18th Annual
Beef Cattle Day Report
May 14, 1977
Oregon State University, Corvallis
Special Report 486, Agricultural Experiment Station, Oregon State University
CONTENTS
MINERALS IN CATTLE NUTRITION
Jim Oldfield
IRRIGATED PASTURE BEEF PRODUCTION
Clair Acord
MARKETING OPTIONS
Carl O'Connor
GRASS STRAW FEEDING
Dave Church
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FACTORS AFFECTING MINERAL FEEDING OF BEEF CATTLE
J. E. Oldfield
Department of Animal Science
Oregon State University
Meeting the mineral needs of cattle, and other livestock, is a fairly
recent but highly productive area of nutrition. We have known for some years
now that even if rations are sufficient in terms of energy and protein supply,
they may be unsatisfactory to the point of being practically useless if the
necessary minerals are not provided in the amounts required. Much of the
research into mineral requirements of cattle has been done in the United States,
and quite a bit of it right here in Oregon, and it has resulted in significant
improvements in cattle performance: in improved reproduction, faster weight
gains and better rates of feed conversion.
I'd like to give you a few illustrations from the history of mineral research.
Over 30 years ago, Professor W. E. Watkins, on the staff of New Mexico State
University, reported on analyses he had made of grasses from every county in his
state, sampled at different times during the year and concluded that, "samples
taken... when the grass was dry and weathered were nearly all deficient in
phosphorus and even... when grasses were green but nearly mature, deficiencies of
phosphorus were found in nearly all parts of the state." (Knox, Benner and
Watkins, 1946) Similarly, last year, while attending a meeting at Texas A&M
University, I heard a speaker describing the early years of the famous King Ranch
refer to their conquest of phosphorus deficiency as one of the most significant
moves in its development. Up to that time, most ranchers used bone meal or
dicalcium phosphate as sources of supplementary phosphorus: the King Ranch used
monosodium phosphate, and they metered it in to the cattle through their drinking
water (Smith, et al., 1950). The implications of these developments in the South
were not lost on Oregon and the Pacific Northwest, and in 1951 former Dean Price
wrote that "research must be intensified in Oregon to provide more complete information on the adequacy of minerals in feed produced in various parts of the
state." (Haag, 1951). Such research was intensified, and the results have been
rewarding.
The examples I have given relate to one of the so-called macrominerals, phosphorus, and it is logical that the earlier research should have focused on those
minerals that were present, both in animals and their feeds, in the largest
quantities. Others followed, and we learned about calcium deficiency in milk fever
and magnesium deficiency and grass tetany and a number of other interesting
problems. More recently, however, attention has turned to the micro-minerals
or trace elements and it is with them that I would like to deal, more specifically,
today.
The essential trace elements include iron, copper and cobalt; iodine, manganese,
selenium and zinc. All of them function as parts of emzyme systems, and since
enzymes are needed for virtually all the metabolic reactions by which cattle break
down and use their feed, they are very important, indeed. These elements have
been shown to be essential by careful experiments in which diets complete in all
respects except for the element in question have been fed and the animals observed.
If the animals fail to grow or to produce or reproduce normally in such conditions,
and if deficiency symptoms develop, it is an indication that the element is essential.
Of those listed, iron seldom gives cause for concern, partly because it is such a
common element in so many things that animals come in contact with, but all of the
others have been involved in problems of one sort or another. We know copper
deficiency causes scouring and results in coat-color changes in cattle; cobalt
2
deficiency causes a wasting disease that has different names in various parts
of the world; iodine deficiency causes goiter and hairlessness in the young;
manganese deficiency contributes to the "crooked calf" problem; selenium deficiency
causes white muscle disease in calves and zinc deficiency causes parakeratosis.
All of this knowledge has been gained through experiments on the individual
elements and these have led to generation of what we call "normal" levels for each,
either in the feed or in the tissues of the animal body, such as the blood and in
turn these levels have been used as diagnostic aides in identifying mineral deficiency
problems. I expect that none of this is particularly new to you.
What is more recent, and less well understood, is the knowledge of interactions
that occur among various mineral elements and between them and organic components
of the diet. This has complicated the picture greatly, because it means that in some
situations where the supply of an essential trace element is within normal limits,
the animals may still show signs of deficiency because of these various interfering
factors that limit its availability to the animals. Let me give you a few examples,
with specific reference to cattle in Oregon, using selenium (Se) as the element in
question.
Soil Influences on Se in Forages
There is considerable evidence that soil conditions, including the nature of
the parent material from which the soil was formed, soil acidity and alkalinity
and soil drainage all may affect the content and/or availability of Se in soils
and plants that grow on them. In much of central and southern Oregon, the soils
are primarily of volcanic origin, and are quite generally low in Se content. The
theory is that, in the heat of volcanic eruption, most of the Se became volatile
and passed off, leaving behind a Se-deficient soil residue. The volcanic plateau
on the north island of New Zealand, which is also extremely Se-deficient, is another
3
case in point. Beyond this matter of formation of the soil, the more humid the
area and the lower (more acid) the pH, the greater the likelihood of Se deficiency.
The reason here is that such conditions (acidity, high moisture) favor the formation
of highly stable complexes of iron and selenium, which are generally unavailable to
plants (Lakin and Davidson, 1967). There also are some strong indications that intensive irrigation practices may contribute to Se deficiency in plants, particularly
if the soil is fairly low in the element to start with. A good example is the irrigation district in the Madras area, which has produced forages with a very low content
of Se. There are, then, these thumb-rule guides which help suggest what the adequacy
of Se in plants grown, on certain soils will be. Unfortunately they are just that:
guides, and it is not possible to tell with complete accuracy what the Se status of
plants will be from analyses of soils on which they grow (Kubota, et al.,1967).
Influence of Plant Type on Mineral Content
Certain types of plants have greater ability to take up minerals than other
plants grown on the same soil. This is a genetically-controlled trait, inherent
in the particular plant. One of the best-known examples of this is the well-known
ability of legumes like alfalfa and clovers to accumulate calcium. Table 1 gives
some analytical data from U.S. studies which illustrate the point. Such figures
led Dr. J. R. Haag, with whom I studied some years ago, to remark that "You can
grow wheat in a lime quarry, and it won't contain as much calcium as alfalfa grown
on an ordinary, low-Ca, soil."
Table 1
Comparison of mineral contents of grasses and legumes.*
Forage Type
Ryegrass hay
Fescue hay
Alfalfa hay
Clover hay (Ladino)
Calcium, %
0.49
0.44
1.64
1.38
Phosphorus, %
0.32
0.33
0.26
0.40
* From Committee on Feed Composition. Agricultural Board, 1958.
4
Ca:P ratio
1.5:1
1.3:1
6.3:1
3.5:1
Selenium, again, provides a dramatic example of the varying abilities of
plant types to store a mineral element from the soil. Nearly 40 years ago,
Dr. O. A. Beath, at the University of Wyoming identified certain types of plants
that had a remarkable ability to take up Se and called them "selenium accumulators."
One of the most active types, Astragalus bisulcatus, which is a type of wild vetch,
was found to contain over 5500 ppm of Se when growing nearby were wild grasses
containing only 23 ppm Se (Rosenfeld and Beath, 1964). Such plants as Astragalus
are clearly toxic and hazardous to livestock. Moreover, they only grow on seleniferous soils, so they are useless as a means of preventing Se deficiency. There
are differences also at the physiological levels of Se, and common crop plants show
differences in Se content that may be significant in areas of Se deficiency. In
New Zealand, for example, it has been shown that Browntop, a native grass, contains
more Se than white clover grown on the same soil. Conceivably, choices of pasture
plants in Se problem areas might make the difference between deficiency and adequancy
of the element.
The Matter of Fertilization Practices
From time to time, questions have been raised about the effect of fertilization
practices upon the forage content of certain essential trace elements, like Se.
The argument goes something like this: If certain fertilizers like ammonia or urea
are applied to grass crops, they will usually increase the dry matter production of
them. If the soil in which they grow is deficient in Se, then the meager amount of
Se available will be diluted in the larger amount of forage produced. The evidence
on this point is not clear-cut. In Israel, where marginal soils were brought into
a cropping condition, alfalfa contained as much as 44 ppm of Se the first year a crop
was removed, but this level decreased until 3 years later it was barely detectable
(Ravikovitch and Margolin, 1957). This was in a semi-arid climate where there was
5
not much opportunity for leaching, so presumably it represents a dilution of the
available soil Se in the increasing amounts of plant material removed.
Some trials in Klamath county, dealing with other elements than Se, indicate
that this dilution effect does not necessarily take place (see Table 2).
Table 2: Effect of fertilization practices on forage yield and trace nutrient content.*
Fertilizer treatment
Forage yield, lb./acre
7072
9896
8648
None
100 N, 100 P, 100 S
0 N, 100 P, 100 S
Trace element content, ppm
Copper
8.8
11.3
10.7
Zinc
21
22
23
* From Petersen, 1970.
