- Feeder cattle prices have declined due to the record grain prices and forced liquidation of herds due to drought.
- Many cattle producers are contemplating their future in the industry. Should they hang on and purchase feed or exit the industry? What will feeder cattle prices be in 2013? Who makes this decision? The owner?
Maximizing profit per unit of production (cwt.) can be achieved by year-round grazing. Many producers incorporate stockpiling forages into their grazing systems as a way to eliminate the need to bale hay to feed their animals during the winter months. By having the cattle harvest their forage year-round, producers are able to use less machinery and reduce their overhead costs.
Sometimes producers may need to reduce stocking rates in order to have enough acreage for the animals to graze year-round. This is an excellent time to cull marginal animals from herds and cash in on above average fat cattle prices.
In previous years, producers have occasionally liquidated their entire herds during periods of high prices. Then, these producers took their profits and restocked their herds in the future when cattle prices were significantly lower.
By pursuing the policy of selling herds at high prices and restocking at low prices, some of these producers have generated significant increases in their saving accounts! In addition they were able to take vacations and not worry about who was caring for their herds!
The recent record high prices of feeder cattle are presenting cow/calf producers the opportunity of their lifetimes. The old adage “On the plains of hesitation bleach the bones of countless millions” can be used to describe the opportunities that are presented by the recent record high prices of feeder and fat cattle.
For producers contemplating retirement in the next five to 10 years, the sale of their cow/calf herds at current prices will increase the size of their retirements.
For younger producers who have made the decision to remain in the industry for the “long haul” (10-15 years), these near record prices provide them the opportunity to position their businesses to weather the inevitable decline in prices.
Consequently, producers need to make the decision to exit or remain in the cow/calf industry before there are further declines in feeder cattle prices. Otherwise they will squander a prime opportunity that has the potential to significantly increase the size of their bank accounts.
Reference: Virginia Market News Service. Virginia Department of Agriculture and Consumer Services.