Anybody who has succeeded in any business for any amount of time knows at least this one simple truth: Efficiency equals profits. The tricky part, of course, is figuring out just where your inefficiencies lie and what you can do to remedy them. Sometimes, it’s a relatively simple matter of minimizing costs. Often, however, it’s necessary to invest a little more in the math budget. With input (particularly feed) costs continuing to rise, it’s vital for producers to understand not only what’s costing them the most to operate, but which costs will provide the highest return on investment (ROI).
“Folks in the industry need to ask and assess whether cattle prices are as elastic as feed costs,” says Monty Kerley, senior nutritionist with Farmer’s Business Network. “Most of the time, the answer is no. So investing less in feed may not help. The knee-jerk reaction whenever profit margins get tight is to try to reduce cost. But you have to make certain you don’t pull out the things that will make a positive difference in what your income potential can be.”
It’s true that, for many operations, finding less expensive feed is the quickest and easiest way to slash costs. But is it the best way to maximize profits? In most cases, it’s not, says Kerley.
“Feed efficiency is obviously important,” he says. “But every producer, whether he’s a feeder or a cow-calf guy, needs to ask himself, ‘Is cost per ton or cost of gain most important for me?’”
Kerley and the nutrition team at FBN work with producers to formulate diets that maximize the efficiency of a particular animal at a specific ranch or feedyard. There are, of course, myriad factors to consider, but environment, age, weight and genetics top the list. And even once that optimal diet is achieved, Kerley advises that there is a balance to strike between offering cattle the best dietary options and losing money.
“On the cow-calf side, mineral and vitamin supplements are extremely important for cow-calf guys,” he says. “If you pull trace minerals out of the diet, you see negative consequences next breeding season.
“With that being said, producers really need to evaluate what they need in that free-choice mineral supplement and ask if they’re buying more than is necessary. We don’t want to have excessive amounts of trace minerals in a product because we don’t want to cost the producer money they don’t need to be spending.”
Of course, hay is probably the first thing that comes to mind when cow-calf producers think of cutting costs. It’s also perhaps the most obvious exhibit of the effects of making decisions based solely on cost of product rather than cost of gain. High-quality hay will always cost more per ton than a low-quality forage will. But making the investment in better feed not only has dietary benefits for a cow herd; it typically puts more money in the producer’s pocket when all is said and done.
“If you look at the amount of digestible nutrients,” says Kerley, “the cost per nutrient intake for high-quality hay is usually cheaper than a poorer-quality hay that hasn’t been stored properly. Forage quality, like mineral supplementation, makes a big difference for the mother cow.”
In backgrounding operations and feedlots, Kerley says analyzing animals’ protein needs is a parallel need with mineral intake. Determining the microbial needs of an animal, then adjusting the diet to meet those amino acid needs, is probably the quickest route to maximizing the efficiency of that calf.
“We may pull distillers grains back in the diet and come in with something like rumen-protected soybean meal,” he says. “That delivers more amino acids from the rumen into the intestines, where the body can absorb it. It may be more expensive, but the improved feed efficiency reduces cost of gain compared to a cheaper diet. Even if you increase diet costs by 30 or 40 dollars per ton, you can decrease the cost of gain on that calf by as much as 5 cents per pound because of that diet adjustment.”
When he consults with producers, Kerley helps them determine the energy value of their cattle’s diet, then calculate what he calls the effective energy of that diet. The energy value will, of course, differ depending on what kind of operation is being run. A diet will have different values for mother cows, weaned calves and fat cattle, and even for different breeds in different climates. As a young animal gains bodyweight, for example, its nutritional needs shift from higher protein to something that adds fat to the body. There is no one-size-fits-all plan, Kerley says.
“There are a lot of factors to consider,” he says. “We look at a diet’s energy density, a cow’s body condition score [BCS] and milk production, the bodyweight of the calf, the calf’s average daily gain [ADG]. Then we calculate the energy consumed by that animal as a ratio to the energy required by that animal. Then we can see if there’s any potential to gain efficiency.”
The primary idea Kerley always comes back to is the focus on cost of gain rather than cost per ton. Understanding your cattle with that mindset, he believes, is the key to unlocking an operation’s greatest profitability.
“When things get tight,” he says, “don’t just rush to eliminate the things in your operation with the highest price tags. That could end up costing you more than what the benefit is.”