In this instance, significantly-increased yields of forage, due to fertilization
actually contained more of the trace nutrients copper and zinc than the lesser volume
of unfertilized control forage. These data are from a one-year trial however, and
the effect of continued heavy cropping needs to be studied.
There is another dimension of the fertilizer effect, and that involves cases
where elements are added to the soil that interfere with the uptake of other, needed
elements by the plants. Sulfur and selenium tend to be antagonistic, which suggests
that application of S (elemental S, gypsum or "land plaster") may interfere with
the uptake of Se by plants. This situation can be complicated by the effect of
fertilization on the botanical composition of pastures. In New Zealand, where
superphosphate (which contains S) is heavily applied, it greatly increases the clover
content of pastures, at the expense of grasses (Davis and Watkinson, 1966). Since
the New Zealand grasses tend to contain more Se than clovers, this has the effect
of lowering the total forage Se level.
There are several possible solutions to these situations. Where fertilization
brings significant responses in terms of crop yield, it is obviously impractical
to forego it because of possible trace element problems, but equally obvious that
the trace element difficulties must be overcome. One approach has been to add the
6
necessary trace elements to the fertilizer and this has been practiced very effectively in New Zealand and Australia, especially with reference to copper and cobalt.
In Oregon, we have done the same thing with Se, on an experimental basis. Several
years ago, we set up field plots in Jefferson county, in one of the seriously-Sedeficient areas of the state and showed that injection of sodium selenite in water
solution to provide a level of about 1.0 ppm in the top 10 cm of soil raised the Se
content of alfalfa sufficiently to prevent white muscle disease in lambs for at least
2 years post-application (Allaway, et al. 1966). Grant (1965) had done similar work
in New Zealand by topdressing pastures with sodium selenite, mixed with fertilizer,
to supply 1 ounce of actual Se per acre. The main problem with such soil applications
is that they are expensive and wasteful of Se, which is not in very plentiful supply.
Estimates from the Oregon work suggested that only about 2% of the Se applied was
actually removed by the plants. Such being the case, it would seem advisable to
ensure that animals be provided the necessary trace nutrients directly in cases
where interferences or dilution effects are likely to apply. As far as Se for
cattle and sheep is concerned, the only way that is currently approved is injection
of certain proprietary Se-vitamin E preparations.
Other Interfering Factors
There is some evidence that organic factors in plants can sometimes interfere
with the availability of some minerals to animals. A familiar example of this is
the interaction between oxalic acid, which is found in quantity in some plants,
like the range weed halogeton, and calcium. This forms an insoluble and hence
unavailable complex, calcium oxalate. There may be similar interactions with some
of the trace elements, but we are less sure of the details.
7
As far as selenium is concerned, Montana workers were intrigued several years
ago by the fact that white muscle occurred frequently in animals that were fed on
alfalfa hay (Cartan and Swingle, 1959). They reasoned that there might be some organic factor present in alfalfa that interfered with the availability of some dietary
essential (which we now recognize as Se). This past year some of my colleagues
carried this theory one step further. They figured that organic interfering factors
can often be destroyed by heat and they steamed some alfalfa hay from a Se-deficient
area in a soil sterilizer and fed it to ewes. Those ewes produced significantly
fewer white muscle lambs than others fed the same hay, unheated. More suggestion
of organic interferers with Se came from Klamath county trials. Beef heifers
drinking water from an irrigation ditch contaminated with algae responded to Se
supplementation more poorly than other heifers grazing the same area but given
clear well water (Allison, 1976).
Conclusions
I hope these few examples will illustrate some of the complexities of mineral
nutrition of cattle. We cannot simply think in terms of the individual elements
and take care of them, one by one, when deficient. Rather, we have to think of them
in relation to the environment in which they exist where they may be influenced by
other things, inorganic or organic, in the soil or in plants. I have used Se as
an example, but the same things can occur with most of the essential trace elements.
8
References
Allaway, W.H., D.P. Moore, J.E. Oldfield and O.H. Muth. 1966. Movement of physiological levels of selenium from soils, through plants to animals. J. Nutrition.
88:414-418.
Allison, L.D. 1976. Unpublished data. Klamath Experiment Station.
Cartan, G.H. and K.F. Swingle. 1959. A succinoxidase inhibitor in feeds associated
with muscular dystrophy in lambs and calves. Am. J. Vet. Res. 20:235-241.
Committee on Feed Composition: Agricultural Board. 1958. Composition of cereal
grains and forages. National Acad. Sci.-National Res. Council 663 pp.
Davies, E.B. and J.H. Watkinson. 1966. Uptake of native and applied selenium by
pasture species. II Effect of sulfate and soil type on uptake by clover.
New Zealand J. Agr. Res. 9:641-652.
Grant, A.B. 1965. Pasture top-dressing with selenium. New Zealand J. Agr. Res.
8:681-690.
Haag, J.R. 1951. Minerals for livestock. Sta. Bull. 503. Oregon Agr. Exp. Sta. 12 pp.
Knox, J.H., and J.W. Benner and W.E. Watkins. 1946. Seasonal feeding of mineral
supplements. Bull. 331, New Mexico Agr. Exp. Sta. 12 pp.
Kubota, J., W.H. Allaway, D.L. Carter, E.E. Carey and V.A. Lazar. 1967. Selenium
in crops in the United States in relation to the Se-responsive diseases of
livestock. J. Agr. and Food Chem. 15:448-453.
Lakin, H.W. and D.F. Davidson. 1967. The relation of the geochemistry of selenium
to its occurrence in soils. In: Symposium: Selenium in Biomedicine ed. O.H.
Muth, J.E. Oldfield, P.H. Weswig. AVI Pub. Corp. Westport, Conn. pp 27-56.
Petersen, R.O. 1970. Mimeo. report of accomplishment: The effect of fertilizer on
yields and mineral content of irrigated pasture forages. Klamath county
extension office.
Ravikovitch, S. and M. Margolin. 1957. Selenium in soils and plants. Israel
Agr. Res. Station, Rehovot. 1959 series 145-E, 7:41-52.
Rosenfeld, I. and O.A. Beath. 1964. Selenium. Geobotany, Biochemistry, Toxicity
and Nutrition. Academic Press. p. 91.
Smith, A.L., U.D. Thompson, J.H. Jones and J.K. Riggs. 1950. Minerals for beef
cattle. Bull. B-174 Texas Agr. Ext. Service. 11 pp.
PASTURE PRODUCTION FOR BEEF CATTLE
Clair R. Acord
Extension Animal Scientist
Utah State University
In addition to facing high costs and low profit margins in raising beef
cattle, farmers and ranchers in some areas of Utah are experiencing increased feed costs and decreased numbers of grazing units on public lands. Others
are finding a decreased demand for cash crops, even to the extent of some
cash crop factories being discontinued. Others are being required to pay additional freight to ship their cash crop products to another area of the state
or a neighboring state. Confronted with these situations, many have been seeking alternatives to maintain a living.
As alternatives, they may (1) sell out and seek other employment; (2)
strive to improve their position through greater integration with feeders
and retailers; or (3) undertake more efficient use and management of land
resources at hand to produce more meat per unit of land and thus offset increased capital and current expenses. The latter alternative focuses attention on the possibility of more efficient use of irrigated pastures as a
means of bolstering farm income.
The idea of grazing beef cattle on irrigated pastures is not new. The
putting of final pounds on cattle by feeding vast quantities of grain didn't
become popular until the 1940's. Now it appears as if we may need to revert
to the older method of using more forage to grow and fatten cattle.
The national economy, as well as humanitarian considerations, demand
more grains be used directly to feed people. The shift is going to require
a re-education of both consumers and cattle producers in this country.
Consumers will need to learn how to appreciate the advantages of meat
that carries relatively little fat and, therefore, grades "Good" instead of
10
"Choice". The producers will have to optimize a combination of range forage,
irrigated pastures and minimal grain.
Neither group seems to have options other than to adapt to changing conditions. The cattlemen are going bankrupt as their costs skyrocket while
returns per animal decline. At the same time, consumers continue to pay premium prices at their supermarkets. If too many cattle producers are forced to
abandon their business, consumers could find themselves confronted with even
higher prices for a far less available supply of meat.
Forage-fattening instead of grain-fattening cattle obviously won't solve
all the complex economic problems inherent in raising and marketing beef, but
it is a step in the right direction.
Cattlemen in Utah have an unusually wide choice of alternatives in producing "grass-fed" or "forage-fed" beef. Alternatives are:
1.
Run the cows and calves on regular summer range. From July through
December offer the calves for sale on a grass-fed or milk-fed basis.
This alternative would limit options for heifer selection for replacements if all calves were sold. But moving the calves early
could conserve feed and possibly help improve the ultimate carrying capacity of some sections of a given range.
