Interview With David Hall Part 3

Parts one and two of this series focused largely on cows.  In this post I’ll wrap up with a focus on business and some final tips.  I didn’t want to pry into David Hall’s personal finances.  I asked him for the top-down view of his farm.  David said they run 400 head of cattle on top of a couple of off-farm businesses.  400 cows and he has time to pursue other interests in town!  So, where is the farm income?  He sells 150 bulls each year.  He sells culls at the local sale barn.  When he ran hair sheep (something he suggests strongly, more later) he sold lambs and cull ewes at the local sale barn.  They are into commodity production, seeking a high tonnage of medium-quality forage for a cow/calf operation instead of high-quality forage for a finishing operation.  That distinction is key.

“To maintain profitability each cow has to bring in a calf at weaning time.  Cows that are too hairy, too big or produce too much milk won’t last in a grazing operation.”

He breeds for fall calving.  Cows are most fertile in the fall, the temperatures are cooler which helps when grazing fescue, those calves help soak up the spring flush of grass and he gets another flush of grass in the fall just as the cows are calving.  He sells 18 month old bulls in the spring as well as weaned calves, just when both the local calf market and the bull market are at their peak.

Hall likes to feed hay.  “Land costs are high.  Feeding hay puts more head on the farm but you have to manage it carefully.”  For 2-3 years he won’t need any hay.  For 2-3 years he’ll need a little hay.  For 2-3 years he’ll need lots of hay.  Hall says to buy hay off-farm.  This went well with his whole theme of allowing specialists to specialize.  For example, someone else raises the stockers, he raises calves.  Allowing someone else to put up hay and own the equipment frees up your time and capital.  One less tractor could easily be 15 more cows.  He drove home how important he thought this was by telling me his family had owned a green farm equipment dealership for 30 years.  “Buying the hay off-farm may have $18-22 worth of fertilizer value (if you just roll out a round bale) we just rolled out for $25.”  Once the cows eat it, the fertilizer value goes up and he doesn’t have to de-stock his farm when forage becomes scarce.  I asked him how long he fed hay last winter (coming out of drought) and he said, “5 months.  But each day I only fed the cows 20% of their diet in hay instead of feeding them 100% hay for 30 days.”  That helped him stretch his stockpiled forage and increase recovery times.  “Feeding hay can make you profitable.”

David, I’m just getting started, next year I’ll have 60 acres and 10 cows.  What would you suggest to help me get stocked?  Here are his quick tips:

“Think about a marketing plan for calves.  Raise good heifers for the next few years as they will be in demand.”

“Buy 10-20 sale barn cows, 100 ewes (hair sheep), spend heavily on getting fencing and water ready and buy in all hay.  You’ll need a dog and better fencing to protect the sheep but sheep can be quite profitable and will utilize forage the cows ignore.  Parasites can be a real issue with sheep so you will need to lengthen the time between grazings.”

“Manage grazing as well as you can.  Whatever happens, do your best…but push for diversity.”  (I think he meant both in livestock and in landscape.)

Livestock are employees.  “Fire employees that don’t work.”

“A short, defined breeding season will push things forward faster than anything you can do.”

Thanks David.

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Interview With David Hall Part 2

Last time I wrote about a conversation I had with David Hall about recognizing the cost of raising a heifer calf.  She will have to throw her fourth calf at age 6 to pay for her own development.  This is no small feat as heifers are still growing themselves and gaining molars…without which, it’s hard to fully chew their cud.  That first calf is hard on a heifer as she has to provide milk for a growing calf while retaining/regaining condition so she cycles in time for her next pregnancy within a defined breeding window.  Without those molars, she faces an up-hill battle.  Now, I have heard Kit Pharo toss this around a little bit suggesting if we’re ever going to forgive a cow for coming up open it’s when she’s due for a second calf…but he hasn’t done that in practice, he just suggested it might pencil out.

That math makes sense but why bother raising heifers when I can buy bred heifers?  Either way somebody has to pay those heifer development costs but maybe I can save myself some labor if I can find replacement heifers of the same quality.  While it is possible to buy in heifers a little cheaper than I can raise them, it’s a little bit of a gamble genetically.  David said, “If my own herd genetics are good enough I can afford to spend more on my own heifers than taking a chance on new genetics.”

