What will you do with the increased profit that has come your way?
There is no doubt about it. Good times are here in the cattle business. Prices are at an all-time high for all classes of cattle. The latest Canfax report shows feeder cattle trading $50 to $60 higher (per cwt) than this time last year. On a 500-pound calf that’s an increase of $250 to $300 per head. On a 900-pound yearling the increase would be $450 to $540 per head. These numbers represent a significant increase over what was a strong market last year. We are being given an opportunity to recover from the difficult challenges of the BSE years.
What will you do with the increased profit that has come your way? I think it would be wise to develop a plan to invest our increased profits wisely. The time to do that is now! It is easy to spend our money. There are countless products and services all claiming they can help us. It requires thought and reflection to invest our money wisely.
We did a brainstorming exercise at our last H M conference. The topic was, how to invest your increased profit wisely. We ended up with 175 different ideas. All of them were valid for different people. Investing wisely is a very individual exercise. The answers will be as diverse as the people involved. I invite you to come up with a plan so when you are looking back 25 or 30 years from now you will be able to say: yes I remember the good times. I remember investing in (whatever you choose) and I (or my children or grandchildren) am still benefiting from it.
While all of us are enjoying the strong cattle market many are also facing severe challenges from the widespread drought conditions in Western Canada. The conditions vary widely. Some have no drought. In many places it is very severe. The effects for many people have been increased by the heavy grasshopper infestations.
In our little corner of the world we were very dry until mid-July (about 1.5 inches of rain). Since then the rains have been excellent (about an additional eight inches). The result is that the hay crop is poor and winter feed will be a challenge. The pasture varies from poor to pretty good. The variation is largely due to the management. Better-managed pastures are doing well, continuously grazed pastures are suffering. The local grain crops appear to be about average.
A lot of cows in this area will winter on a straw or hay ration supplemented with some grain. There is lots of information available about formulating rations. I would encourage you to access whatever you require. This is the year to think in terms of the least-cost ration as opposed to “what I have always done.” No matter what ration you use, remember that it is vital to have adequate nutrition to ensure good performance and breeding in the coming year.
At times like this I tend to recall the wisdom of Bud Williams when he told us, “In the cattle business you basically have cattle, grass and money. You can have too many cattle but you can’t have too much grass or too much money.”
Cattle prices are strong but feed is in short supply and relatively expensive. Is this the year we might be wise to break with tradition and do something different than we have done in the past?
At our place, we calve in May and June and generally background our calves to go to grass the following summer. But with calf feed scarce and expensive, wintering our calves at home doesn’t appear to be a wise choice. Selling our calves on today’s market might be the best decision. If we sold our calves today we would be ensuring a profitable year in 2016. This would fit with Bud’s advice as we would have less cattle but more grass and money to use wisely as we move ahead. There would be some tax implications as we would be selling two calf crops in one year but there are ways to defer your income.
Another plus for this decision would be that all our yearling grass would be available to use as we think best. The extra grass could be cow feed should we suffer another dry year. It might be extended grazing next year to reduce our winter feed costs and increase our profit.
We could also purchase cattle next spring to utilize the grass and again increase profit. We have lots of flexibility.
Another option we are looking at is to have our calves custom wintered. This would allow us to retain ownership of our calves and have yearlings to market next fall.
We will be picking one of these options over the next few weeks.
I encourage everyone to look at all the options. Cattle prices are strong. The slide is high which tends to favour lighter cattle. We don’t have to do what we have always done. We can do what is best in today’s situation.
Remember, thinking pays more than working. I wish you success.
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