2.
As in number 1, run cows and calves on summer range. Then in the
fall, wean the calves and winter on strictly forage such as alfalfa
hay and/or corn silage. If corn silage was fed alone, a protein
supplement should be added. This program could put about 11/4 to 11/2
pounds per day on each calf from weaning to spring sale.
3.
Utilize range for summering the calves that had been held in alternative 2 and then offer them for sale as "grass-fed" cattle in the
fall.
11
4. Develop an improved irrigated pasture for calves in one of Utah's
valleys. Experience over 15 years suggests that such pastures can
produce excellent results. For example, a straight grass pasture
such as smooth brome or orchard grass or a combination of the two
will produce approximately 650 to 750 pounds of beef per acre under
Utah growing conditions. This assumes the pasture is properly fertilized, irrigated and used in a rotation system whereby the cattle
do not graze one section more than four or five consecutive days.
When a combination of alfalfa and a grass such as smooth brome
and/or orchard grass are used for a pasture, then approximately
750-900 pounds of beef can be produced per acre. With a legume
added to the pasture mix, however, either the liquid-molasses with
poloxalene will have to be used as a top dressing or poloxalene will
have to be mixed and fed with one or two pounds of grain per day to
control bloat.
When cattle are pastured on straight alfalfa, gains of 1300 to
1800 pounds of beef can be obtained per acre. But again, poloxalene
must be used to control bloat, with the added costs involved.
To be effective, each of these pasturing programs must be on a
rotation basis, with the cattle grazing a section for four or five
days and not returning to the same section before 25 days.
For example, the amount of production depends largely on the treatment of the pasture and management of cattle; bloat was a problem.
One investigator ) reported, "The basic legume mixture with no grasses
yielded nearly twice as much as a basic grass mixture with no legumes." This latter statement suggests that to produce large gains,
pastures with high legume content are required; however, 2 legume
12
plants high in nitrogen cause more bloat than non-legume plants.
From analyses on alfalfa bloat foams, the foaming constituent was
found to be principally proteinaceous. 3 A protein with physical
and chemical properties that make it an ideal bloat-promoting agent
was isolated from alfalfa leaves. 3 Plants producing bloat have a
higher content of saponins than plants with few or no bloat-promoting properties.4
With high-carrying capacities of irrigated grass-legume pastures
in Utah being reported, often the reports conclude with a tone of
"if bloat were controlled." For example, in 1966, 8 cattle died
in 2 days on a 6.3-acre test pasture in the Palmyra area of Utah
County. The pasture had been seeded with 8 lb. (3.6 kg.) of orchard
grass and 3 lb. (1.4 kg.) of ranger alfalfa per acre (to be identified as Pasture A).
In 1967, studies were begun on Pasture A to investigate the bloat
problems and pasture production. Sixty calves (heifers and steers)
of 475 lb. (215.5 kg.) mean body weight were allotted at random to
3 lots of 20 calves each. Each lot was then subdivided to produce
intensive grazing. The calves grazed a sublot no longer than 5 or
6 days. Each sublot was rested for 25 to 30 days before regrazing
was allowed. The calves in each lot were individually ear-tagged,
and each group was kept separately during the summer. Cattle in
lot 1 (control group) were given a salt-molasses block without
poloxalene; cattle in lot 2 were given a salt-molasses block without
poloxalene; cattle in lot 2 were given a salt-molasses block with
poloxalene (30 Gm/lb. of block), and cattle in lot 3 were given
1.5 Gm. of a medicated premix with poloxalene per 100 lb. of body
13
weight fed as a top dressing on 1 lb. of barley per animal per day.
Half the grain ration was fed in the morning and half in the evening.
The calves were weighed every 28 days and were observed 4 or 5 times
daily.
Pasture A was treated with 66 lb. (29.9 kg.) of available nitrogen
per acre. Irrigations were scheduled every 14 to 21 days, depending
on availability of water. Bloat incidence is given (Table 1).
TABLE 1 -- BLOAT INCIDENCE ON IRRIGATED PASTURE A, 1967
Bloat Incidence
Date
Lot 1
Control
Lot 3
Lott
Top dressing
Medicated
With Poloxalene
block
0
0
7
7/16
0
0
3
7/10
0
1
3
7/14
0
2
0
7/28
0
0
6
8/6
0
0
2
8/11
0
0
3
8/19
0
0
3
8/27
0
3
27*
Total
*Significantly (P-0.05 different from lots 2 and 3.)
All calves in lot 1 bloated once during the 123-day test -- 2
severely. Three calves in lot 2 bloated, and there was no bloat
incidence in lot 3.
In 1968, the pasture study employing rotation grazing and irrigation practices was expanded to include 2 pastures. Pasture A
was expanded to 8.7 acres with 69 heifers and Pasture B, located
in Heber Valley, Wasatch County to 7 acres with 34 steers. The
results for 1967 and 1968 are given (Table 2).
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TABLE 2 -- BEEF PRODUCTION ASSOCIATED WITH THE USE OF
IRRIGATED PASTURE
A
1967
Total number calves
Total acreage
Total grazing days
Mean initial weight (lb.)
Mean final weight (lb.)
Mean total gain/animal (lb.)
Mean daily gain/animal (lb.)
Total pounds beef
Total pounds beef/acre
Gross return/acre @ 2501b.
Pasture
A
1968
60
6.2
123
475
640
165
1.34
9900
1597
$399.25
69
8.7
151
530
749
219
1.78
15,111
1737
$434.25
1968
34
7.0
123
380
668
288
2.35
9792
1399
$349.71
'
In 1969, a program was instituted to study grazing of irrigated
alfalfa pastures in comparison to grass-only and grass-legume
pastures. Pasture A was increased to 15.7 acres and divided into
the following treatments: (1) grass-legume (smooth brome, 8 lb./
acre, and ranger alfalfa, 3 lb./acre, or later orchard grass, 8 lb./
acre, and ranger alfalfa, 3 lb./acre) supplemented with 1 lb. of
grain/head/day (with poloxalene to control bloat; (2) grass-legume
supplemented with 4 lb. grain (with poloxalene); and (3) straight
alfalfa supplemented with 1 lb. grain (with poloxalene).
There were 111 heifer calves. The test began April 28, 1969.
Each animal was individually tagged and weighed every 50 days. The
pastures were divided to allow rotational grazing, and the grain
was fed in a pellet form made as follows (for 1 lb. grain/animal/
day):
Grain Pellet
2,400 lb.
100
200
500
500
1,100
25
lb.
lb.
lb.
lb.
lb.
lb.
Poloxalene
Beet molasses
Wheat bran
Beet pulp
Barley
Salt
Half the required pellets were given to the calves in the morning
and half in the evening.
Pasture A production is shown (Table 3).
TABLE 3 -- BEEF PRODUCTION ASSOCIATED WITH USE OF
IRRIGATED PASTURE
Pasture A, 1969
Treatment 1
(alfalfa &
grass + 1 lb
grain)
Total calves
30
Total acreage
4.35
Mean No. of calves/acre
6.9
Total grazing days
150
Mean initial weight (lb.)
529
Mean final weight (lb.)
704
Mean total gain/animal (lb.) 175
Mean daily gain (lb.)
1.16
Total pounds beef
5250.0
Total pounds beef/acre
1207.0
Gross return/acre @ 25(t/lb.
$302.00
Treatment 2
(alfalfa &
grass + 4
lb. grain)
31
4.35
7.1
150
538
771
233
1.56
7273.0
1660.0
$415.11
Treatment 3
(alfalfa
+ 1 lb.
grain)
50
7.0
7.1
150
523
748
225
1.50
11,250.0
1607.0
$401.79
There was 400 lb. more beef produced per acre on treatment 3 than
on treatment 1, a 33% increase in beef production. For the third
straight year, no bloat occured.
The analysis of Pasture A expenses and returns for 1969 are given
(Tables 4 and 5).
16
TABLE 4 -- EXPENSES FOR PASTURE A, 1969 (Calculated
on a Per-Acre Basis)
TreatTreatment 2
ment 1
(alfalfa &
(alfalfa &
grass + 1 lb. grass + 4
lb. grain)
grain)
Treatment 3
(alfalfa
+ 1 lb.
grain)
Interest on investment*
Water and real estate
$ 80.25
$ 80.25
$ 80.25
taxes
30.73
30.73
30.15
Labor @ $2.00/hour
Depreciation, fences,
12.00
12.00
12.00
corrals
Fertilizer, seed bed
12.33
12.33
12.33
preparation
Insurance, dipping
interest on cattle,
102.74
198.59
99.84
veterinary, grain costs
$238.05
$333.90
$234.57
Total expenses
*Interest on investment calculated on an acre value @ $1,000
@ 6%.
