CATTLE FEEDING

Do we want to feed cattle?What kind of cattle feeding ?

Business Planning steps?

Cattle Feeding - has a positive and modest impact on the community

• More Feeding - because

– better markets for larger lots of uniform preconditioned calves

– Add and capture value in superior cattle

– utilization of damaged grains and byproduct feeds

– keep more people involved in agriculture

– Economic activity and diversification

Cattle Feeding - competitive potentially rewarding enterprise with associated risk

• Feeding - because

– Personal interest, knowledge and/or experience

– Complimentary to other agricultural enterprises

– Utilization of available resource

– Opportunity for expansion of operation to support next generation

– Economic profits

ND Adult Farm Management

2009 2008 2007 2006 2005

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250Net Return

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Industry Trends

• High grain prices – increased byproducts• Low cattle inventory- high prices• Excess feeding capacity – shift north• Continued concentration• Product Branding• Growing niche markets (natural, organic,…)• Added documentation (PVP, ID, …) • Alliances (supply chain integration)• Greater Regulation• International Competition

Cattle Feeding Requirements

• Source of cattle• Competitive reliable feed• Favorable climate – temps, rainfall• Capitol/financing• Land/facilities/equipment/infrastructure• Interest and knowledge• Services – vet, trucking, feed• Markets• Labor

Important Business Concepts

Competitive advantage• Examples

– Land best suited to corn and alfalfa crops best marketed through finish feedlot

– Feed base in range country supports custom heifer development

– Low cost land reclamation forage and proximity to DDGS supports custom cattle wintering

Economy of scale• Overhead

– Equipment– Facilities

• Marketing• Purchasing• Examples

– JBS Five Rivers 960,000 feeding capacity 13 locations

SWOT analysis

Strengths Weakness Opportunities Threats

location

feed

cattle

equipment

facilities

capitol

markets

Knowledge

competition

labor

Economies of ScaleCapital Cost Summary (NDSU 1997)

Feedlot Size

Lot Land Building Equip Mach

Total

$ Per Head

1000 156,111 54,720 251,970 462,801 $467.80

5000 636,409 174,797 583,270 1,394,476 $278.90

20000 2,222,945 517,594 2,119,014 4,859,553 $242.98

How about our Winter Weather?ND weather?

Greater intake and maintenance

Performance can be highWind protection and

bedding criticalSnow and storm work,

preparations, and costIdeal feeding climate in

much of the rest of the year

Local Feed Resources

• Large farming base

• Cheapest hay in country

• Many opportunity feeds– screenings, damaged

crops, feed barley– Midds, DDGS, WDGS, oil

seed meal, pressed pulp– CRP hay, stover,

aftermath

Site, Equipment, & Facilities

Cattle/Feeding Alternatives• Wintering stock cows• Feeding cull cows• growing/developing

heifers• Bull test/ development• Wintering calves for

grazing• Preconditioning

/backgrounding• Finishing calf feds• Finishing yearlings• Dry lot cow calf

Business planning

• Analyze a business/enterprise idea on paper including definition of production, financial requirements, associated risks and projected returns

• Informal to Document• Takes time, research, and honesty • Planning to evaluate alternatives• Access to credit

NDSU Plotting the Coarse – planning prices

Planning prices grain/feed

Example: Situation

• Due to high grain prices feed yards are looking and offering good value for heavier cattle

• Medium quality hay has consistently been available and at a cost of about $50/t

• Current farming operation includes a shop, well, utilities, tractors, trucks and equipment available for seasonal feeding

• 5-6 cwt calves are available through local sale barns and direct from Oct-Jan, with considerable discounts on heifers in fall diminishing by grazing/breeding season

Description of Business

• Type of business, structure of business, size and scale, ownership of cattle, expectations of performance, days on feed, marketing endpoint and method, custom feeding arrangements

Example: Business Description

• Construct a 500 head calf feeding facility to background fall purchased heifer calves

• Feed hay based ration supplemented with local grain screenings, feed grains, and byproduct

• Market heavy feeder heifers in Jan-Feb, and light stocker heifers and replacement heifers in Mar-Apr

• Purchase feeding/handling equipment• Employ seasonal hourly labor

Operational Plan

– Feeding program• Rations and feeding protocols• Feed sourcing and costs• Performance targets and breakeven

