Glacier FarmMedia – A farm’s best plan when it comes to rebuilding the cattle herd after drought may have a lot to do with how deeply they had to cull, according to the Beef Cattle Research Council (BCRC).
The advice is the result of a BCRC modeling study, which hoped to gauge the best recovery method for different farms after last year’s drought.
Brenna Grant, executive director of CanFax and one of the names linked to the project, said the study drew information from 17 farms registered with the BCRC’s cow-calf production network from Western Canada and northern Ontario. They then modeled the farms’ recovery, based on a projected cull level (ranging from no extra culls, to a 25, 50 or 75 per cent herd loss) and recovery strategy (purchased replacement stock versus replacement heifers).
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“The overall objective that we wanted to answer with this study was: how do you minimize the equity drain on the operation?” Grant said.
Why it matters: Manitoba Agriculture estimates the province lost about 12,000 beef cows between January 2021 and January 2022, with drought being a driving factor.
Circumstances were rarely that cut and dry, Grant acknowledged.
A farm’s choices, for example, might have had a lot to do with how much local feed was available for sale. It might have depended on how strongly the producer wanted to preserve their herd genetics or if they were concerned over biosecurity when bringing in new stock. Cash flow, meanwhile, had been a serious concern after the financial difficulties of the last few years, and obviously impacted a producer’s ability to buy replacements.
“One of the reasons we wanted to ask this is we know that, with the economies of scale being a major driver (of profitability), that the impact of cost structure — the longer it takes to get back to your ideal herd size for your operation — you end up with high per-cow costs and you’re not able to necessarily cover them,” Grant said during a recent webinar hosted by the BCRC.
Early results from the BCRC cow-calf production network pegged economies of scale as one of the main profitability drivers in the sector, along with a smaller mature cow size.
About 89 per cent of monitored farms that ran 200-300 head and 75 per cent of farms with over 300 head turned a profit in the last two years, according to network data. That compared to less than half of herds below 200 head.
Results
Farms with the deepest culls should also be the most serious about buying replacements, the study suggested.
“If you were culling 25 to 50 per cent, rebuilding with your own heifers within the herd was the most profitable option for the majority of the farms, and if you were culling 75 per cent, purchasing heifers was the most ideal to rebuild in a timely fashion,” Grant said.
Buying new breeding females came with the advantage of a quicker recovery — assuming the producer could take the financial hit or absorb added debt.
The study assumed that producers would be buying enough bred stock in fall 2022 to be back to pre-drought numbers by the 2023 calving season.
There was, however, the matter of interest. Most ranchers would likely have to take out loans to buy their replacements, Grant acknowledged, and researchers found that cash flow deficits were more severe when rebuilding from the sales ring rather than holding back heifers.
“It was definitely a more risky strategy, but for the scenarios that were higher culling rates of, like, 75 per cent, it actually was more profitable and had less of an equity drain in the long run because of that ability to regain economies of scale faster,” she said.
Replacing solely from the herd, meanwhile, took time, borrowed against the market revenue those heifers would otherwise have provided and meant available pasture resources were being wasted with a smaller herd grazing them.
“One of the main challenges we had with a regular retention rate was that we were unable to rebuild to the original herd size within a 10-year period, and that resulted in a prolonged period of lost economies of scale with that lower herd size number,” Grant said.
Instead, the study projected an aggressive retention rate to shorten the recovery window, “recognizing that there would be less revenue in those early years, negatively impacting cash flow,” she said.
Realistically, Grant acknowledged, farms will be aiming somewhere in between the extremes of buying all their replacement stock immediately or aggressively retaining heifers.
– This article was originally published at the Manitoba Co-operator.
