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Structure of the Beef Cattle Industry

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Title: Structure of the Beef Cattle Industry


1
Structure of the Beef Cattle Industry
  • Industry is very segmented - numerous phases of
    production
  • Industry is very diverse - almost infinite number
    of environments, types of resources, etc

2
Structure of the Beef Industry
  • Cow-calf Operations - Purebred
  • Producers of germ plasm -- genetic information
    for the beef industry
  • Animals are recorded (or eligible) in breed
    association registry have record of pedigree
  • Probably only 4 of cattle reproducing needs to
    be PB

3
Goals/Objectives/Challenges of the PB Producer
  • Have a sense of seed stock needs of commercial
    cattlemen
  • Develop a planned mating system
  • Have long range goals
  • Merchandise - be a salesperson
  • Stay current

4
Structure of the Beef Industry
  • Cow-calf Operations Commercial
  • Raise cattle of nondescript origin to produce
    final product
  • 89 of operations have less than 100 head but
    these account for only 52 of total cows
  • These operations are concentrated in areas of
    abundant, inexpensive forage -- at most times of
    the year cows nutrient requirement can be met by
    forage alone
  • Warmer climate advantage?? Probably from a
    forage standpoint
  • Majority of the operations are spring calving
    -- make use of grass when cows have the greatest
    need

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Structure of the Beef Industry
  • Stocker Operations (yling, backgrounder, others)
  • Weaned calves to graze grass, range, or any
    available forage
  • most in warmer climates to place fall-weaned
    calves through the winter
  • Consume high forage diet (lower energy), weaned
    calf is physiologically ready to develop muscle
    and skeleton
  • Need any form of abundant (cheap) mid quality
    forage
  • corn stalks
  • wheat pasture, hay field regrowth
  • harvested forage concentrates in drylot

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Non-feed costs often dictate what is needed for
economical gain
Goal keep cost-of gain low What if running on
corn stalks (low gain but low non-feed cost) if
get 1.2 lb/day gain for .12/day non-feed cost,
then non-feed cost of gain .10/lb of gain,
not bad! What if feeding in drylot for the same
gain if get 1.2 lb/day for .28/day non-feed
cost, then non-feed cost of is .23/lb, not
good What if you drylot and get 2.5 lb/day
gain non-feed cost is .11/lb, not bad
  • Feed costs are associated with a cost per weight
    gain (/lb)
  • ? Non-feed costs are usually associated with a
    cost per
  • time (/day)
  • ? Can not afford slow gain if non-feed costs are
    high

What about compensatory gain??!!
14
Structure of the Beef Industry
  • Feedlot Operations
  • Feed calves and yearlings a ration that is
    moderately high to very high in energy -- rapid
    growth and some fattening
  • More rapid gain with more expensive feeds than
    the stocker operations -- higher nutrient
    concentration
  • Where are feedlots located??
  • Dry, moderate climate
  • Near source of feed, especially grain
  • near source of feeder cattle
  • Population centers
  • Others

15
United States Feedyards gt 4,000 Head
January 1, 2002
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Midwest Slaughter vs. Feedlot Capacity
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Types of Feedlots
  • Farmer/feeder
  • smaller - usually less than 2-3,000 head
  • raise much of their own feed
  • Commercial lot, one-time capacity more than 2,000
    head
  • May own the cattle
  • May custom feed

22
Commercial Feedlots
23
Farmer/Feeder Feedlots
24
Structure of the Beef Industry
  • Packer Operations
  • Slaughter and carcass processing -- did not
    process carcasses in the recent past
  • Eliminated some of the middle men
  • No butchers at super markets
  • Packing industry is now controlled by 3 major
    companies (concern about packer concentration)
  • Tyson (was IBP)
  • Swift and Company (was ConAgra)
  • Excel (Cargil)

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United States Packers gt 200 Head
January 1, 2002
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Vertical IntegrationRetained Ownership
  • Weaning and selling calves at weaning greatly
    simplifies planning for credit, labor, feeds,
    market however,
  • Market flexibility is difficult in strict
    cow-calf operations
  • When the market drops the producer is a price
    taker
  • Retained ownership for a period post-weaning
    increases the option, thus the market flexibility

30
Advantages of Retained Ownership
  • Potential for lowering the total cost of
    production
  • Reap benefits of genetically superior animals
    (growthy calves, carcass quality, breed
    discrimination) builds track record on cattle
  • Growth potential for cattle is greatest at
    weaning
  • Take advantage of your superior management
  • Owning cattle longer provides more time to
    utilize marketing and risk management chose
    time to market allows for flexibility
  • Take advantage of seasonal market

31
Disadvantages of Retained Ownership
  • Finance and credit needs slower cash flow
  • More feed and other costs
  • Tax implications
  • Understanding banker
  • Need to be a more complete manager
  • Knowledge of more phases of production
  • Facilities
  • Must have a market for heavier cattle
  • Watch price spread between calves and yearlings

32
Basis of Decision to Retained Ownership Watch
the price slide
  • The greater the price slide the less likely
    retained ownership is a good option
  • Example if weaned calves (500 lb) are worth
    90/cwt, total value 450
  • 700 lb yearlings _at_ 85 is worth 595, difference
    is 145 or 72.50/cwt
  • 700 lb yearling _at_80/cwt is worth 560,
    difference is 110 or 55/ cwt
  • 700 lb yearling _at_ 76/cwt is worth 532,
    difference is 82 or 41/cwt

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What factors affect the price slide??

Read CL 816
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Price slide example
  • Conditions of the sale selling weaned calves
    with a base weight of 565 pounds for 90. The
    buyer wants a 6.00/cwt price slide. The calves
    are weaned and weigh 610 what is the selling
    price?
  • 610 565 45 pounds over the base price
  • 45 pounds x .06 slide per pound 2.70
    (negative)
  • 90 2.7 87.30/cwt (only 24.03 more revenue
    versus 40.50)
  • Some negotiated prices might include a grace
    period or weight what if the slide did not take
    effect until 10 pounds over the base?
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