TABLE 5 -- PROFITABILITY/ACRE, PASTURE A, 1969
Item
Treatment 1
Gross return/acre
$302.00
(Table 3)
Total expenses/acre
$234.57
(Table 4)
$ 67.43
Net profit/acre
Treatment 2
Treatment 3
$415.11
$401.79
$333.90
$ 81.21
$238.05,
$163.74
It is noteworthy that when interest on investment and labor is
paid together with other expenses, there is significantly (P-.c0.05)
more income ($96.31) per acre from grazing straight alfalfa than
the grass-alfalfa with equal amounts of grain fed. Thus the results
would suggest alfalfa can be pastured at a greater profit than the
grass-alfalfa pasture under the same conditions.
Pasture B was divided into 4 treatments with 25 steer calves per
17
treatment. The treatments were: (1) grass only plus 1 lb. grain;
(2) grass and alfalfa plus 1 lb. grain; (3) alfalfa plus 1 lb.
grain; and (4) alfalfa plus 4 lb. grain. All grain was fed twice
daily and all treatments contained poloxalene to control bloat.
All pastures except treatment 1 were grazed on a rotation basis.
This group of cattle had total access to pasture for 123 days.
The results of pasture B production, expense, and profitability
are given (Tables 6, 7, and 8).
TABLE 6 -- BEEF PRODUCTION ASSOCIATED WITH USE OF
ALFALFA PASTURES -- PASTURE B, 1969
Treatment 1
(grass +
Item
1
Treatment 2
Treat(alfalfa & ment 3
grass + 1 (alfalfa
lb.grain) lb. grain)1
Total calves
25
Total acreage
8.6
Mean No. of calves/acre
2.9
Total grazing days
123
Mean initial weight
(lb.)
530
Mean final weight
(lb.)
757
Mean total gain/
animal
227
Mean daily gain/
animal (lb.)
1.85
Total pounds beef
5675
Total pounds beef/
acre
660
Gross return/acre
@ 25(4/lb.
$165.00
Treatment 4
(alfalfa +
4 lb.
lb.grain)
grain)
25
6.8
3.7
123
25
5.25
4.8
123
25
5.0
5.0
123
512
502
524
759
771
785
247
269
261
2.0
6175
908
$227.02
2.19
6725
2.12
6525
1281
1305
$320.25
$326.25
The results of the 1969 studies suggest more pounds of beef can
be produced by rotational grazing and from straight alfalfa than
from grass only or a mixture of grass and alfalfa.
18
The expenses of Pasture B are shown in Table 7 with a net return
being shown in Table 8.
TABLE 7 -- EXPENSES FOR PASTURE B, 1969 (Calculated on
a Per-Acre Basis)
Item
TreatTreatment 1
(alfalfa &
ment 1
(grass +
grass + 1
1 lb.grain) lb.grain)
Treatment 3
(alfalfa +
1 lb.grain
Treatment 4
(alfalfa +
4 lb.
grain)
Interest on investment*
Water & real estate
$ 54.67
$ 54.67
$ 54.67
taxes
$ 54.67
42.00
42.00
42.00
42.00
Labor @ $2.00/hour
Depreciation, fences,
23.20
23.20
23.20
corrals
23.20
Fertilizer, seed bed
7.50
7.50
preparation
7.50
7.50
Insurance, spray,
interest on calves,
veterinary expenses,
72.50
128.20
68.28
grain, mileage**
65.28
$325.50
$195.65
$199.77
Total expenses
$192.65
*Interest on investment calculated on an acre value of $800.00/
acre @ 6% interest. **Mileage charged on an acre basis @ 10¢/mile
for daily travel to and from farm.
TABLE 8 -- PROFITABILITY/ACRE, PASTURE B, 1969
Item
Gross return/acre
(Table 6)
Total expense/acre
(Table 7)
Net profit (loss)/
acre
Treatment 1
Treatment 2
Treatment 3
Treatment 4
$165.00
$227.02
$320.25
$326.25
$192.65
$195.65
$199.77
$255.57
$ 31.37
$120.48
$ 70.68
-($ 27.65)
The steer calves on treatment 1 (grass only plus 1 lb. grain),
when compared with those on treatment 3 (alfalfa and 1 lb. grain)
had a net loss of $27.65 and 621 lb. less beef per acre. There
19
was $148.12 greater net return per acre for treatment 3 than for
treatment 1. This difference was significant (P<0.05). One acre
of grass was able to support only 2.9 calves, whereas one acre of
alfalfa was able to support 4.8 calves.
It may be concluded that properly managed pastures can bring a
net return of $25.00 to $163.00 per acre including credit for labor.
To obtain these returns, pastures should be: (1) grazed in rotation; (2) grazed intensively for 4 or 5 days; (3) allowed to rest
and grow for 25 to 30 days before grazing again; and (4) irrigated
according to the plants' needs, usually every 14 to 21 days.
The increased efficiency gained from the recommended practices
makes beef production on irrigated alfalfa pastures a profitable
income-enhancing alternative for farmers and ranchers.
Long-yearling calves taken off these pastures should weigh 750850 pounds. Taken off pasture in late September or early October,
these calves are prime candidates for a feedlot; however, many of
them could be killed right off the pasture and would grade "USDA
Good." The resultant meat sold over the counter to the consumer
would be palatable and nutritious and merely require slower cooking than "USDA Choice" grade cuts and some addition of liquid.
5. Wean calves and winter them on forage (alfalfa hay and/or corn
silage) before pasturing on improved pastures with four to five
pounds of grain added to each calf's daily intake while on the
summer pasture. For example, feeding four pounds of grain daily
to each calf on pasture for 150 days would mean 600 pounds of grain
per animal for the summer at a cost of approximately $40 per
animal. Such a process increases the carrying capacity of a pasture
20
by one to two animals per acre depending upon management and the
kind of pasture. Also, the calves produced would easily grade
"USDA Good" and some would reach "USDA Choice".
6.
Summer calves on pasture as in alternative 5, then put the calves
in the feedlot and finish to low choice on a high-concentrate grain
ration. Experience indicates that of heifers held for 60 to 70
days in the feedlot, nearly one-half will grade "USDA Choice".
7.
Follow the sixth alternative, except that when the calves go into
the feedlot give them pelleted alfalfa (free-choice) plus four or
five pounds of pelleted grain per day. Calves consume more alfalfa
in a pellet than in a long or chopped form and weight gains should
therefore be optimized to a point at which the calves would be
"USDA Good" with a few "USDA Choice".
Which alternative is best depends on relative prices of feed and other
costs and individual circumstances. Certainly the consumer's interest in
having each producer make the best possible choice is becoming increasingly
apparent. Optimizing the uses made of Utah's forage might even someday displace the Pro Super Bowl as a prime topic of conversation at meatless dinner
tables throughout the state.
References
1. Keller, Wesley, and Bateman, G. Q.: Grass Legume Mixtures for
Irrigated Pastures for Dairy Cows. Utah Agric. Exptl. Sta., Utah State
University, Bull. 382, 1956.
2. Bartley, E. E., and Bassett, R.: Bloat in Cattle. III. Composition
of Foam in Legume Bloat. J. Dai. Sci., 44, (1961): 1365
3. McArthur, J. M., and Miltmore, J. E.: Bloat Investigations. The
Foaming Stabilizing Protein in Alfalfa. Canad. J. Anim. Sci., 44, (1964): 200.
4. McClay, W. D., and Thompson, C. R.: A Review of Bloat in Ruminants.
National Academy of Science, National Research Council Pulbication 388
(1955): 21.
21
MARKETING ALTERNATIVES FOR OREGON RANCHERS
"A Look at 1976-1977 and the Results"
by
Carl O'Connor
Department of Agricultural and Resource Economics
Oregon State University
Livestock Marketing - A Systems Approach
Livestock markets of today are not only fast paced, but are operating
at much higher levels of uncertainty than have historically been true.
There's an old adage that "any darn fool" can make a profit when prices
are going up and demand rising, but it takes a good manager to hold
things together when the opposite is happening. The same thing can be
said about marketing. And, you can safely bet that there will continue to
be both good times and bad times in the livestock business. The key is to
set up a marketing program that will let you take maximum advantage of
the good times, and minimize the impact of the bad times. There are two
necessary ingredients for profit in livestock; efficient production and
astute marketing. Marketing is usually the orphan child of the two. While
there is no perfect marketing program, too often producers exert tremendous
resources to assure the best possible ration or production system and are
looked upon by their peers as having a well deserved reputation, but fail
to have an organized marketing program -- other than searching in their
local area for the highest price being paid when the animals are ready to
sell.
There are no cookbook methods of marketing. Each producer needs to
develop a marketing or profit plan. Marketing is more than selling -- it
is one piece of a complex enterprise management system that has a specific
profit goal well outlined in advance of the time of selling the livestock.
There are four major components to a good marketing plan: (1) enterprise objectives; (2) a production and sales plan, the principal topic of
this paper; (3) a budget, or set of budgets; and (4) a set of alternatives
to accommodate the unexpected which might put your well designed plan in
jeopardy.
