Tuesday, February 24, 2015

Thinking About Stockers on Wheat Pasture

Part of my original plans when I started raising cattle as a cow-calf operation was that I would have the option to graze my calves after weaning on wheat pasture through the stocker phase to make some extra money from my calf crop (it's also called backgrounding in some parts of the world).  

Usually, the calf is weaned in early fall and put on wheat pasture until late-February so that the grain yields aren't affected.  If everything goes exactly right, a good stand of winter wheat will give you 2-2.5 lb. of gain per day so that after 120 days of grazing you'll end up with around a 750-850 lb. feeder steer.  Having a good stand of wheat suitable available for grazing doesn't come without a little management, some extra fertility (nitrogen and phosphorus), and a little luck with the weather though.  

In addition to having a decent field of wheat pasture, there's also the problem of dealing with the "roll-back" in cattle prices, which is basically that as the weight of the steer gets higher the price per pound goes down.  

Growing wheat pasture is something that's relatively easy to do, it just takes a little time and extra money, but figuring out if it would pay to keep my  calves after weaning and sell them as feeders after grazing that wheat pasture is more tricky (especially if the cattle market turns down over a winter).   

Five years ago, I ran some of my steers with some replacement heifers on wheat pasture and after roughly figuring my expenses, I ended up making a grand total of an extra $20/head on the steers which wasn't much money compared to the amount of extra work and worry.  Ever since that winter I've been meaning to sit down and do some serious figuring to determine if it even worth it for me to try grazing stockers again but I've never gotten around to it because for the last four years, I've sold all of my calves at weaning (except for a handful that I've kept for beef) due to drought, higher calf prices, and higher grain prices.  

This year I weaned some calves and sold them on October 20, at the stockyards the steers were sorted into two groups that averaged 550 lb. and 650 lb., the smaller ones sold for around $1350/head and the larger ones sold for $1550/head.   I've been checking the market report for the stockyards for the last few weeks and 750-850lb. feeders have been averaging about $1600/head.  That tells me that I wouldn't want to keep any of those larger steers to put on wheat pasture, I could make about $250/head before expenses on the smaller steers, and I might be better off trying to get my weaning weights higher (although in other years those 650 lb. calves have sold for almost the same price per head as those smaller calves).

Making an extra $250/head after only 120 days of grazing wheat pasture sounds like it would be relatively easy, but there are some extra expenses.  The typical fertility recommendation for wheat pasture is an extra 40 lb. of N per 100 lb. of weight gain, which would mean that if those steers gained 250 lb. I'd have to apply an additional 100 lb. N per head on the wheat pasture.  Nitrogen costs approximately $0.60/lb (it varies a little), which means it would cost $60 for the extra Nitrogen.  If I added extra Phosphorus, it would be somewhere around $30/acre or $60/head (at a 2 acres per steer stocking rate).   So the extra fertilizer needed for the higher quality grazing needed for higher rates of weight gain would end up costing between $60 and $120 per head.

Whenever cattle are on lush wheat pasture it's still necessary to feed hay to help balance out their rumen, prevent bloat, etc.  At a minimum, I'd estimate that a stocker steer on wheat pasture would need at least one 1200 lb. bale of hay over the winter.   I bale my own hay, but always calculate that a bale of hay costs me about $30 (to account for fuel, fertilizer, replacement cost of haying equipment, etc).  In a bad winter, it might take more hay, which would increase my hay expenses to about $60/head. 

Cattle also need minerals, salt and other miscellaneous, which I'd estimate costing about $10/head.  And, I always like to include an extra 10% in any estimate I do to account for anything unexpected.

Summing up so far, it would cost about $60-120 for extra fertilizer,  $30-60 for hay, $10 for minerals, etc. and an extra 10% on top of everything.  So, my expenses would range between $110 and $210 per head, which means that I would make an additional $40 to $140 per head. 

I've read some articles on raising stockers that make some sort of complicated claim that making an additional $140 on a $1400 steer in 120 days means that you are making an annual return on investment of 30% (because you made a 10% profit in only 4 months), but to me that doesn't seem like enough profit to make it worth all the risks.  Only making $40/head is definitely not worth the trouble.

Of course, all these numbers could change tomorrow, next fall, or next year and it might make more sense to try raising stockers.  If calf prices go way down, there might be more money to be made with stockers, or if another drought hits it might make more sense to sell some cows and put some weight on my calves.  There's no way to really know until the future gets here.

If I had a crystal ball, I'd know most of the answers to when I should sell my cattle, but until I find one, I'll have to keep scratching my head trying to figure out what will make me a little bit more money with the least amount of risk.

3 comments:

  1. Growing up on a farm and then leaving the farm for an engineering profession, I have often fielded many questions about the occupation. What do farmers to with their extra time when they aren't planting or harvesting, is probably my favorite question of the bunch. But a close second is that people make the general comment that anyone can be a farmer because it doesn't require much knowledge. Had I access to this post back then, I would have given it to them as required reading and making sure to point out this is just what goes behind one single decision related to farming which is an occupation where the farmer must make hundreds of similar decisions every year.

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  2. It used to mildly irritate me whenever I'd hear comments like that, but now I just wonder how much intelligence or training does it really take to do the jobs of the people that make those sorts of comments?

    Those people also don't understand that a good part about being a farmer is that you have to almost have a gambler's mindset. I take a lot of risk putting a bunch of money in the ground on the chance that it will pay off big, and at the same time I'm always trying to limit the amount of risk I expose myself to.

    I might hit the jackpot due to good luck, because I made the right decisions, or in spite of the bad decisions I made. I might lose everything due to bad luck or because I made the wrong decisions. I could do everything right and still fail miserably through no fault of my own.

    Until I started farming full time, I don't know if I fully understood that part of farming.

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  3. I've been on both sides so I take it in good faith these days. I moved off the farm to living outside of Minneapolis for six years. I know I asked my share of dumb questions to people who had lived in the city all their lives and for them it was second nature. Once I moved back to rural Iowa, I could see how rural people could misunderstand city dwellers and vice versa. They are entirely different cultures and if they could stay separated for several generations, one might see some Darwinism at play.

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