Now the market is in favor for herd expansion but drought, prices of feed and other issues make the choice difficult.

Tom Brink, President of J&F Oklahoma Holdings Inc. provided an encouraging presentation called, “10 good reasons to expose more heifers in the next few years.”

“It’s always nice to own a scarce commodity.”

The U.S. cowherd is still dropping yet slaughter numbers are still high. The week of Sept. 11, 159,000 cattle were slaughtered. That’s the largest single week since 2001. The latest USDA projection of beef production for 2012 is down 4.7 percent. That’s almost 1 billion pounds less of beef projected in 2012. “Obviously, this will have some market impact on the value of cattle,” Brink says.

“Drought in the South will end.”

According to Brink, he is no innocent bystander, owning his own cattle in Oklahoma. Year to date beef slaughter is up 19 percent and that’s driving a lot of the change. “What’s going to happen when Texas goes from looking like a desert to a green state?” Brink made an interesting transition point. “What’s worse, cows and no grass or lots of grass and no cows?” This will change the dynamic of the demand for these beef females.

“Beef demand is rising.”

If you look at the wholesale value of beef – the industry is taking in about $100 million per week more than it did in previous years. This shows no sign of stopping. That’s very impressive from the demand side of the equation. Total sales from this year are up almost 12 percent. “The domestic market is lagging and its not wanting to play at the same level that the exports are, but it’s also being forced to increase spending.” Domestic spending is up 8.7 percent and export spending is up 43 percent.

“Beef exports are growing rapidly.”

Income growth in Asia and other parts of the world are starting to see the consumer demand for more meat protein. U.S. year-to-date exports are up 39 percent. A lot of countries are up 10 percent to as much as 75 percent, with an average of almost 40 percent. “In Middle Eastern countries, they never used to buy anything besides offal, but we’re seeing some changes now.”

According to Mark Gustafson, currently in charge of JBS international sales in Asia, the U.S. beef industry has a very competitive advantage in international trade with the weak dollar amount and high cattle prices globally. He also said, there is a global protein shortage in some of the key markets such as Japan, Russia, Korea and “the greater Vietnam”. “The bottom line is, beef is short and prices will go higher,” Brink says.

“Calf prices are high and they’re likely to head even higher.”

“I grabbed an auction report from Pratt, Kansas – kind of a key livestock market.” According to Brink, on Sept. 15, a five-weight steer was bringing $158 per hundredweight and that’s not too far off $800 per head. A 450-pound heifer was worth $639. These prices are likely to last and go even higher over the next few years.

Bred heifers are selling.

According to Cattle Fax, bred heifers used to trade $30 to 40 cheaper than bred cows and now they are $20 per head higher. This isn’t occurring during expansion but actually during liquidation.

Synchronization works.

Dave Patterson, one of the best synchronization experts in the country said we already have on the shelf technologies, including protocols that allow very successful AI by appointment. The cost of these programs is competitive with natural service using average price bulls.

High-quality genetics

Brink said the availability of high quality heifer bulls has become more prominent in the industry over the past year. “The genetics that are out there are amazing,” he said. “Maybe this is why the bred heifer premium has increased.”

Increased availability of byproducts

Brink said the growing supply of byproduct feeds – in many parts of the country, although not everywhere – has been a “game changer” in periods of high feed costs. Those tools can be used to keep down expenses related to heifer development.

“The timing looks right.”

According to Brink, the heifers we breed in the next few years will very easily be some of the most profitable we’ll ever own for many years. “The situation just seems that set up in our favor in terms of the positive supply demand balance.”

Notes of Caution:

“Make certain that you have a competitive cost structure.”

According to Brink you need to have lower than average costs. How much out of pocket costs are you spending each year? That becomes critical. Average to above average reproductive rates and average to above average weaning weight. If you put those three pieces together then you will be a low cost producer.

An average producer will be spending about $500 per cow per year (with a large bell curve on that of course) and a high profit producer would be spending about $25 less per calf. For the reproductive and weaning weight the average producer may be around 85 percent if the high profit producer is a little better he may be running around 88 percent. Weaning weights would be about 525-540 pounds. So, if you do those three things better in all three categories its going to be $10 to 12 per hundredweight lower on that high cost of that high profit producer. They’ll be in much better shape from a profitability standpoint in $12 per hundredweight. On a five-weight calf that’s $60 per head more profitability.

“Make sure you’re raising a calf that has marketability.”

According to Brink, everything has marketability but that doesn’t mean they’re all going to sell at the same price.

Brink said, according to the Five Rivers feedlot managers, who have fed well over 1 million cattle, the ideal feeder cattle probably has an Angus base, 50-75 percent Black or Red Angus, 25-50 percent Continental for muscle, and that would leave 25 percent for whatever else. That’s a formula that could be followed for good marketability. From a grid standpoint, those cattle would do very well.

STAFF

Tom Brink gives his presentation, "10 good reasons to expose more heifers in the next few years."