Last week’s column, we discussed cull cow grades. Remember cull cows that are destined to go to the packing house are graded by their fleshiness. The fattest cows are called “Breakers”.  Moderately fleshed cows are “Boning utility”. Thin cows are called “Leans” or “Lights”, depending upon the weight of the cow. There will be price differences among these four grades. 

However, within each grade, large variation in prices per hundredweight will exist because of differences in dressing percentage. Cow buyers are particularly aware of the proportion of the purchased live weight that eventually becomes saleable product hanging on the rail. Dressing percentage is (mathematically) the carcass weight divided by the live weight multiplied by 100. For instance, a cow with a 1,400 lb. live weight and a “hot carcass” weight (once they have been eviscerated, and the hide, feet, and head removed) of 650 lbs. has a Dressing Percent of 46% (650/1400 = .4642 x 100 = 46%)

Key factors that affect dressing percentage include gut fill, udder size, mud and manure on the hide, excess leather on the body, and anything else that contributes to the live weight but will not add to the carcass weight. Obviously, pregnancy will dramatically lower dressing percentage due the weight of the fetus, fluids, and membranes that will not be on the hanging carcass. Most USDA Market News reports for cull cows will give price ranges for High, Average, and Low Dressing Percentages for each of the previous mentioned grades. As you study these price reports, note that the differences between High and Low Dressing cows and bulls will generally be greater than differences between grades. Many reports will indicate that Low Dressing cows will be discounted up to $8 to $12 per hundredweight compared to High Dressing cows and will be discounted $5 to $7 per hundredweight compared to Average Dressing cows. These price differences are “usually” widest for the thinner cow grades (Leans and Lights). See examples from last week’s sale in the Oklahoma City National Stockyards: http://www.ams.usda.gov/mnreports/ko_ls151.txt

As producers market cull cows and bulls, they should be cautious about selling cattle with excess fill. The large discounts due to low dressing percent often will more than offset any advantage from the added weight. They should also be cautious about selling old, “broke mouth” or “smooth mouth” cows that are pregnant but not likely to be purchased by someone intending to take them to grass.

Cull cow prices are typically lowest in the fall, as many producers sell cull cows immediately after weaning. The cull cow market exhibits consistent seasonality across years, as evident in the graph below, where prices in March and April are approximately 15 index points higher than prices in October and November. Though the market price levels have seen unusual increases in more recent years, the seasonal pattern has persisted. This seasonality offers opportunities to deviate from traditional fall marketing of cull cows and potentially increasing salvage value by retaining cows into the spring months to market during seasonal high prices (Feuz 2010; Peel and Meyer 2002; Yager, Greer and Burt 1980). Many factors influence this decision, including individual cow health, potential weight gain, cash flow needs, on-farm resources for retention and feeding, current market conditions versus market expectations and time. In addition to feed costs, the decision to retain cull cows requires more labor and management time, including feeding cows, separating culls for possible rebreeding and pregnancy checking. Facilities and pasture availability are important considerations as well, since cull cows on feed are likely managed as a group separately from the breeding herd. Not considered here is the fact that retaining cull cows utilizes forage resources that might be used for another cattle enterprise, either more brood cows or stocker cattle. On the other hand, feeding culled cows may be a good way to capture the value of excess or leftover pasture or hay that may not otherwise get utilized or have a better use. Ultimately, the marketing decision has implications for the individual cow’s salvage value and the producer’s bottom line.

 Seasonal Price Index for Utility (Slaughter) Cows, Southern Plains, 2004-2013. Data Source: USDA-AMS, Compiled & Analysis by LMIC Livestock Marketing Information Center.      

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Oklahoma State University, in compliance with Title VI and VII of the Civil Rights Act of 1964, Executive Order 11246 as amended, and Title IX of the Education Amendments of 1972 (Higher Education Act), the Americans with Disabilities Act of 1990, and other federal and state laws and regulations, does not discriminate on the basis of race, color, national origin, genetic information, sex, age, sexual orientation, gender identity, religion, disability, or status as a veteran, in any of its policies, practices or procedures. This provision includes, but is not limited to admissions, employment, financial aid, and educational services. The Director of Equal Opportunity, 408 Whitehurst, OSU, Stillwater, OK 74078-1035; Phone 405-744-5371; email: eeo@okstate.edu has been designated to handle inquiries regarding non-discrimination policies.  Any person who believes that discriminatory practices have been engaged in based on gender may discuss his or her concerns and file informal or formal complaints of possible violations of Title IX with OSU’s Title IX Coordinator 405-744-9154.