So, what is it we’re looking for when we are shopping for a long-lasting heifer?  Well, here are the herd requirements David listed on his first slide in the presentation:

  • Fit the environment (Adaptable)
  • Calm
  • Calving Ease
  • Fertile
  • Longevity
  • Low Maintenance Requirements

David started his presentation in February by showing a table of relative values comparing a business based on yearling sales to a feedlot.  According to the chart (which I believe was cited to a research company and I’m unwilling to republish), reproduction is 10x more important than carcass quality for yearling sales.  If you are in the business of selling calves, you have to have calves to sell.  The detail below should help us find stock that will work for us, delivering and weaning a calf year after year but keep in mind, fertility is the top priority.  So let’s look at the criteria in detail, though I think you’ll find the details overlap considerably.

Adaptable:
“Be sure to breed to bulls who have a proven record on fescue.  Get a bull that is well adapted to your environment.”  If I have 25 cows and one bull, that bull makes up half of the genetic makeup of the next generation.  Picking the right bull matters and the consequences of a poor choice will impact the operation for years to come.  For example, I want a bull that is slick-haired as the shaggy cows (Ms. White) don’t perform as well as the slick cows (#111) on hot days in July.  Even better were the Jerseys who got slick in April or May in spite of cool weather and continue grazing when the heat index is above 100.  I feel that it is important to select within my herd for shorthorn genetics that are still out working alongside of the Jerseys.  Those Jerseys are the benchmark.  I have a couple of cows I can usually count on to be out there working on a hot day so I’ll tend to favor their offspring in the coming years.

Bull1

Disposition:
“Cull out ornery cows and bulls.”  As an inexperienced cow owner (I’m not a cattleman.  I’m a cow owner.  Maybe in a few years I’ll graduate.), it is easy to confuse ornery and nervous.  There is a difference between the cow that wants to eat you and the cow that is afraid of you.  Ms. White was terribly skittish when she first arrived and when she saw us it was time to run…and all the cows went with her…right through the fence.  I thought we were going to have to invite her to leave.  But, after a little while, with a few changes on our part, she fell into the routine.  She hadn’t been in as close proximity to humans as she necessarily is on a daily basis with our daily grazing moves.  She has to walk right past me every day now and is doing fine.  That said, she does tend toward excitement and we want cows that tend toward calm.  Hopefully she’ll give us steer calves each year.  Looking at cows as employees David says, “if the employee has a bad attitude she needs to be fired.”

Calving Ease:
If I pick a bull that throws heavy birth weight calves, I’m breeding heavy birth weight into my herd.  I don’t want to spend my spring camping out with the herd and pulling calves.  I want to sleep in my soft, comfy bed, get up early and head out to the pasture with a camera to take a picture of the new, live calf on the ground…a calf that was born without any interference from me.  If I am selecting for cows that bring a live calf in for weaning each year I have to be careful to do my part by stacking the deck in their favor.

Fertility:
We need a heifer that cycles three times before we introduce the bull at 15-16 months.  We need her to settle, not just the first time but also (and more importantly) on her second pregnancy.  Finally, we need her to continue to get pregnant every year, on time and bring a live calf in at weaning.  “View your cows as employees.  That cow’s job is to put on weight and bring in a healthy calf.  Any employee that doesn’t work gets fired.  No calf?  Fired.”

David says he breeds in the fall (more on that another time) from December 1 – January 15th.  “A short, defined breeding season will push [the herd] forward faster than anything you can do.”  However, a bred cow is worth more than an open cow so he DOES leave the bull in after January 15th.  “Leave the bull in to breed cows that are late BUT sell any cow that did not breed in 45 days.”

Finally, he points out that “there is a strong relationship between age of puberty and longevity.”  Cows that are late to mature don’t tend to last in the herd.

Longevity:
As we looked at last time, “Cows must be 6 years old and rear 4 calves to pay for her development costs.  Optimal economic return is in  years 8-11 for commercial cow/calf operations.”  So a 6 year-old cow has broken even.  I need more than 4 calves out of her to make money.  If she misses throwing a calf within a defined window she gets fired.  If her attitude is poor she gets fired.  If I have to pull a calf, she probably gets fired.  The odds are against 90% of the cattle in North America but without this culling we’ll go broke pampering our tea cup cattle and servicing the equipment required to pamper them.  That means a short, slick 14 year old cow with a good attitude has thrown 12 calves, year after year eating whatever there is to eat on my farm, with a little bite of salt and mineral.  Any cow that can do this has just the genetics we’re looking for in our future herd and continues to impact our herd genetics positively over time.  Any cow that can’t will be fired before she makes much of a genetic contribution to the herd.  Any bull I select for my own use MUST come from a older cows as that predisposes future generations for success.