Presented at Beef Day, Corvallis, Oregon, May 14, 1977.
22
The enterprise objectives must be tailored to each individual's needs,
but basically should attempt to answer the following questions:
(1)
How does this enterprise fit into my total production
unit?
(2)
What marketing alternatives are available and feasible?
(3)
Is the operation a long-run or short-term venture?
(4)
What are the capital requirements and risks involved?
(5)
What is a reasonable or acceptable level of income?
Once you sit down and jot the answers to these questions on a scratch pad,
you can then begin in earnest to continue preparing
a
marketing plan.
In preparing the production sales plan and budgets, essentially two
marketing opinions are available; selling in the cash market or forward
contracting and hedging. Selling in the cash market can take several forms,
for example, auction sales, selling direct or selling to order buyers. On
the other hand, forward contracting can take several forms, ranging from
contracting calves or feeders to feedlots, to contracting finished cattle
to retail stores. In fact, hedging is simply one form of forward contracting.
Given costs and price expectations, Oregon cow-calf ranchers are critically
evaluating cattle ownership alternatives. Some of these alternatives include
cow dispersal and various retained ownership forms. Budgets and break-even
prices for a 300 cow, beef cow-calf operation, and various ownership options
are presented below. These budgets are a quick way to assess the expected
profitability or the likely consequences of these options. They are no more
than aids in analyzing a cattleman's decision about what to do with cattle
now owned, or those which might be purchased. Even though no general budget
is specific enough for a particular farmer's decision, the budgeted figures
can easily be adapted to represent an individual's situation and possible
outcome. Three budgets are presented: a beef cow-calf budget, a backgrounding
calves budget, and a custom feeding yearlings budget.
The Cow-Calf-Man's Options
The short-run situation now facing most beef cow-calf ranchers in Oregon
can be readily assessed by inspection of Budget 1. Illustrated in this
23
Budget 1.
Estimated Livestock Expenses and Selling Prices Required to
Cover Various Levels of Production Expenses for a 300-cow
Herd in the Intermountain Area: 1975a/
Item
Variable Expenses:
Pasture
Public grazing
Hay
Protein supplement
Salt and minerals
Veterinary and medicine
Hauling livestock & marketing
fees
Machinery, equipment &
facilities
Labor
Miscellaneous expenses
Interest on operating capital
General farm overhead
Limit
cwt. TDN
AM
T
cwt.
cwt.
Units per cow
6.63
6.72
1.62
.40
.36
7.56
7.39
48.63
4.31
2.32
1.82
3.84
hrs.
5.25
$
37.79
10.05
14.48
3.44
5.02
$108.86
TOTAL VARIABLE EXPENSES
Ownership Expenses:
$ 29.80
6.35
21.98
3.67
Livestock
Machinery
Other equipment and fencing
Real estate taxes
$ 61.80
TOTAL OWNERSHIP EXPENSES .
Land
Management
$ per cow
acre
TOTAL ALL EXPENSES
Average Feeder Calf Selling Price Per Cwt. to Cover:
Variable expenses
All expenses except q uad and management
All expenses
44
50.02
4.41
$225.09
$ 37.60
64.70
88.51
a/ SOURCE: James E. Nix. "Estimated Production and Expenses for Beef
Cow-Calf Enterprises in Five Regions of the U.S. LMS-210,
August 1976.
24
budget are the latest production cost estimates available for a "typical"
cow-calf operation in the intermountain area of the U.S., which includes
portions of Oregon. Although cost estimates are for the 1975-1976 production
year, they are indicators of the cost situation in the area now. Also note
that costs are emphasized and returns are not estimated. Instead, the
average selling price for feeder calves that would be required to cover
various levels of expenses is computed. These computed prices, coupled
with 1977 fall feeder calf prices, quickly assess the profitability of most
cow-calf enterprises in the intermountain area.
Given the estimated livestock and selling prices required to cover the
various levels of production expenses in 1977, the current market of $38 to
$39 per cwt. will just cover the variable expenses estimated to be $37.66,
but will not go very far toward ownership, land, and management expenses.
Therefore, the cow-calf producer should examine some other alternatives.
Backgrounding Calves
One possible option is to background calves. Calves are fed to gain
a pound and a half per day over a 180-day feeding period, as shown in Budget
2. The beginning value November 1 is assumed to be 35c per pound. The
average selling weight is expected to be 620 pounds. Feed costs amount to
about $98 per head. Death loss is included and interest is charged on the
value of the calves and feed costs.
Dividing the total cost per head of about $243 by the 620-pound sale
weight of the calf in the spring gives a 29c per pound break-even price. At
this price, the rancher just breaks even in terms of covering the itemized
costs. These costs, however, do not include a return to labor, equipment,
buildings, and other fixed costs.
Given these production costs, the producer has two marketing options,
selling in the cash market in April, or hedging in November in a May Feeder
Futures' Contract. Experience has been a vivid teacher for most producers,
and most would agree that the fundamentals of supply and demand, at best,
lead to a wide variance in predicting cash prices. Our crystal ball is
25
BUDGET
BEGINNING DATE 1.
NOVEr TER
2,
BACKGROUNDING CALVES
1, 1976
ENDING DATE: APRIL 30, 1977
TOTAL
DESCRIPTIM
Eqp.
FOR
HEAD
($)
1.
ENDING VALUE
( 620 LBS.
a $ ? )
2.
BEGINNING VALUE
( 350 LBS.
a
3.
FEED COSTS
$0.38 )
133.00
0,n6 )
32.40
$65,00 )
65,00
CONCENTRATE
( 540 LBs. @ $
HAY
(
1 TONS
GRASS
(
MOS.
OTHER
(SALT, MINERALS, ETC.)
a
)
as $
.50
97,90
TOTAL FEED COSTS
4, NON-FEED COSTS
DEATH
1 7 OF
Loss
LINE 2)
1,65
VET & FEDICAL
INTEREST ON CATTLE
(,
9 % FOR
6 MOS,)
5,51
INTEREST ON FEED
(
9 % FOR
3 rios,)
2.20
OTHER
(TAXES ON CATTLE,
FEES, FUEL, ETC.)
5. TOTAL VARIABLE COSTS
BREAK-_VEN SALE PRICE TO
COVER VARIABLE COSTS
1. 65
12,23
TOTAL NON-FEED COSTS
26
1.22
(LINES 2 + 3 + 4)
243,13
(LINE 5/620 os,)
0.39
usually rather blurred, and the producer has been a pure speculator in the
cash market.
Futures
Another marketing strategy which deserves explanation is the feeder
1/
cattle futures market on the Chicago Mercantile Exchange.
This market
does not have the volume necessary to deem it a highly successful or viable
market, but is being used in the Pacific Northwest with adequate results.
Before a worksheet for exploring this alternative is presented, some background information is necessary.
Futures Prices as Forecasts
Futures prices should not be interpreted as specific forecasts for the
delivery month of the contract. A futures market does focus attention on
prospective market conditions; and it provides a mechanism for registering
a price in some future time period.
However, it is unlikely that either speculators or hedgers in an active
futures market view price quotations as a price forecast. Speculators buy
or sell contracts because they believe prices will change from their current
level. This is the only way they could hope to make a profit in the market.
Similarly, a hedger may be willing to "lock-in" a price through hedging at
some discount below his actual expectation of cash prices -- in order to
obtain a greater degree of price certainty.
Thus, futures prices may actually reflect a level that none of the participants in the market really expect to continue for very long. Historical
data provide evidence that futures price quotations are not reliable forecasts of future cash prices.
Localizing Futures Prices
The futures price quoted in The Wall Street Journal, or by a commodity
broker is the price in Chicago for 500-650 pound USDA choice feeder cattle
1/
— Contract specifications for live beef and feeder cattle on the Chicago
Mercantile Exchange are presented in Table 3.
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delivered in Omaha or Sioux City. But what does this price represent in
Oregon? The potential hedger must adjust the futures price to reflect
his own local market and type of livestock produced. This procedure is
called localizing the futures price. The localized futures price, not
the quoted futures price, should be compared with the production costs
for an estimate of the potential hedging return.
The localizing factors are transportation, shrink, delivery marketing
costs, brokerage fees, interest on margin deposit, quality discount, and
delivery point discount. These factors are subtracted from the relevant
futures price so that a localized price can be established.
Transportation - Only the added cost of transporting
livestock to the delivery point should be used in
this adjustment figure.
Shrink - The shrink adjustment is handled in the
same manner as transportation costs, with only the
additional shrink loss from shipping to the delivery
point used in localizing.
Delivery Marketing Costs - Livestock delivered on
the contract have to be delivered to various public
markets and assigned to a livestock commission firm.
