King Ranch Institute
After adjusting for inflation, there was an 18% increase in calf value from 1990 to 2015.
The big cost categories are Depreciation, Feed, and Labor. The drivers of these are corn, oil, ag land and minimum wage.
- Corn cost increased 24%.
- Oil increased 284%.
- Ag land increased by 134%.
- Labor only increased by 9%.
"Like calf prices, all of these increased more than inflation." Mathias said.
We have seen a 30 to 50 lb increase in weaning weight over the past 20 years in the seedstock sector. We have data-driven tools for selection decisions such as genomic-enhanced EPDs.
In Texas, New Mexico, and Oklahoma:
Pregnancy rate from 1993 to 1995 was 89%. In 2013 to 2015 it was 90%.
Weaning rate from 1993 to 1995 was 84%. In 2013 to 2015 it was 84%.
Weaning weight from 1993 to 1995 was 525 lbs. In 2013 to 2015 it was 525 lbs.
Pounds of calf weaned/cow exposed was 439 lbs. It was 438 lbs. in 2013 to 2015.
Identical trends are seen in the northern plains. However, this is looking at averages, and some individual ranches have seen improved performance.
Why is there no change in the commercial cow-calf level? Not limited by growth potential.
Why has reproductive performance not improved? Perhaps we have reached a maximum level.
What is more important, genetics or management?
Good genetics must be accompanied by great management.
How much improvement can we see in pregnancy rate and weaning rate? To do this in a cost effective manner, might have limited opportunity to make improvement if pregnancy rates are above 90%. If rates are below 90%, can probably make improvement in a cost effective manner.
If we look going forward, in the next 20 years we can expect the cost of oil, land, feed, and labor to all increase.
"There are opportunities going forward, we need to know how to capitalize on it," Mathias said.
A manager cannot control commodity prices, grazing land prices, compensation rate for labor, and others.
We can control labor (number of employees), feed, depreciation, technology, and genetic decisions. We need to think through these and identify the right decisions.
One of the laws of system dynamics and thinking, is that the harder we push the harder the system pushes back. An example of this could be asking each employee to work an extra hour each day. There is likely to be push back to this as employees value time with family, etc.
The greatest opportunity and leverage for cost effective performance are at the ranch level.
Crossbreeding is always high leverage. It improves fertility, calf age at weaning, calf weaning weight, and cow longevity. This is not a new concept, but remains underutilized. If you improve fertility, age at weaning, weaning weight and cow longevity you improve pounds weaned per acre.
Calving heifers can be high labor, and thus high expense.
Feeding hay is also an issue. Depreciation of equipment and storage facilities.
Labor is a high leverage factor. Can you operate your herd with one less employee?
Are the children of current employees also planning on being ranch employees? In most cases, probably not.
Where do we focus?
There is no silver bullet. Ranches are different in many ways, so there is no single answer. However, there are several factors in common.
Management should focus on high-leverage interventions at the production system level (ranch level).
- Maintain or improve genetics of the cowherd.
- Optimize labor, purchased feed, and depreciation to minimize unit cost of production.
- Employ proven technology with positive ROI.
- Marketing calves and cull cows to their highest value.
Question from the audience: Why do we see higher performance in the upper plains vs Texas?
- They have higher quality dormant forages.
- They have a less challenging environment, especially in terms of heat stress.
- They have genetics with higher performance potential.
Decker's Take Home
I appreciate Mathias singing the praises of crossbreeding. However, I continue to doubt that genetic selection decisions have been optimized in the last 20 years of the beef industry. When we look at BEEF Magazine survey data, producers are using phenotypes (actual birth weight) as their top selection criteria. This indicates to me that producers are not fulling using genetic selection tools.
How can we change this?
First, if we are focusing on profit, we should be using economic selection indexes to make and drive our selection decisions. Here, we are putting all of our emphasis on profit and each trait is being incrementally changed according to its economic importance. This is the optimal way to use these selection tools.
Second, I think there are opportunities to better match the cow's genetics to her environment. We are working to create these tools.
I believe if we use these two tools (economic indexes and environment-specific genetic selection) this will allow the commercial sector to see genetic and performance improvement.
I always enjoy hearing Mathias speak because I learn more about systematic decision making focused on profitability.