Low Maintenance Requirements:
I just touched on this but if she is fertile and long-lasting she obviously doesn’t demand much from me.  I need thrifty cows.  Because much of my forage base is fescue, I’m looking for short, barrel-shaped, light-weight cows.  Hall said 70% of a cow’s feed is used to maintain condition.  A 1,700 pound cow has to eat much more feed to maintain condition than does a 1,000 pound cow.  There are only so many hours in a day.  How many pounds of forage can a cow ingest and ruminate on each day?  To be direct, a heifer that is weaned above 600 pounds won’t last.  The cards are stacked against the big cow in a forage-based operation.  111 stays fat no matter what.  Notice how wide her mouth…it’s as wide as her eyes.  Maybe wider.

111

So where do you find these cows?
I wish I knew.  You need to pick a bull based on his mother and her production numbers.  How many calves has she thrown.  How big were the calves?  How big is the mother?  How old is she?  When looking for heifers from within our herd or when buying outside, look for calves that weaned below 500 pounds.  We’re looking for a 4-5 frame score.  Again, big cows have to eat more to maintain condition.  Small cows are hard to market.  I could probably run 2-3 Dexter cows per acre on my farm but what feedlot wants to finish out Dexters?  I have to find the middle ground between what the market demands and what is profitable to produce.  They can’t be too big, they can’t be too small.  Hall says to sell the extremes.  Hall also pointed out that crossbred cattle tend to have better longevity.  That’s something to consider when buying stock.

Over time there are things you are watching for in your herd.  Cows should be feminine but we’re looking for function, not beauty.  A cow with a rough hair coat should find work elsewhere (I have a couple of these).  A cow with bad feet or a bad udder should go down the road.  Too big or too small?  No calf this year?  Poor attitude?  Prolapse?  Down the road.

This kind of selection doesn’t require much of the manager.  It comes back to the three O’s (which are really two O’s); Old, Open or Ornery.  The old cow will eventually come up open, weather from loss of teeth, bad joints or whatever.  The selection process is hard on herd numbers early on but success breeds success…literally.  In a few years…decades maybe – a picture of our cows will feature less leg than this one both from change in genetics and prenatal response to conditions and management.  Really.

GroupPhoto

In part 3 we’ll go a little more in-depth on ideas David has for making the operation profitable and ways to smooth out the highs and lows of the cattle market.

Interview With David Hall Part 1

I heard David Hall of Ozark Hills Genetics speak at the Southern Indiana Grazing Conference last winter.

I was thinking about his presentation and reviewing my notes and needed a little clarification so I shot him an email.  This started because I’m working on the economics of each of our enterprises trying to answer a simple question: Would I be better off financially living in the suburbs?  I don’t work for free and I certainly don’t want to pay my livestock for the privilege of owning them.

I asked David:

I heard you speak in Indiana this spring and you said, “Cows must be 6 years old and rear 4 calves to pay for her development costs.  Optimal economic return is in years 8-11 for commercial cow/calf operations.”

I’m hoping you can give me a little more detail on that.  Spell out for me what you believe it costs to raise a replacement heifer on grass, when you sell her calves and what your expected return per calf is.  Also, how much should it cost a grazing operation to keep a cow each year?  This article suggests $350 per head but I have a hard time with that math.

Rather than reply to my email, which he said would require him to write a book, he asked me to call him back.  Over two phone conversations and nearly an hour of chatting I ended up with 5 pages of notes on top of the 5 pages of notes I took during his presentation.  (Talk about a generous man!)

He was ready when I called and, after greeting me politely, started right in.  “Cost is wildly different between ranches but you can roughly figure $500-550 for every weaned calf.  This counts salt, mineral, vet, medicine, land charge (calculated on how much it would cost you to rent your neighbor’s ground) and how much time you spend.”  Obviously packing more animals in per acre without raising your feed bill is a good thing and spreading your time across more animals helps with the labor charge, not to mention discounts for buying salt and mineral in volume.  Labor is the big expense and reckoning the rest of the data as closely as I can I come up with $450 to keep a cow each year.  Since some percentage of cows are going to come in without a calf at weaning that price should go up but let me be a little lazy in this post.  We’ll stick with the $500 figure for my farm, you calculate your own for your farm.  Feeding hay can really ratchet that annual maintenance up.