The producer has to pay the livestock commission
fee, yardage, feed, water, insurance, and a grading
fee. These charges need to be deducted from the
futures price because they have to be paid if
delivery is made. For feeder steers, these costs
amount to 75 cents to $1.00 per cwt.
Quality Discount - If the livestock hedged are of
a lower quality on a different weight than the par
contract, an adjustment from the par needs to be
made.
29
Delivery Point Discount- For hedgers in the Northwest, feeders are one of the few agricultural commodities which are deliverable. Two delivery points
are feasible -- Greely, Colorado at a 500 per cwt.
discount and Billings, Montana at a 75c per cwt.
discount.
Brokerage Fees - These fees are like taxes and death,
they are inevitable, the fee is negotiable, but is
usually $40 per contract, or 10 per cwt.
Interest on Margin Deposit - A margin deposit is
required for every contract bought or sold on the
futures market. The money is deposited in an escrow
account, thus the producer receives no interest, and
should deduct an interest fee for this deposit.
An Example of Localizing Costs
The following costs are representative of the localizing costs to
deliver feeder cattle from Baker County to Billings, Montana.
Transportation
..$1.60/cwt.
Shrink
.85/cwt.
Delivery costs
.75/cwt.
Quality discount
Delivery point discount
.75/cwt.
Brokerage
.10/cwt.
Interest
.06/cwt.
TOTAL
$4.11
Evaluation of a Potential Hedge
Once a producer has estimated his production costs, localized costs,
selected a futures contract, and obtained a futures price quote from a
broker, the potential of a hedge can be evaluated. On November 1, 1976,
the April and May contracts were trading at $43.00 and $43.05, respectively.
This data can now be used in the worksheet on page 10. The net, hedge
The following example . (you will have to insert current data) will illustrate
the procedure to follow in analyzing a feeder cattle hedge.
Example 1 Analyzing feeder hedge return (Billings, Montana)
Step
1.
May feeder futures price (contract selected
by estimating the month the cattle will be ready
for market).
2. Cost of feeding (should be taken from feeders
records, if available, and contain cost of
feed, cost of feeders, and all non-feed costs).
(1)
(2)
3. Localizing costs
$43.05
(Table 2)
$39.00
Dollars/cwt.
a. transportation (different depending on
producer's location)
b.
shrink (calculated for producer's
location)
.85
c.
delivery marketing cost
.75
d.
quality adjustment (obtained from estimating
type of livestock producer will sell and
adjusting from par)
e.
delivery discount (75c to Billings)
.75
f.
brokerage fee
.10
g.
interest on margin deposit (estimated by
length of time, degree of price change,
and interest rate)
.06
TOTAL LOCALIZING COST
4. Adjusting futures price to obtain localized
futures price
May futures price
4.11
/cwt.
-(3)
Localized future:, price
Localized futures price
Cost of feeding
(4)
(4)
-(2)
Estimated net hedge return
(5)
Forecasted price obtained from private,
university, and farm magazines
Expected May
7.
(3)
(1)
Localizing post
6.
1.60
Expected no hedge return
SO to $4.00/cwt.
$39.00 to $43.00
•
31
return would be (-$0.06). One now needs to compare this with the estimated
return, if one were not to hedge. Assuming that the cash price will be
in a range of $39.00 to $43.00 per cwt. the net return is estimated to be
zero to $4.00/cwt., versus breaking even if one were to hedge.
Custom Feeding Yearlings
Another alternative many ranchers and lenders may be considering is
retaining ownership and having feeders custom fed to slaughter weight. A
custom feeding program is shown in Table 4. The estimated break-even sale
price, using current market conditions, is $43.00/cwt.
Cash
Industry and university sources were predicting in November that fed
cattle prices would face into a price range of $41 to $45 per cwt. in late
March, 1977. Assuming that one had some confidence in this forecast, profits
in custom feeding would appear to have only a 50-50 chance of breaking even.
Futures
It is not feasible to deliver cattle fed in feedlots in the Pacific
Northwest to Peoria or Sioux City, the delivery points for the live cattle
futures contract. However, unlike the feeder contract, the live cattle
contract is very active and a very viable market. Therefore, it is easy
to get in and out of this market, plus, the nearby futures price fluctuates
in a pattern similar to the cash price in the Northwest. This can be seen
in Figure 1, when both the Portland cash and nearby futures prices are
plotted on the sate chart. This high correlation in the two prices allows
the producer to use another technique in evaluating the potential for a
fed cattle hedge. This technique is called the "basis", or simply the
local cash price minus the futures price.
Basis
Cattle production is a continuous, year-round process. By comparison,
in grain markets, the supply available for an entire marketing year is
known once the harvest is completed. This production-utilization pattern
affects the nature of the "cash basis" or price difference between cash
and futures markets.
32
TABLE
CUSTOM FEEDING
BEGINNING DATE: NOVEMBER 1, 1976
ENDING DATE: MARCH 20, 1977
TOTAL FOR
DESCRIPTION
1.
ENDING VALUE
( 1050 LBS
$
)
2.
BEGINNING VALUE
(, 700 LBS. a $
35, )
3,
CUSTOM LOT CHARGES
FEED COST
(ELLBS, GAIN a
YARDAGE (IF EXTRA)
( 140 DAYS a $
$0.50)
0,08)
VET & MEDICAL
OTHER
9
245,00
375,00
11,20
1,10
(IMPLANTS, INS,, ETC.)
.55
187,85
TOTAL LOT CHARGES
OWNER'S OTHER COSTS
7
TRUCKING TO LOT
cwr, a $ 0
40 )
2,80
DEATH Loss
(
1 % OF LINE 2)
2,45
INTEREST ON CATTLE
(
9 % FOR4 2/3 mos,)
8,58
INTEREST ON LOT CHA P '7E
(
q % FOR2 1/3 rm.)
3,28
OTHER
(TAXE ON CATTLE, FEES,
ETC.)
55
TOTAL CWNER'S OTHER COSTS
7.66
5. TOTAL COSTS
(LINES 2 + 3 + 4)
450,51
6. BREAK-EVEN SALE PRICE TO
COVER ALL COST EXCEPT
MANAGEMENT
(LINE 5/1050 ms)
0.43
33
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4
Basis that results from location and quality differences between the
futures market and a specific cash market for particular lots of cattle is
quite important and relevant. However, basis related to a time period,
which is especially important to grain markets, is not relevant in livestock futures markets. First, there is no storage period and, therefore,
no cost of storage that must be reflected in futures prices. In addition,
there does not seem to be much reason to expect cash and futures markets
in livestock to show a consistent relationship from one period of time to
another. The exception is at the maturity of a contract. Then, the two
markets must be in close accord or substantial delivery of product will
occur. At other times, cash prices may logically be either above or below
a particular futures contract -- depending on current conditions. Inverted
markets in livestock futures are fairly common, while they are relatively
rare in stored commodities.
The pattern of cash-futures price relationships in livestock markets
may also be quite different from one year to the next. And prices of
individual contracts may be fairly independent of each other. This is
true because of the continuous nature of the production process. Thus,
supplies and utilization in one period do not necessarily affect the market
in later periods.
The basis for Northwest fed cattle for the years 1972 to 1976 are
shown in Table 5. It is important to note that the basis always approaches
zero (cash and futures are the same) at the maturity date of each contract
month.
The Northwest feedlot basis has ranged from a negative basis of -$6.78
in 1975 to a positive basis of $4.20 in 1973 (Table 5). But, how does the
basis affect the returns of the producer who has hedged? An example_ may
answer the question. Let's assume that in November a producer hedged one
contract of live cattle on the April contract at $45.00. In March, when
the cattle are finished, the cash price for choice steers is only $41.00.
How would a positive $2.00 or negative $2.00 basis affect the producer's
return? The producer's accounting ledgers would appear as follows:
35
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Positive $2 Basis
Date
Cash
Sell
Net
Return
April
Futures
Date
Sell
45.00
Nov.
41.00
Buy
43.00
March
41.00
Net
2.00
Nov.
March
Negative $2 Basis
$41 + $2 = $43/cwt.
Sell
Net
Return
April
Futures
Cash
Sell
45.00
41.00
Buy
39.00
41.00
Net
6.00
$41.00 + $6.00 = $47.00
Thus, a negative basis at the time that cattle are sold in the cash market,
and the offsetting transaction of buying a futures contract is made, will
add to the expected or target price which was "locked" in at the beginning
of the hedge. The opposite is true of a positive basis at the time the
hedge is terminated.
Evaluation of a Potential Hedge
The producer must estimate his production costs, select a futures
contract, obtain a futures price quote from a broker, and estimate the
basis at the time the cattle will finish. Historical data will be of some
value in helping to estimate the basis. For example, the basis for the
April contract in the second to fourth week of March for 1972 to 1976 are
as follows:
1972
1973
1974
1975
1976
2nd week....
-.35
+2.10
+ .90
- .68
+1.27
3rd week....
