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295: When to Buy Hay — and When to Let Cows Go · CattleUSA Daily

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  Welcome to the Cattle USA Daily podcast, your go to source for
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  the latest livestock markets, industry insights and the update
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  shaping agriculture today. I'm your host, Lauren Moylan, a
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  passionate advocate for agriculture, here to keep you
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  informed and connected. Now let's dive into today's
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  episode. There's a decision every cattle
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  producer faces at some point. And I know it's also one that a
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  lot of us are really battling right now with the drought
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  conditions and the current reality of when conditions are
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  tight and when grass runs short and when the forecast just
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  simply isn't helping. It's Do we buy the hay or do we
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  let some cows go? On the surface, sometimes it
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  feels simple, feed them or sell them.
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  But in reality, this is one of the most financially impactful
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  decisions you will make as a producer all year because one
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  option preserves your herd and cost cash, but the other
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  protects your cash and reduces your herd.
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  And once you make that decision, you don't get to undo it.
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  So today we're breaking down how to actually think through it.
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  Most people don't make this decision on paper.
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  They make it in their gut. I don't want to sell cows.
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  We've always kept this number steady.
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  We'll and just feed through it and that's understandable, but
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  this is not a loyalty decision. This is a business decision.
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  Cows are not the goal. The operation and the health of
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  that operation is. If feeding cows puts the
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  operation at risk, that's the wrong decision, even if it feels
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  right. Now let's slow this down for a
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  minute and actually look at the math.
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  Here's an example of hay cost. Let's say hay is $160 per ton.
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  Not completely unrealistic in tight ears.
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  A cow eats roughly about £30 a day, which would equal about
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  0.015 of a ton per day over 120 days.
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  So you take that decimal times 120, that's 1.8 tons per cow.
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  1.8 tons times 160 dollars is roughly.
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  When you do all of the math and put all of this together, let's
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  say 4 numbers sake, it's $288 per cow.
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  Now that's just hey, we also need to add in supplementation
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  in a roll every year, hauling and feeding loss.
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  So realistically you are often at around $350.00 to $450 per
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  cow for winter feeding. Now multiply that by your herd.
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  Let's say you have 150 cows times $400.00, that's $60,000
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  for that year. That's not a small decision,
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  especially when we're looking at drought conditions across the
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  entire United States right now. That is going to take that 120
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  days and make it 240 days or maybe add another 30 days or
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  another 30 days. What if you have to feed hay all
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  the way through summer? What does that look like?
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  So now let's let's look at the other side too, because selling
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  cows has a cost too. You are going to lose future
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  calf revenue, the genetics that you've built, you're going to
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  lose herd size and you're going to have replacement cost later.
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  So if bread cows are worth $1800 today, for numbers sake guys,
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  like I know what the market is right now, but if for numbers
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  sake, if bread cows are worth $1800 today and $2200 next year,
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  you just gave up a $400.00 potential upside.
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  Plus you'll still need to rebuild, and rebuilding is
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  almost always more expensive than maintaining.
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  With calf prices right now and with half our prices right now,
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  I understand why so many people are making the decision to sell
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  rather than to maintain. But here's what some people
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  miss. Selling cows early is going to
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  preserve your pasture, your cash flow, your flexibility and your
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  body condition of the training herd.
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  And flexibility is sometimes worth more than the potential
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  upside of keeping those cattle, cattle coming off the mountains.
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  Right now we're seeing a lot of producers sell heifers, sell
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  bred cows because the financial upside in the flexibility of
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  that financial gain is worth more than the potential upside
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  of maintaining them and having to feed them through a drought.
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  Now we also need to ask a really difficult break even question.
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  This is the question that simplifies everything.
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  Does feeding this cow cost more than she will return?
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  Every operations math is going to be different, but for numbers
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  sake, let's say your feed cost is $400.00 and your expected
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  calf value is 900. Well, that seems fine, right?
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  Duh. Big red truck.
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  There's an obvious answer there, but also you need to factor in
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  open cow risk. What if you have lighter weaning
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  rates, your additional labor that you're going to need, the
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  stress you're going to put on your pasture, and your margins
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  all of a sudden shrink very quickly If feed cost approaches
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  or exceeds expected revenue, you are not maintaining the herd.
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  You are subsidizing your herd. And here's the thing, timing is
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  also everything. This decision is not just what
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  you do, it is when you do it. Because if you take earlier
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  action, you're going to have stronger cow prices, cheaper
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  feed alternatives, better pasture recovery, and more
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  options. And if you take late action,
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  you're going to have thin cows, you're going to have a flooded
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  market, you're going to have expensive feed that's already
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  been purchased, and you're going to have fewer buyers.
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  Because the reality of it is in a market in a world that we're
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  living in right now where drought is absolutely ravishing
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  a large portion of the country, late decisions are going to cost
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  you more money every single time.
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  Now, it's not always all or nothing when we're having this
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  conversation either. Sometimes the best answer
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  actually is both. A strategic move for you might
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  be to cull the bottom 10 to 20% early.
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  You're going to feed your top most efficient cows.
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  Maybe you feed in be you shorten your feeding period, you adjust
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  your stocking rate, or you just prioritize young productive
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  females. Now this is where true
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  discipline shows up in your operation because not all cows
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  deserve to be carried through a tough year.
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  The best operators and the best ranchers aren't going to ask how
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  do I keep every cow. They ask which cow earns the
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  right right to stay on my ranch through this drought year.
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  They're going to know their cost per cow.
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  They're going to monitor their forage closely.
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  They're going to act early, coal aggressively.
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  They're going to protect their land 1st and they're going to
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  protect cash flow second. They don't let the conditions
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  force decisions. They make decisions before
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  they're forced. They are being proactive, not
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  reactive. Here's a question you should be
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  asking yourself, right? If feed prices increase another
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  20% or if rain does not come for the next 30 to 60 days, would we
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  wish we had already done it? That question removes the
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  emotion and it forces clarity. Buying hay and selling cows are
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  not equal decisions. One spends money to maintain
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  inventory, the other protects the business at the cost of
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  inventory. The right decision for you is
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  going to depend on your numbers, Your forage, your flexibility
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  and your timing. But one thing is always true,
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  delaying the decision makes both options worse.
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  So do not wait until you don't have a choice because that is
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  when a decision gets very expensive.
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  This is the Cattle USA daily podcast.
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  I'm your host, Lauren Moylan. Thanks for listening to another
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  episode. We will see you all next time.