The last cold front has passed, and moderate temperatures are again upon us. However, it is still January in Oklahoma and more cold weather is sure to come.  Moisture, high winds, and cold temperatures increase the cow’s energy requirements, and the question arose the other day about some guidelines to provide extra energy during winter weather events. Unsurprisingly, some thoughtful planning in the fall helps to mitigate the negative impacts of winter weather and providing extra energy ahead of a cold front is more effective than during or after.

Cows in an optimal body condition score (BCS 5 to 6) are better able to withstand adverse environmental conditions. As a risk management strategy at the ranch level going into the winter, reduce the number of BCS 4 cows and increase the number of BCS 5 cows in your herd.

Usually what happens metabolically is cows begin to shiver. These processes require extra energy. Lower critical temperature for beef cows is influenced by hair coat condition (dry or wet/muddy), body condition (thin, moderate, fleshy) and hair coat description heavy/winter, winter, fall, or summer. It is worth noting that a cow with a wet hair coat at 60 degrees expends more energy to maintain core body temperatures than does a cow with a dry hair coat at 32 degrees.

When feeding cows, we need to consider the effect of weather conditions. Dr. Glenn Selk, Oklahoma State University Emeritus Extension Animal Scientist, offers these tips for feeding cows in cold weather. The major effect of cold on nutrient requirement of cows is increased need for energy. To determine magnitude of cold, lower critical temperature for beef cows must first be estimated. For cows with a dry winter hair coat the lower critical temperature is considered to be 32 degrees F. In general, researchers have used the rule of thumb that cows’ energy requirements increase 1% for each degree the wind chill is below the 32-degree lower critical temperature. Therefore the calculation example for a cow with a winter dry hair coat would be: 

tep 1: Cow’s lower critical temperature is 32 degrees F. 

Step 2: Expected wind-chill from weather reports (let’s use 4 degrees wind chill in this example) 

Step 3: Calculate the magnitude of the cold: 32 degrees – 4 degrees = 28 degrees 

Step 4: Energy adjustment is 1% for each degree magnitude of cold or 28%. 

Step 5: Feed cows 128% of daily energy amount. (if a cow was to receive 16 pounds of high-quality grass/legume hay; then feed 20.5 pounds of hay during the cold weather event).

Research has indicated that energy requirement for maintenance of beef cows with a wet hair coat is much greater. Cows that are exposed to falling precipitation and have the wet hair coats are considered to have reached the lower critical temperature at 59 degrees F. In addition, the requirements change twice as much for each degree change in wind-chill factor. In other words, the energy requirement actually increases 2% for each degree below 59 degrees F. To calculate the magnitude of the cold when the cow is wet would be the difference between 59 degrees minus 4 degrees = 55 degrees. True energy requirements to maintain a wet cow in this weather would be 2% X 55 degrees or 110 % increase in energy (which would mean that over twice the normal energy intake is needed.)

This amount of energy change is virtually impossible to accomplish with feedstuffs available on ranches. In addition, this amount of energy change in the diet of cows accustomed to a high roughage diet must be made very gradually to avoid severe digestive disorders. Therefore, the more common-sense approach is a smaller increase in energy requirements during wet cold weather and extending the increase into more pleasant weather to help regain energy lost during the storm.

Cows that were consuming 16 pounds of grass hay per day and 5 pounds of 20% range cubes could be increased to 20 pounds of grass hay offered per day plus 6 to 7 pounds of range cubes during the severe weather event. This is not a doubling of the energy intake but by extending this amount for a day or two after the storm may help overcome some of the energy loss during the storm and done in a manner that does not cause digestive disorders.