-.83
+1.20
- .93
+ .62
+ .45
4th week....
0
+ .93
-2.35
+2.02
+ .17
A conservative estimate of the basis may be +$2.00. Given the estimate,
the data can be simply plugged into the worksheet on page 17. The price for
the April live cattle option on November 1, 1976, was $43.00. The cost
data was generated in Table 4. The producer must pay a brokerage fee and
interest on his margin account, in this case estimated at 10 and 6 cents,
respectively. The results are an estimated net hedge return of -$2.06.
Again, this is a conservative estimate, and is only relevant for prices
on November 1, 1976.
37
LIVE BEEF WORKSHEET
STEP
1
4 3, 0 0
TARGET MARKETING MONTH FUTURE'S PRICE
COSTS
COST OF FEEDER
2 4 5 0 0
COST OF GAIN
187
85
17
66
NON-FEED COST
TOTAL ../Celt',
$450,51/10,50 =
3
EXPECTED BASIS AT MARKET TIME
4
LOCALIZED FUTURES PRICE
$42,90
+ 2,00
43 00
MARKET FUTURES PRICE
EXPECTED BASIS
(SUBTRACT THE BASIS)
2 . 0 0
-
.16
BROKERAGE AND INTEREST
40,
8 4
LOCALIZED FUTURE PRICE
40,
8 4
TOTAL COSTS
4
90
LOCALIZED FUTURES PRICE
5
NET RETURN FROM HEDGE
ESTIMATED NET HEDGE RETURN
2 ,
-
2, 0
$
41-$4
E
ESTIMATED RETURNS WITHOUT A HEDGE
FORECAST PRICE FOR TARGET MONTH
MINUS TOTAL COSTS
38
ESTIMATED RETURN WITH NO HEDGE
5
-43
-$2 TO $2
Results of Alternative Strategies
This paper has assumed, to this point, that the producer was making
a decision on November 1, 1976. This section briefly shows the economic
results of each decision at the proposed finishing date of each lot of
cattle.
The cow-calf producer would have made a greater return to land and
management by retaining ownership and backgrounding the calves.
Exhibit A shows that selling strictly in the cash market would have
yielded a return of $3.00/cwt., while a hedge during the backgrounding
period would have cut the return to $1.05/cwt. If a producer were to
custom feed yearlings, and failed to hedge, he would have incurred a loss
of $4.50/cwt. On the other hand, a hedge would have cut the losses to
$.90/cwt.
Summary
Some cattlemen have traditionally sold calves or yearlings each fall.
However, given the present market situation, the alternatives of backgrounding, or custom feeding should be evaluated. The purpose of this
presentation was not to compare the profitability of alternatives, but
to illustrate a method of evaluating marketing alternatives. The cattleman and his lender and/or his Extension Agent should always take their
careful production budgeting that extra small step -- estimating the returns
from marketing alternatives.
I am not telling you that retaining ownership or forward pricing in
the futures market will always work better than trading strictly in the
cash market. I am saying that evaluating all the alternatives and using
forward price contracting can provide better pricing performance and that
anyone who intends to use futures trading needs to spend a considerable
amount of time learning to recognize those conditions favorable to successful
forward contracting. Changing your present production-marketing system, and
learning to hedge is not easy. You must be willing to commit yourself to
a strong marketing program. However, I guarantee you, that extra step in
your decision making process may make a difference of a mile in the everchanging dynamic livestock markets of today.
39
Exhibit A
COW - CALF
A.
Sell November 1, 1976 Cash Market
Cash Receipts
Variable costs
Net Revenue
B.
$38.00/cwt.
37.66/cwt.
$ .34
Retain Ownership and Background
1.
Sell April 30, 1977 Cash Market
Cash Receipts $42.00/cwt.
Variable costs 39.00/cwt.
Net Revenue
2.
$3.00/cwt.
Hedge from November 1, 1976 to April 30, 1977
_Date
Cash
Nov. 1, 1976
April 30, 1977
Sell May Contract
sell
Return
$42.00
42.00
Cash Receipts $42.00/cwt.
- Loss Futures
1.95/cwt.
- Variable Costs 39.00/cwt.
Net Return
40
Futures
1.05/cwt.
Buy May Contract
Return
$43.05
45.00
-$ 1.95
CUSTOM FEED YEARLINGS
A.
Sell March 20, 1977 - Cash Market - Without a Hedge
Cash Receipts
$38.50/cwt.
Variable Cost
43.00/cwt.
Net Revenue
B.
-$ 4.50/cwt.
Hedge from November 1, 1976 to March 20, 1977
Date
Futures
Cash
Nov. 1, 1976
Sell April contract $43.00
March 20, 1977
$38.50
Buy April contract
Return
$38.50
Return
Cash Receipts
+$ 3.60
$38.50/cwt.
+ Gain Futures
3.60/cwt.
- Variable Costs
Net Return
39.40
'
43.00/cwt.
-$
.90/cwt.
41
GRASS STRAW IN FINISHING RATIONS FOR CATTLE
D. C. Church and W. H. Kennick
Department of Animal Science
Oregon State University
The use of straw for cattle feed is hardly a new topic but use of relatively
high levels of grass straws in finishing rations has received much less publicity.
As feedstuffs, straws have several disadvantages. Most grass straws are low in
protein, average values ranging from about 3 to 8% (dry basis) although there
may be a much wider range in protein content (Youngberg and Vough, 1977) depending
on the origin of the straw, fertilization practices and how much weathering has
occurred before harvest.
In addition to the low protein content, digestibility of the energy in grass
straw is low, primarily due to the high content of fibrous carbohydrates (cellulose, hemicellulose) and relatively high levels of lignin. Furthermore, this
type of material is digested slowly by ruminant animals and the combination of
low and slow digestion greatly restricts-the amount of feed which animals can
consume and the nutritional value which can be obtained from it.
As a result of the poor nutrient content in straws, they are normally used
to a better advantage when fed to beef cows or other classes of animals which
have low to moderate requirements for energy and protein. In the feedlot, some
bulky material of this sort can be used to provide a more suitable physical texture
when added to high concentrate rations without any appreciable effect on daily gain
although feed conversion will normally be reduced. When the prices of concentrates
are relatively high in relation to the price of beef, it is often desirable to increase the amount of roughage which is fed. Increased roughage feeding will usually
result in less trouble with cattle going off feed but increasing amounts will
eventually result in reduced rates of gain and a longer feeding period, so costs
may or may not be reduced by using excessive amounts of straw or other low quality
roughage.
42
The surplus of grass straw in Western Oregon as well as in other localities
coupled with legal restrictions on burning has stimulated interest in utilizing
more straw in animal feeds. Use of straw is now more feasible because of the
development of improved technology for harvesting and processing. Consequently,
a number of experiments have been carried out during the past few years to evaluate
the use of grass straws in growing and finishing rations.
The experiments which have been carried out are described in the remainder
of this report.
43
Steer Finishing Trials
1973-74
Weanling steer calves from the Experiment Station herd were utilized in this
study. The rations which were utilized are shown in Table 1. For comparative purposes two lots (10 head) were fed high concentrate growing (#1) and finishing rations
(#2) which were 15 and 5% roughage, respectively. Calves received the growing
ration from an initial average weight of 600 lb. to an average weight of about 840 lb.
and were then switched over to the finishing ration until the cattle were slaughtered
at a final weight of about 1050 lb. The experimental rations were fed as shown:
pen no.
1,2
3,4
5,6
7,8
9,10
rations
High concentrate growing ration (#1); conventional finishing ration (#2)
High-straw pellet (#3), conventional finishing ration (#2)
High-straw pellet, straw finishing ration (#5)
High-straw meal (#4), conventional finishing ration (#2)
High-straw meal, straw finishing ration (#5)
In each instance the cattle were shifted from the growing ration to the finishing
ration when the lots averaged about 840 lb. The high straw pellet (50% straw) was
included since there is adequate information to show that cattle or sheep can utilize
more straw or other poor quality roughage in pelleted rations. These animals (pens
3-6) were then finished on a conventional ration (#2) or on a finishing ration (#5)
which contained 12.5% straw. The other pens (7-10) were started on a high straw
meal grower (#4, 25% straw) and were shifted to the conventional ration or the straw
finishing ration. Information on ration content of crude protein, estimated total
digestible nutrients and calcium (Ca) and phosphorus (P) content are given in Table 1.
All steers were implanted with 36 mg of Ralgro at the beginning of the experiment and
gainwhen they weighed about 820-840 lb. When individual animals reached about 1050 lb
or the choice grade, they were slaughtered at the 0.S.U. Meat Science Laboratory. In
all instances daily gain for the total period and feed conversion were calculated usin
a final weight obtained by dividing carcass weight by 0.6. This procedure is used
44
because cattle on high roughage diets generally have a low dressing percentage and
a large amount of fill (feed, water) in the stomach and gut. On a more typical
finishing ration, cattle of this sort should dress about 60% depending on weighing
conditions; thus, the reason for use of this method.