– Health program• Treatment and vaccination protocols• Death loss and treatment cost

– Procurement-Marketing plans• Target weight and date• Location and method

– Labor• Needs and costs

Example: Operational Plans

Health• Vaccination

– 4 way viral– 7 way clostridial– Bangs

• Treatment– Treat 10%– $20/HD

• Death loss– 1%

Procurement - Marketing

• Nov buy 500 heifers– 550 lbs @ $1.20

• Mar sell 250 heifers– 800 lbs @ $1.05

• Mar sell 240Heifers– 850 lbs @ $900

Labor– 150 days – 2.5hr/day

Example: Operational Plans

Feeds• Feeding

– Ration:– Cost:– Performance: 2lb/day

Ration

financials

• Budget BE• Capital investment/debt service• Income statement• Balance sheet• Cash flow projection

• Lender assistance• NDSU Extension • Adult farm management

Capitol InvestmentsQuantity Cost Description

Site 15,000 Landscaping

Water 5,000 Waters and line

6,000 Well and pressure system

Feed Storage 3,000 Grain bin

Pen 23,000 Bunks

1,500 Gates

7,000 Windbreak fence

Handling Facilities 5,500 Chute and tub

Buildings 0

Machinery 50,000 Tractor and loader

25,000 Feed wagon

$146,000

Expenses

quantity cost Annual cost Cost per head

Cattle

heifer calves 500 hd@550 Lb 1.20 $330,000 $660

Feed

screenings 100 T $30 $3,000 $6

hay 600 T $45 $27,000 $54

wheat midds 100 T $100 $10,000 $20

mineral 5 T $600 $3,000 $6

Vet/Health

vaccine $2,000 $4.00

pour-on $750 $1.50

antibiotic $1000 $2.00

vet service 2.5 hrs 200 $500 $1.00

Utilities

electricity $1,500 $3.00

Interest $325000 .06% $6,000 $12

ExpensesQuantity Cost Annual cost Cost per head

Bedding

straw 50 T $30 $1000 $2.00

manure removal $2000 $4.00

Marketing

Trucking 700 mi $4 $2,800 $5.60

Commission 1% $4,100 $8.20

Check off $500 $1.00

Buying 2750 cwt $1 $2750 $5.50

Repairs $1500 $3.00

Fuel $2000 $4.00

Insurance $750 $1.50

Equipment and Facility

annual payment $14,000 $29

Labor 300 hr $15 $4500 $9.00

IncomeQuantity Price Total per head

Cattle

Feeder Heifer 250 hd @ 800 lb $1.05 $210,000 $840

Replacement Heifer 240 hd @ 850 lb $900 $219,000 $900

Total Income $429,000

Total Expenses $420,650

Feed cost per gain $.346

Yardage cost per day $.363 per day

Total COG $.766

Net per heifer $17.0 $8350

BE $858 - $1.04

Financing Issues• Loan Structure

– Annual feeder loans (cattle and feed) 75%– Term operating (equipment) 65%– Long term real estate (land, facility, site) 60%

• Equity-collateral– Co sign– Equip cost share– FSA guarantee / subordination– Custom feed

• Interest Rates– Beginning farmer– Socially disadvantaged

Loan TableSOURCE TYPE COLLATERAL/TERM AMOUNT PAYMENT

FSA Farm Ownership Land, well, pens 65,000 2000

5% down 40 year

45% FSA 1% for 20 yr

50% Bank 4%

FSA Term Operating Tractor, wagon, bin 70,000 12000

7 yr 5%

Bank Annual Operating Cattle, feed, utilities 325,000 331,000

90% bank sub Labor, repairs, truck

5% for 150 days

350,000

Regulation Issues/Limitations

• Local zoning• ND feedlot permit• Nutrient management plan

Custom Feeding

• Services– Feeding– Processing

• Chute charges– Marketing

• Promotion/ Clients– Cow/calf – Stocker– Buyers– Finish feedlot– seedstock

• Billing– Feed + yardage– Cost/ lb of gain– Daily cost per head

• Business– Feeding contract– Feed lien

Adopt a Professional Attitude

• You’re in the customer service business• Be precise• Be timely• Be thorough• Be knowledgeable• Pay attention to details• Cattle care is a responsibility

Yes, we can feed cattle profitably.