The fact that it is not feasible to feed a wet, very cold cow enough to maintain her current body condition, underscores the need for cows to be in “good” body condition at the start of winter.

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Livestock Risk Protection Insurance

Listening to Derrell Peel, OSU Extension Livestock Marketing Specialist, speak this past week, one might conclude that profit margins may be a little tighter in the coming year or two. According to Derrell, we may have reached a plateau on the national cow herd expansion and, subsequently, the potential for higher prices. If so, and IF is a big word, it would seem that management and marketing skills will become much more prominent in determining the profitability of the cattle enterprise; or, in a worst-case scenario, minimizing the down-side risks of market prices.

 With those thoughts in mind, I found the following comments, courtesy of OSU Extension Area Ag Economist Trent Milack, of particular interest.

Livestock Risk Protection is an insurance product that protects against declines in cattle prices. In the past, the main focus when raising cattle has been on the production side. Arguably, this is still true. However, price is at the forefront of many producer’s minds due to recent cattle market volatility.

Livestock Risk Protection can be purchased through a livestock insurance agent. This product insures between 1 and 1,000 head at a time with a total of 2,000 insurable head per year. The length of the insurance coverage varies from 13, 17, 21, 26, 30, 34, 39, 43, 47, or 52 weeks. Insurance can be purchased on calves, steers or heifers, which fall in the weight classes of Weight 1 (under 600 pounds) or Weight 2 (600-900 pounds).

Coverage levels vary between 70 percent and 100 percent of the expected ending value of the animals. The coverage options available vary each day so it is important for producers to check the RMA website https://public.rma.usda.gov/livestockreports/main.aspx daily to determine which coverage options are available. The ending values of the policy are based upon the weighted average prices reported in the CME Group Feeder Cattle Index. This index is used to settle the Feeder cattle contracts.

An indemnity payment is triggered if the actual ending value is lower than the coverage price. This has nothing to do with what the producer receives for the animals in the cash market when he sells the cattle. Indemnity payments will only occur if the price declines below the coverage level during the coverage period. Also, the producer must own the cattle and have taken delivery of them in order to qualify for the insurance coverage.

An example of the insurance coverage includes a producer who wants to use LRP to put a floor on his 2019 steer crop. He normally sells in the middle of March and his steers currently weigh 500 pounds. His herd consists of 100 predominately Angus cross steers.

The insurance is purchased in October so he needs 26 weeks of coverage. The option he selects includes feeder cattle steers for the 2019 crop year with an expected ending value of $136.794 per cwt. He chooses a 99% coverage level with a coverage price of $135.040 per cwt. The premium will be $6.889 per cwt. He expects the steers to gain 250 pounds over the course of this coverage. The premium is calculated by multiplying the final weight in cwt. by the premium cost per cwt. and the number of head covered. So 7.5 cwt. X $6.889 X 100 hd. = $5,166.75. RMA subsidizes 13 percent of the premium cost so the producer will be responsible to pay $5,166.75 X .87 = $4,495.07.

In the event that on March 31st the actual value is below the coverage price of $135.040 per cwt., an indemnity payment will be triggered. If prices fall to $120.00 cwt., the producer would be paid a premium in the following example. The price decline in this example is $135.040 – $120.00 = $15.04. The producer’s payment is 100 hd. X 7.5 cwt. X $15.04 = $11,280.00. This farmer received an indemnity payment of $11,280.00 on 100 steers for the cost of $44.95 per head. While there is no way to know what the actual ending price will be, this is an option to manage downside price risk.

Perils not covered include death, government seizure, and forced destruction. If one of these events do occur, the producer is required to notify their insurance agent within 72 hours of the occurrence of the loss. By giving notice of the loss, the producer will have the affected livestock included if an indemnity is payable on the endorsement. Not giving notice of the loss will result in the affected livestock being excluded from the indemnity calculation and the premium will not be refunded.

Some producers are aware of hedging and the ways that they can manage price risk in the futures markets. There are many reasons, however, why producers do not utilize this option. They may not have enough cattle to fill an entire contract, they may be reluctant to pay brokerage fees and margin calls, or they just do not understand the complicated world of futures markets and are uncomfortable with that risk management system. Livestock Risk Protection allows a producer to tailor the insurance coverage to the number of cattle he needs to insure at a price where he will remain profitable.

