Town Creek Farm Since 1993
SPRING 2016
Vo l u m e 4 , I s s u e 2 • P u b l i s h e d b y To w n C r e e k Fa r m , We s t Po i n t , M i s s i s s i p p i • B r a n g u s a n d U l t r a b l a c k
The Cash Cow
BY FEDE MAISONNAVE, TOWN CREEK FARM THE PAST TWO YEARS MAY BE THE MOST INTENSIVE YEARS I COULD HAVE EVER IMAGINED REGARDING THE BEEF INDUSTRY. I’ve traveled to six beef cattle countries, attended several conferences and visited many ranches. I just returned from South Africa and now I am in the United States. I’ve spoken to many people in different languages about the beef industry in many different environments, economies and management strategies. Seems the wave of high prices sooner or later affected every corner of the world. Good for those who took advantage of this. During my travels there was a question throughout the entire industry that not many people could answer. Not one of the most experienced people that I met was in a position of knowledge to deliver a proper answer. My question was, how long will national/international commodities
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Town Creek Farm Milton Sundbeck, Owner Office: 32476 Hwy. 50 East West Point, Mississippi 39773-5207 662.494.5944 www.TownCreekFarm.com Joy Reznicek, President 205.399.0221 Joy@TownCreekFarm.com Clint Ladner 662.812.8370 CLadner@TownCreekFarm.com South American Representative Ing. Agr. Federico Maisonnave (011) 595 981 362 898 Skype: federico.maisonnave Maisonnave.Federico@gmail.com Total Commitment
Since 1993
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(including beef) high prices last? The more optimistic replied, “China and India populations will start eating more beef and we don’t have the beef cattle cows worldwide to feed them, nor the crops. This is going to last forever, we are not going back.” More conservative people didn’t want to state a number of years, but many thought the sky was the limit! Looking at the shrinking U.S. cow herd over the past 50 years, I, too, thought it would take at least five to six years to recover to a decent number of cows. By the way, there was one person, only one, who told me exactly how long the high price wave was going to last. It was Kevin Good, Cattle Fax Senior Analyst from Cattle Fax. I met him after he gave an outstanding talk of the worldwide beef industry situation at the 2014 Brangus World Congress in Mexico. He said it would last two years! Coincidence or not, I have to give him credit, he was darn right! The fact is there are so many new components to this industry that it is almost impossible for a regular human being to predict the behavior of markets for two years. I can’t imagine more than that. What the market is going to do, even if we knew, is way beyond our influence. Remember that 80 percent of the U.S. herd is represented by commercial producers that carry 50 cows or less. They are a drop in the sea, literally! We are the last link in the chain and we have to understand that situation. The truth is that we have to look at the cattle business as cold-blooded as we can. Like any business, gambling is risky and expensive. Success is only for ones that have the wisdom to make long-term management strategies, stick to them, keep calm and keep working toward your long-term profit goals. Being in the last segment of the chain is probably the most uncomfortable place in any industry. We will always be the trash can for the rest of the chain, and we can expect the dump truck to drive by and pick up late or not show up at all that day. While ranching is generally viewed as a way of life, it is much more rewarding when it makes a profit. Indeed, profit is a necessary condition to sustain ranching as a way of life. Most ranch owners and employees tend to love production aspects of ranching, but aren’t very comfortable with the business side. That probably means the majority of the ranchers struggle to be profitable, even with the good prices of the last two years. We have to know that within the next 10 years we will have floods, droughts and plagues, and most likely a market with medium to low prices. If there are outstanding prices, we will be the last to capitalize.
Looking over the hill, you need to have a system in place to make profit above the average, come hell or high water. There are at least a dozen ground “management rules” that you might think about for adding more profitability to your operation. I will leave that to Joy Reznicek and Jeff. I will talk about the genetic side of the business and what it means to breed the cash cow. Fertility comes first: 70% of fertility of a cow is explained by her age at her first and second calvings. In other words, the more fertile a female, the earlier in life will she give birth to her first and second calves. A cow that calves at the front of the calving season delivers a heavier calf at weaning and has a greater chance of rebreeding. If that early calving cow delivers a heifer calf, her heifer calf has more chances to breed early, before other heifers in her contemporary group. A herd built with fertile females gives their second calf at three-years of age and has 20% more gross income per year than a herd built with females that calve their second calf one year later. Short calving periods (60 days) and hard culling for those who don’t, ensures a herd with the most profitable cows. Low inputs–high outputs: Look to your genetic source where females are selected that work under simple and low input environments for multiple generations. Cash cows will deliver high value calves even in bad years because their genetics are from ancestors that have been selected in a low input environment. They have genetics to behave the same. Genetic progress does not depend on feed. Neither does the gross income of your operation. What is it worth to take a female to calving if she eats 80 to 90% of the value of her future calved prior weaning? Don’t work for your cows. Let them feel the environmental pressure and select ones that adapt and deliver a consistent product. That is the true cash cow! Large contemporary groups: Selecting your replacement females from large groups managed in the same environment ensures a genetic package that puts them ahead. True cash cows are ones that drive profit of your operation. These cows are not created from one year to another; it takes years of precise work and selection under the same and adequate management system. Genetics have to prove themselves in the pasture. It takes long-term planning, droughts, low prices, good and tough times to make them solid enough to survive hurdles. The Town Creek Farm herd is based on a rock-solid genetic pool developed from cash cows. As the last segment of the chain and to survive the ups and downs, the industry demands cash cows.