has some sort of risk management in place. We wouldn’t drive a pickup down the road that costs $70,000 without insurance on it. Why would we want to produce beef for the world without some kind of protection to live another day?”

Sourcing struggles

With a tight supply of quality feeder calves bringing a premium at market, it’s no wonder that one of the shared concerns amongst all yards — whether purchasing cattle or feeding retained ownership animals — is keeping pens full.

“With the contracting cow herd, my focus is going to be, how do I expand the footprint of the area I cover with producers selling me less calves than they have in the past?” says Warren White, chief procurement officer for branded beef program Prime Pursuits™. “I’ve got to focus on how I get other producers involved in our program, or let them know about our program, to expand the available supply.”

White’s concerns were echoed by yard managers who are all looking for cattle that come from well-managed programs, meaning they will have the best opportunity to thrive when put on feed.

Grant Morgan, general manager of Poky Feeders, Scott City, Kan., says his yard is fortunate to have a customer base from Montana to central Texas. Despite a steady flow of cattle independent of the season, seeing empty pens in the very recent past has Morgan on guard.

“I think that’s going to be the biggest challenge for us, to stay full and to not step too far out in front with this market being as volatile as it is,” explains Morgan. “I think the other challenge we will see longer term is building back the herd.”

One barrier to producers beginning to rebuild their herds is the high price of replacement females and the interest rates being offered.

Over the last year, producers have finally started to get their balance sheets back in better shape. Many are considering options to grow their herd with a critical eye.

“Why would they want to keep heifers back with what these calves are bringing? Or why would somebody want to start out buying a $3,200 or $3,400 pair with 8% interest?” asks Morgan. “It’ll be interesting times in the next two or three years.”

Cost of inputs

Across the board, one of the variables at the top of the list of importance for all cattlemen is input costs. Whether cow-calf or cattle feeder in nature, all producers face the challenge of procuring high-quality feeds and forages for their livestock.

Even if getting feedstuffs weren’t necessarily the main concern, cattle feeders felt the pressure that cow-calf producers were experiencing.

“Drought areas were covering the Western half of the United States, which is the territory I procure from,” notes White. “We get cattle in the eastern U.S., too, but most of our numbers come from the western side. Almost all those states were affected to some degree or another by drought.”

Producers may have faced some of the same challenges feeders had, according to White. Supply wasn’t as large of an issue where he feeds cattle, but costs were hard to swallow, he says.

Regardless of where inventory and prices for inputs are, relationships with hay producers and feed suppliers are always going to be paramount. Whether they’re his retained ownership customers or his long-term commodity vendors, Moore stresses the strength of the partnerships built at Cattleman’s Choice.

“I have — literally for 23 years — bought alfalfa from the same place. We have a really good relationship,” says Moore. “Once a month she’ll call me and give me the new price for this month. She’s always in the market. She’s never way out of range. She’s consistent. The quality is consistent.”

That attention toward building partnerships with his vendors extends to his other brokers, as well. He isn’t a price shopper, but someone who honors relationships built over years of hard work. Knowing he can depend on his vendor to take care of him and his yard is huge for Moore.

That loyalty pays off in dividends when it comes to consistency of supply.

“I’m not a bit worried about where my next load of corn or my next delivery of hay is going to come from. We’ll have a chitchat conversation. We’ll throw the ball at each other a couple times, and I may try to dig them for a dollar or two cheaper on wet distillers’ or a dime on corn or something,” explains Moore, adding that he contracts three months out on feed so he knows what to expect price-wise during that time frame. “At the end of the day, we know we’re going to do business, and we know we’re going to do the best for the yard and the customers.”

After all, his customers are feeding some of the best cattle in the country. Quality and quantity of feed, Moore says, are more important than price shopping.

Tackling labor

Of all the concerns that run through the mind of a feedlot manager, there is one constant: labor. Many might label it the most pressing concern moving forward in the cattle industry.

“It’s not the cattle, and it’s not the feedstuffs. It is simply labor. We’ve got to have more of it,” says Moore. “We are a very progressive yard here. I’ve got a state-of-the-art processing facility that will almost run itself. But, I’ve done that because of labor. Everything we try to do here is to minimize labor with some sort of technology. I think producers need to use that.”

The size of the operation and number of employees don’t necessarily safeguard anyone from the struggles of finding and retaining good employees. Whether a cow-calf guy with one hired hand or a feedlot with dozens, if one hired man decides not to show up, that action can wreak havoc on productivity.

Producers need to have all the tools they can possibly develop to combat that, says Moore, adding that he doesn’t see the problem going away any time soon.

Opportunities

With all the concerns going through the minds of producers, the industry outlook could be seen as a little gloomy. But along with the speed bumps of the cattle cycle come opportunities for producers willing to take a chance.

Even if expanding and improving your herd isn’t on your radar, there are opportunities to take advantage of this cattle cycle and set yourself up for success no matter your role within the cattle space. The current market is an opportunity to get things done on your operation, whether it’s improving genetics, bringing ideas into your operation to make calves more marketable or implementing techniques to make your ranch more productive.

The No. 1 opportunity available to producers to improve the U.S. cow herd, White says, is to upgrade their genetics.

“I don’t know if I’ve met very many producers that haven’t downsized over the last three years,” says White. “Instead of replacing a normal 10 or 15% of my cows, maybe it’s 20 or 30% of my cows.”

Cattlemen can upgrade genetics tremendously with just a bull purchase, he says. By upgrading genetics, those calves become more desirable to the next person taking ownership.

Another opportunity comes with readying calves for sale by preconditioning.

“If you don’t precondition, but you have the resources to wean the calves, weaning adds value,” says White. “I think it’s a good return. Most of the calves I buy (95%) are weaned calves.”