The application for Livestock Risk Protection can be filled out at any time, but insurance does not come attached until a specific endorsement is made. The insurance coverage will begin when a specific endorsement is made and approved by RMA.

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Oklahoma State University, in compliance with Title VI and VII of the Civil Rights Act of 1964, Executive Order 11246 as amended, and Title IX of the Education Amendments of 1972 (Higher Education Act), the Americans with Disabilities Act of 1990, and other federal and state laws and regulations, does not discriminate on the basis of race, color, national origin, genetic information, sex, age, sexual orientation, gender identity, religion, disability, or status as a veteran, in any of its policies, practices or procedures. This provision includes, but is not limited to admissions, employment, financial aid, and educational services. The Director of Equal Opportunity, 408 Whitehurst, OSU, Stillwater, OK 74078-1035; Phone 405-744-5371; email: eeo@okstate.edu has been designated to handle inquiries regarding non-discrimination policies.  Any person who believes that discriminatory practices have been engaged in based on gender may discuss his or her concerns and file informal or formal complaints of possible violations of Title IX with OSU’s Title IX Coordinator 405-744-9154.

By and large, the 2019 hay crop is, as they say, “in the barn.” Meeting the supplemental protein needs for the cows and replacement heifers consuming that forage must be done properly and economically. Protein is a vital nutrient for the ruminant because protein is necessary for the multiplication of, and the feed digestion by the microbes in the rumen. The microbial population in the rumen of cows is largely responsible for digesting cellulose in standing or harvested forages.

Higher quality forages are more readily digested in the rumen and have higher rate of passage through the digestive tract of the cow than do lower quality roughages. Therefore, the cow can consume more of the high-quality forage on a daily basis and receives more total digestible nutrients (TDN) from each pound of feed consumed. If adequate protein is available to cows consuming lower quality roughages, then the rate of passage and the digestibility is improved compared to cows that are inadequately supplemented while consuming the same low-quality forage.

Producers may be surprised to know the large differences in protein supplement needed to meet the cow’s requirement depending on the quality of forage that makes up most of the diet. Below is a table of the pounds of 40% protein supplement needed daily for moderate-sized (1100 pound) beef cows in different stages of production and consuming differing quality of grass hays. Larger cows and cows that produce above average milk production will consume more forage and need even more supplement to match their requirements. The table above describes the protein-only needs of the beef cow. Energy deficiency may occur and result in some weight and body condition loss. Energy needs will be increased if cows are already in thin body condition and must be improved before calving next spring. Also, winter weather conditions can greatly increase energy needs. In many instances, the energy requirements can be met with lower protein supplements (for example 20% protein range supplements) fed at about twice the rate as noted in the table above.

Forage quality differences are important, whether the supplement choice is high protein (40%) or lower protein (20% protein). Learn about testing hay for protein content by visiting with your OSU County Extension Office or downloading Oklahoma Cooperative Extension Fact Sheet PSS- 2589 Collecting Forage Samples for Analysis.

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Oklahoma State University, in compliance with Title VI and VII of the Civil Rights Act of 1964, Executive Order 11246 as amended, and Title IX of the Education Amendments of 1972 (Higher Education Act), the Americans with Disabilities Act of 1990, and other federal and state laws and regulations, does not discriminate on the basis of race, color, national origin, genetic information, sex, age, sexual orientation, gender identity, religion, disability, or status as a veteran, in any of its policies, practices or procedures. This provision includes, but is not limited to admissions, employment, financial aid, and educational services. The Director of Equal Opportunity, 408 Whitehurst, OSU, Stillwater, OK 74078-1035; Phone 405-744-5371; email: eeo@okstate.edu has been designated to handle inquiries regarding non-discrimination policies.  Any person who believes that discriminatory practices have been engaged in based on gender may discuss his or her concerns and file informal or formal complaints of possible violations of Title IX with OSU’s Title IX Coordinator 405-744-9154.