Data on cattle performance (Table 2) indicate that 50% straw in the pelleted
ration (#3) was too much for maximal rate of gain. There was some problem in maintaining good quality pellets since straw does not pellet well. As a result, there
was some problem with fines and this will nearly always reduce consumption.
Calves fed the high-straw meal ration (#4, 25% straw) gained more rapidly than
steers on the pelleted ration and equally as much as steers on the conventional
ration, indicating that this amount of straw can be very well utilized. In addition,
it might be noted that rations of this type are less apt to cause problems such as
bloat or digestive disturbances than rations with more concentrate, particularly
if the straw is chopped rather than ground in a hammermill. Nutrient dilution with
straw may be expected to result less efficient feed conversion but the change in
this case was of a minor nature.
The cattle that were finished on the straw ration (#5, 12.5% straw) also performed very well as indicated by the gains in the second half of the feeding period (Table 2), 3.15 lb./day for the lot initially fed the high-straw meal and 2.94 for
those initially fed the high straw pellet, or an overall performance of 3.04 lb./day
for all lots finished on this ration as compared to 3.12 lb./day for those finished
on the control. Based on our feed mill prices in January, 1974, the cheapest gain
was produced by the cattle fed the high-straw meal (#4) and finished on the conventional ration (#2). The straw finisher (#5) was priced lower initially, but a
shift in grain prices resulted in it costing more per lb. than any of the others.
Feed costs here might not be at all representative of those in another year.
Carcass data did not indicate any appreciable differences in these cattle,
regardless of the ration combinations used.
45
Table 1. Steer rations * 1973-74
Ration Ingredients
1
Ration #
3*
2
4
lb/ton
Alfalfa hay, gr.
100
Alfalfa hay, coarse gr.
100
Grass hay, coarse gr.
200
100
Ryegrass straw, gr.
100
100
1000
500
250
500
455
665
600
700
150
150
150
60
Barley, steam rolled
900
900
Corn, steam rolled
360
450
Beet pulp, shredded
190
320
-
Molasses
100
100
150
Mustard seed, gr.
100
60
Tallow
Urea
40
31
5
Wheat mill run
40
33
15
200
Limestone
9
15
Salt, trace min.
4
5
Tricophos
4
4
Antibiotic premix
(TM-10)
1
1
1
Vitamin A premix
2 million IU/lb
40
11
8
4
5
6
2
1
1
1
1
2000
2TOU2000
1
1
2000
1
2000
Crude protein, %
14.01
10.06
14.0
14.0
11.0
Estimated TDN, %
71.1
76.6
56.7
67.1
73.5
Ration Nutrients
Ca, %
.457
.498
.435
.404
.447
P, %
.301
.30
.31
.302
.304
*Ration #3 was pelleted
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47
On average, cattle on the different straw rations consumed from 2.5 to 6.2 lb.
of straw/day (about 150 day feeding period). Some of these were, of course, getting
straw only during the first feeding period (those which were finished on the control
ration). Although of a limited nature, this study gives some indication of the
potential for using straw in beef finishing rations.
48
1974-75 Experiments
Weanling steer calves were used again in this study and they were fed rations
as indicated below during the growing-finishing phases:
Untreated straw
50% pelleted straw; 25% pelleted straw
35% straw meal growing ration; 15% straw finisher
25% straw meal growing ration; 15% straw finisher
Hydroxide-treated straw
35% straw meal growing ration; 15% straw finisher
25% straw meal growing ration; 15% straw finisher
The rations which were used were similar to those used in the previous year. In
addition to the straw, which was from annual ryegrass, the remainder of the rations
was made up of barley, corn, molasses, wheat millrun, alfalfa, cottonseed and feather
meal and lesser amounts of tallow, urea and salt along with mineral and vitamin A
supplements and an antibiotic premix. The management of the cattle was the same as
in the previous year.
The intent in this experiment was to feed a somewhat higher level of straw than
was used in the previous year and to compare untreated straw to straw which had been
treated with sodium hydroxide (lye). The straw used in the meal rations was provided
by the Straw Utilization Center. The untreated straw was chopped, molasses was added
and the mixture was then cubed (1.5" cubes). With the hydroxide-treated straw, the
straw was chopped, sprayed with a 30% solution of hydroxide so that the final product
contained 4% hydroxide, and the material was then cubed. This process results in some
swelling of the straw fibers and some degree of increased solubility which increases
digestibility by ruminant animals. When the rations were mixed, the cubes were broken
up by putting them through a hammermill from which the screen had been removed.
Results of this trial (Table 3) with the pelleted ration were similar to the previous year for daily gain, although feed conversion was somewhat lower. Cattle fed the
untreated straw, particularly the rations with 35% initially, gained at a satisfactory
rate (3.10 lb./day), but treating with hydroxide improved the gain by 0.4 lb/day during
the growing period and by about 0.25 lb./day for the total feeding period.
49
(74-75 cont.)
For the total feeding period feeding the hydroxide-treated straw resulted in an
improvement of 8% in rate of gain with 6.1% improvement in feed conversion. The
treated straw had no effect on ribeye marbling but did result in slightly less
back fat.
Surprisingly, the higher level of straw (35%) in the growing rations resulted in greater daily gain with both the untreated and the hydroxide-treated
straw, and feed conversion was also greater by 5.8%. The greater rate of gain and
improved feed conversion
by
cattle on the 35% straw rations may have been due to
more corn in these rations. In the 25% straw rations, beet pulp and wheat millrun were substituted for the corn with the intent of providing a comparable energy
level in both rations and it may be that the 35% straw rations with corn were, in
fact, higher in available energy.
Overall, this experiment demonstrated that hydroxide treatment will result
in a slight increase in feed consumption with some improvement in rate and efficiency
of gain. Pelleting rations with 50-25% straw does not appear to be feasible because
neither rate nore efficiency of gain were improved enough to warrant the added cost
of processing this type of ration.
50
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51
Yearlings, 1975
In this experiment yearling steers from the Eastern Oregon Experiment Station
at Burns were divided into three groups and fed rations with the following types of
grass straw:
#l--30% hydroxide-treated bent grass straw
2--30% hydroxide-treated ryegrass straw
3--30% hydroxide-treated tetraploid ryegrass straw
The growth response of these steers (Table 5) was quite variable as indicated
by the range in daily gain. The higher values for steers on each treatment indicate
that the rations were satisfactory for some steers to make a high rate of gain, but
some steers did very poorly.
In comparison to the ration which contained annual ryegrass straw, the bentgrass
straw resulted in a very slight increase in daily gain (+2.0%) but less efficient
feed conversion (-7.4%). The less efficient gain may have been because the steers
were slightly fatter on the bentgrass ration as indicated by the increased amount
of backfat. The tetraploid ryegrass straw ration resulted in less gain that the
annual (-6.8%) and also less efficient gain (-9.6%). These steers also had slightly
more backfat than those consuming the annual ryegrass straw. Overall, the performance
of these cattle was too variable to make any firm conclusions as to the relative
value of these different straws.
52
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53
Steer Calves, 1975-76
In this experiment weanling calves were fed rations with approximately
40% annual ryegrass straw during the entire feeding period. During the first
half of the period the rations contained 1% urea which was removed during the
finishing period; otherwise there was no change in ration composition. The
remainder of the rations were made up of wheat, barley, molasses, alfalfa,
feather meal, tallow and small amounts of antibiotic and, vitamin A premixes.
The only experimental treatment was that the straw was treated in different
ways as shown:
Ration #1--40% chopped annual ryegrass straw
2--40% hydroxide-treated straw cubes (reground)
3--40% weathered and treated cubes (reground)
In ration #2 the cubes were treated with the standard 4% of hydroxide before cubing.
With the weathered straw, the cubes were treated with about 2% hydroxide. The
weathered straw was included because of the opinion by some feeders that cattle will
consume it in larger amounts than comparable unweathered straw. The straw cubes
were reground by putting through a hammermill with the screen removed and the straw
was then mixed with other ration ingredients. The various straws were supplied
by the Straw Utilization Center.
Data on performance of the cattle (Table 4) show that feeding either the hydroxide-treated or weathered and hydroxide-treated straw resulted in improved rate
of gain (about 6% increase). There was a slight improvement in feed conversion by
feeding the hydroxide-treated straw (2.7%) but not with the weathered and treated
straw. The carcasses of cattle on the different treatments were similar with regard
to marbling, amount of back fat or kidney fat (not shown).
Although it is difficult to make comparisons from year to year, the rate of
gain on these animals was considerably less than in the previous years when less
straw was fed, particularly during the finishing period, and we would have to conclude that 40% grass straw is too much for finishing weanling steers if maximal rate
of gain and feed conversion are desired.
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