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Opportunities for producers to capitalize on a strong calf market
Herd expansion may not be in the cards for some producers, but a livestock economist says there are still opportunities for operators to increase profitability.
Kenny Burdine with the University of Kentucky tells Brownfield producers should keep one thing in mind as they are considering their options. “The goal is that you want to look back in five years and say, you know what, I used that opportunity wisely,” he says. “Not look back and say, man, I wish I hadn’t made that decision.”
He says investing in genetics is a good place to start. “You tend to think about bulls, but it doesn’t have to be bulls, right,” he says. “But the idea being that how can I produce bigger calves? Can I produce more valuable calves at roughly the same cost per head? Then that makes me more profitable in the long run.”
Burdine says making investments in grazing systems can also provide additional value. “The average producer could probably lower their cost per head if they could have improved grazing systems,” he says. “Rotationally graze and limit their dependence on stored feed during the winter.”
He says investing now is more beneficial in the future when the cattle market isn’t as strong. “Watering systems, setting up the ability to run cross fencing, paddocks, things like that to more efficiently use your forge base,” he says. “I think in most cases can lower your cost structure.”
Burdine says now is also the time to make strategic financial decisions. “Interest rates were so low for so long that I think we kind of lost that understanding of how important working capital can be,” he says. “Because the money was cheap, right?”
He says the lending environment is very different in today’s economy. “And now if I’ve got some working capital, if I’ve got some cash reserves that I can use to fund some of my typical purchases, so that I’m not dipping into a line of credit at a much higher rate right now, there’s a cost savings on that,” he says.
Burdine says another way to lower the cost structure for operations is to pay down some debt with the current increase in income from significantly higher cattle prices.