The Jan. 1 Cattle Inventory report confirmed what many of us had been expecting. Due to ongoing drought and high input prices, the beef cow inventory decreased by 4% year-over-year, creating the fourth consecutive year of liquidation. The annual beef cow culling rate of 13.4% produced the lowest beef cow inventory since 1962. Beef replacement heifers were down 6%, indicating even lower inventory in years to come.

Wesley Tucker

Field Specialist – Agricultural Business / University of Missouri Extension

Email Wesley Tucker

These figures have fueled the fire of excitement for higher prices around the corner. Analysts have begun suggesting new record prices. Throughout my career, I’m not sure I’ve ever seen a time of more optimism in the market for cattle prices than there is today.

But I want to caution us all: Record prices do not always translate into record profits. It’s true the current inventory numbers paint a very similar picture to the last cattle cycle and the dramatic change that occurred as we recovered from the 2012 drought. However, the reality is: We don’t live in the same world we did back then. Our world has changed and so has our cost structure. As forage conditions improved and the drought disappeared in 2013, input costs for things such as hay and feed returned to normal levels. How many of you expect that to happen again in 2023?

• Feed: Based on supply and demand, corn and byproduct feed prices are forecast to stay elevated for quite some time.
• Fertilizer and diesel: While no longer at the extremes, higher prices aren’t going away any time soon.
• Labor: The cost of labor continues to rise, provided you can even find someone to hire.
• Hay: Prices will remain elevated based on fertilizer, fuel and equipment prices, but also because U.S. hay production continues to decline as more acres are planted to corn and other crops.
• Equipment: The cost of anything used in your cattle operation, from pickup trucks and tractors to balers and squeeze chutes, has risen dramatically – not to mention the 18-month waiting list before it arrives.
• Interest: Many young producers have never had to really consider the cost of money. Low interest rates made financing easy. Today is a different world.

So while there is tremendous optimism of higher cattle prices in the future, if we aren’t careful, we may find we are just trading dollars as inputs quickly eat up higher cattle prices. Therefore, 2023 is a year for each of us to evaluate our system and ensure we are giving ourselves a chance to be profitable at the end of the day. Consider these options:

1. Forage management: The quickest and easiest way to reduce feed costs is to get more out of your forage system. While many of us like to call ourselves cattle producers, the reality is we are grass farmers. We are in the business of converting sunlight into grass into beef. Improving forage utilization from 55% to 65% by just spending a little more time rotating cows can greatly improve the bottom line. The higher input prices become, the more valuable forage management is. A 10% improvement in utilization has never been worth more than it is today.
   
   
2. Extending the grazing season: I get the opportunity to speak at grazing conferences across the country – and no matter where I go, everyone can grow forage really well for a short period of time each year. However, no one has found a species of grass that will grow year-round. So unless your cows can go on a diet and skip eating for three months, most operations have to rely on stored feed at some point throughout the year. The key to profitability is often finding creative ways to extend the grazing season as much as possible. Some producers fill the seasonal gaps with summer or winter annuals (including cover crops); others stockpile existing forages to defer grazing. Some grow both warm- and cool-season forages. We cannot accept the “we have to feed hay x amount of days because that’s the way we’ve always done it” tradition.
   
   
3. Stocking rate: A key to improving your forage system and extending the grazing season is finding the “optimal” stocking rate for your operation. As cattle producers, it’s easy to fall into the “wanting just a few more head” mentality. But as we push cow numbers higher, when the weather turns against us, we lock ourselves into buying high-priced feed or selling good cows. The key is building a flexible system to account for highly variable forage production and weather. Often, the most profitable producers are those who choose to run a few less mature mamas and background their calves to heavier weights when they have extra grass. When they don’t have extra, calves are sold earlier as a well-designed drought management plan.
   
   
4. Nutrient management: Higher fertilizer prices increase the value of every urine and manure pile our herds produce. Managing where they are deposited will impact our fertilizer bill for years to come. Is the valuable resource accumulating in the pond and under the shade trees? Are we properly utilizing the buildup of materials in those winter feeding pens?
   
   
5. Invest in infrastructure: In ranching, there is always something that needs to be done. Especially for those who work off the farm. It’s a struggle to just run out each evening and get the cows fed, let alone find time to think about making improvements to the operation. But somehow, we must find time to invest in things that improve our efficiency. New fencing can allow us to rotate cows more often and improve the utilization of our forage. A little more time spent on maintenance may prevent breakdowns that always seem to happen at the most inopportune time. Better-quality bale rings might save an additional 10% of hay.
   
   
6. Management: I often ask producers what makes them money on the farm: Is it your cows, grass, equipment or fencing? The answer is: none of the above. You are what makes money in your operation. How you choose to put those pieces together in the right combination is what creates a profitable cattle operation.

What’s your system? 2023 is a year to carefully evaluate how we produce beef and where we can make improvements to our system. Can you become more resilient and less dependent on inputs to capitalize on higher cattle prices? If so, your future may look really bright. If not, you may find you are just trading dollars and no better off than you were before.