Beef Improvement Federation
Risk Management for Cow-Calf Operators
By Troy Smith
According to CattleFax market analyst Troy Applehans , there are a multitude of ways to manage risk , but few cow-calf producers use them . Applehans offered food for thought to cow-calf operators attending the 2018 Beef Improvement Federation ( BIF ) Convention hosted June 20-23 in Loveland , Colo . He encouraged them to better manage risk by managing fixed costs , giving more thought to marketing , having a plan and being disciplined about carrying it out .
“ The most basic thing , though , is knowing the breakeven price of your product ,” stated Applehans , urging cattlemen to calculate their cost of production . “ Knowing cow cost is imperative .”
Managing inventory is another important factor , said Applehans . He cautioned cow-calf producers that overpaying for replacement females can be dangerous . When adding females to the herd , producers should think about what calf prices are likely to do during the next seven years and the time it might take for a replacement female to pay for herself and start making money .
Applehans emphasized how recognizing and responding to the seasonality of cattle markets should be part of managing risk . He noted how roughly 80 percent of beef calves in the U . S . are born in the spring and weaned in the fall . He noted that prices for 550-pound calves typically hit a seasonal low in October and November , because so many calves are sold during that time .
“ Is that the best time for you to market calves — when prices are lowest ? Or could you deliver calves then , after pricing them on a higher summer market ?” asked Applehans . “ You could take advantage of seasonal highs by marketing calves on a contract or through a video sale .”
Similarly , producers should look at the seasonality of the cull cow market , which usually ebbs during late fall and winter , because that ’ s when a majority of cull cows go to town . Applehans suggested that producers weigh the cost and potential benefit of keeping culls longer , adding weight and marketing them when prices turn upward .
Applehans said indicators , including heifer feedlot placement numbers , suggest that while cow herd expansion has not stopped , it is winding down . Total cow numbers may increase further , albeit more slowly , through 2020 . U . S . beef production is expected to be up for 2018 , but domestic and global demand appears favorable for beef and cattle prices . I
This article is reprinted with permission from www . BIFconference . com , Angus Media ’ s online coverage site of the 2018 Beef Improvement Federation Research Symposium and Annual Meeting .
16 | AUGUST 2018