A new report from the U.S. Department of Agriculture shows the number of cattle in the U.S. is at a record low. Beef prices are up, but many farmers still aren’t turning a profit.
Carson Roberts is the state forage specialist with University of Missouri Extension. He said to increase profits and incentivize more supply, costs need to fall.
“The low hanging fruit? Hay,” he said. “It is the single largest line item in a cattlemen's annual budget.”
Most farms have a profit margin of less than 10%, according to the U.S. Department of Agriculture. While some farmers diversify their income by growing hay for their own use and selling the extra for more revenue, Roberts said that’s one of the things keeping them in the red.
“The farmers that I know that aren't making hay and that are feeding very little hay are very profitable,” he said. “I mean, they’re making close to $400 more per cow than what is normal in the state, and that's a big number.”
Hay is used to feed animals such as cattle during winter, when grass grows slower. Making it requires expensive equipment and degrades soil, Roberts said. And even though beef prices are at a record high, he said inflation on machinery has outpaced cattle inflation. In other words, costs are rising at a higher rate than prices.
For smaller farms, that can significantly cut into profits.
“They're spending too much on their equipment for what they're getting out of it,” Roberts said. “They're not covering enough acreage to make it make sense.”
It’s even more expensive when factoring in the time it takes and the opportunity cost of making hay — the more profitable things farmers could be doing instead.
“Think about all of the time that you can spend improving your marketing, the time you could spend making sure your animals are well cared for, the time that you could spend making sure that your grazing management is correct,” Roberts said.
He added that through careful planning and rotating cattle throughout the year, farmers could leave some grass pasture growing so that cows can eat it throughout the winter.
“To increase cow numbers, we will need to forgo old traditions and embrace beef farming with less fed feed,” he said.
That’s not always possible or easy. Even so, Roberts said hay supply is high and prices are relatively low, so farmers could be better off buying it from someone who benefits from economies of scale, or lower per-unit costs associated with having a large operation.
But even though it saves money, land and time, farmers are still making their own hay.
Culture, constraints and control
Wilburn Harris is a cattle farmer in Cass County, about 40 miles south of Kansas City. Today, all 70 heads of cattle on his farm are descended from 10 heifers — young, female cattle — that he bought from his uncle in 1971.
He’s been making hay for even longer.
“I've been doing it since I've been five or six years old out there messing with it, and that's what you do in the summer, because you have to take care of the cattle in the winter,” he said.
For Harris, it’s cultural — it’s just what you do. And old habits die hard.
“It's kind of like you always drive on the right side of the road,” he said. “You've got some of these loop-arounds and stuff now that confuse us old farts,” he said.
Breaking from tradition isn’t a deal breaker for Harris, but there are other barriers to giving up hay. Harris said in order to extend the grazing season, he’d need more land to rotate his cattle on while grass stockpiles for the winter — land he doesn’t have.
He said he could buy hay from other sources that would likely be cheaper per bale, but there are other costs associated with buying it, such as transportation costs and the cost of taking samples to check the hay's quality.
“If you're gonna buy it, a lot of people sell junk hay and feed the good themselves,” Harris said. “Then you've got the trucking (costs) in it. I've sold something that's gone as far away as Utah — the guy was paying as much for the trucking as he did for the hay.”
To save on both transport costs and time, some farmers use “custom baling,” which means growing hay on their own land, but paying somebody else to actually harvest and bale it.
Harris said he’s been a custom baler for others, but isn’t interested in contracting someone else for his own hay.
“I want my hay put up when I want it put up,” he said. “I don't want to wait till somebody else's schedule says it can be put up. You lose quality or there's a chance they’ll do it in a hurry, or they're gonna do it and get rained on — the uncertainty I don't like.”
Overall, it’s been a good year for Harris. He hasn't dealt with drought, and he’s getting more revenue per head of cattle than he did a few years ago. But, he said, his costs keep rising too.
“It didn't seem to have changed a whole lot getting, $1,500 for a calf versus $500 a few years ago, the expenses and all,” he said, “and I'm getting older, and my wear and tear’s taking a toll on me a little bit too.”
