December 2011 Articles

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Cull Cow Strategy for the Fall

Cull Cow Strategy for the Fall
Ross Pruitt, Department of Agricultural Economics and Agribusiness, LSU AgCenter
As we approach the fall of run cattle, the question over whether to cull brood cows now or later comes to the forefront. Drought conditions add a different dynamic to discussion of this topic as some cows may have been culled earlier than anticipated in order to maintain forage availability for more productive brood cows. With concerns about another La Nina developing this fall, the ability to hold cows until after the first of the year may not be feasible. Like calf prices, cull cow prices weaken substantially in the 4th quarter as seasonal supplies increase. Depending on the region and class of cull cows sold, prices can be 90% of the yearly average during the 4th quarter. In a normal year, prices can be 4 to 5% greater than the yearly average by waiting until February or March to sell. Based on historical Louisiana prices, this translates into about a $5 to $8/cwt gain from the 4th quarter into the 1st quarter of the following year. While this level of increase in prices did not occur every year, seasonality is hard to bet against. In addition to the additional increase in dollars/hundredweight, holding cows into the first quarter allows for the cow to recover weight that was lost during lactation & increasing the total revenue of each animal sold. While it’s unwise to bet against seasonality, its impact can be dampened as seen in 2008/09 . Conditions this year suggest seasonality may be dampened again. Region 6 beef cow slaughter (Arkansas, Louisiana, New Mexico, Oklahoma and Texas) is 22.2% higher through the first 32 weeks of 2011 relative to last year while all other regions have slaughtered 6.4% less. U.S. beef cow slaughter has increased in the past 6 weeks as temperatures increased nationwide & drought conditions spread beyond areas impacted the most in 2011. Normal seasonal increases in beef cow slaughter also account for the increase. Total U.S. beef cow slaughter is fractionally ahead of last year, but pulling cows ahead may ease the impacts of seasonality as we go into the fall. This may result in a smaller decline in prices than normal in the 4th quarter, but also provide a smaller increase in prices in the 1st quarter of 2012 than history would suggest. With imports of beef down this year by 17% through June, ground beef prices remain strong. The continued production cuts in the poultry industry will provide further support for ground beef prices and cull cow prices. Cull cow prices in the Southern Plains have rebounded in the past few weeks, but not seeing a seasonally induced drop in cull cow prices is unlikely. From a cost perspective, what is it going to take your operation to winter the cow to capture potential higher cash prices for culls? It will likely be higher than normal, especially if hay or other feedstuffs must be purchased to winter the cow. The questions then becomes what type of program can you develop for $5 to $8/cwt by delaying the culling decision. Follow-up this calculation with only a $2 to $3/cwt increase in cull prices. If you can show a positive return in both scenarios, it may be worthwhile to hold designated culls until the spring.