That takes us to point of weaning.  Now that we know what a calf costs, let’s find out what she’s worth.  Right now, that 450 pound weaned heifer – that cost us $500 to raise – is worth $2/pound.  That varies by year.  So, any heifer we keep this year should be reckoned at that price and we should work from there.  Think of it this way, you could have had $900 but you got this heifer instead.  It costs money and time to raise and maintain that heifer and it costs something to breed her…either by bull or by straw.  However, not all heifers breed so you need to reckon your heifer costs by the group.

Hope you’re keeping up here, David was moving pretty quickly.

Let’s ratchet up the cost of that heifer.  You ready?  I’ll relate David’s example.  Of a group of 30 heifers, 25 settle in your breeding window.  Of those 25 pregnancies, 20 wean calves.  Of those 20 heifers that brought in calves, 17 re-breed.  Those other 13 heifers don’t fit our program.  My cost per heifer is not reckoned per head…it’s divided over the 17 that were successful at breeding a second time.  If that’s too harsh for you, Chip Hines says to measure profit by the calf across your entire operation but when talking to David, I was specifically talking about development costs of a heifer.  He took it through the second pregnancy.  As time passes and you select for thrifty, fertile, long-lived cows you’ll have a higher rate of success weaning calves but you should probably count on culling 10% of your herd each year.  For the sake of simplicity, let’s pretend those 17 heifers are built to last in the example below.

Starting at the beginning (where else?) you are paying $27,000 for 30 weaned heifers..maybe 6 months old.  You find a quality bull and pay $20 per head ($600) to have them bred at 15 months so they will calve at 24 months.  I’m choosing not to buy a bull to keep total costs at a minimum.  A bull eats every day, I need one for 6 weeks.  We could have started with 30 bred heifers for $45,000 which might be worthwhile if they were high quality animals.  More on that next time.  Keeping those 30 weaned heifers for 18 months (until calving) costs you another $22,500 but when you breed again you are down to 20 cows (the ones that calved).  The rest were sold as springing heifers who missed your breeding window or as open heifers.  Let’s say you can sell them for $1,200 each ($12,000).  After all of that we sold 20 heifer calves ($900 each) and 10 grown heifers for a total of $30,000 and it only cost us $50,100 to do it!  The heifers owe us $20,100.

But we have to breed our 20 remaining heifers.  That’s another $400.  17 of those breed in our window but we carry all 20 through the year.  Our cows only owe use $10,000 for maintenance this year.  We sell the 3 late breeders for $3,600 and sell our 17 calves for $15,300.  This year we’re doing all right making $8,900 so the cows only owe us $11,200.

When those heifers (all 17 of them) drop their third calves (in our fictional scenario) we’ll see another $15,300 with breeding costs of $340 and maintenance of 8,500.  We’re looking at $6,460 in profit as long as we can keep this thing running.  This year the herd only owes us $4,740.  Looks like the heifers will pay us back next year!

That’s why David says it takes four calves for a 6-year old to pay for her own development.  “Optimal economic return is in years 8-11 for commercial cow/calf operations.”  If she falls out at 6 years old we haven’t gotten ahead.  Every year she calves after 6 increases the desirability of her offspring.

The cattle market is a wild ride at times…who knows what the price will be next year.  Along with keeping my production costs minimal, I have to work to provide a quality product so I can make the numbers listed above.  I don’t think Gordon Hazard is paying $2/pound for calves, but he’s not buying calves of the quality under discussion here (small, British breeds, grass-genetic, long-lived).  We have always believed that it costs just as much or more to maintain a poor cow compared to a good cow but Hazard looks for the undervalued calf of any class, gets it to feedlot weight and sends it down the road.  We can’t sell into that market with the numbers presented above.  From what David described, he sells a fair number of culls and calves into the commodity market but sells 150 bulls each year for breeding stock to help make the numbers work.

Any business you start will require an investment and several years to achieve profitability.  A cow/calf operation is no exception.  Is it right for me?  My pastures are currently pretty poor quality.  Cows can get by on less than stockers…requiring a lesser quality pasture.  Right now, cows look like a good way to improve my pastures…but the climb to profitability looks pretty steep.

That wraps up most of page one of my conversation with David Hall.  Next time I’ll share my notes about buying or breeding genetics in your herd, stock selection, adding in other livestock types and keeping a job in town.  Let me know if you have any trouble with my math or if you have any questions or suggestions.  I want to emphasize, my goal here isn’t to discourage the raising of cattle.  I’m sharing my thoughts and research as I analyze the costs and work to put my farm and my time to its best and highest use.  You know…stewardship.