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The impact of price and management on culling decisions

published: February 18th 2022
by: Elliott Dennis, UNL livestock marketing

Editor’s Note: The following is a summary of the webinar “The Impact of Price and Management on Culling Decisions” given on Nov. 4, 2021, as part of the Center for Agriculture Profitability weekly webinar series housed in the Department of Agricul-tural Economics at the University of Nebraska – Lincoln. This webinar and podcast can be viewed https://cap.unl.edu/livestock/impact-price-and-management-culling-decisions.
Cull cow pricing
    Pricing cull cows is an economically important decision because typically between 10 and 20% of cow calf producer income comes from cull cows. Ground beef and merchandisable beef cuts is the market’s two primary purposes for cull cows. Ground beef comes from the U.S.’ insatiable desire for hamburgers and other meals that include ground beef. Merchandisable beef cuts (i.e. tenderloin, ribs, etc.) from cull cows are primarily used in non-white tablecloth food service outlets that offer value steaks and other beef dishes. All the available supply into this market comes from 1) beef cows and bulls, 2) dairy cows, 3) trimmings and grind from steer and heifer slaughter, and 4) beef imports. These separate markets combine to impact the supply, and in part the prices received for cull cows.
    Cull cows are given a grade at slaughter that determines the price received. This grade is like the grading criteria for steers and heifers. How-ever, it is based primarily on the dressing percent and percent of lean content of the trimmings. A higher dressing percentage combined with a lower percent of lean content of trimmings generally equates to higher prices. The four commonly used quality grades are 1) breaker, 2) boner, 3) cutter/lean, and 4) canner/lights. Breakers have the highest value and canners/lights have the lowest value. Breakers have a dressing percent between 52-54% and 76-82% lean content. Boners have a dressing percent between 50-52% and 78-83% lean content. Cutter/lean have 45-49% dressing percent and 88-90% lean content. Can-ner/lights have a 40-46% dressing percent and 90-92% lean content of trimmings.
    The carcass for each grade of cull cow is determined by a composite share of value from different meat products – collectively called the “cutout”. The cutout value is derived from the overall demand and supply from the underlying products. Thus, the more a certain quality grade relies on a certain product, the more sensitive they are to changes in that underlying market. For example, a larger percentage of the carcass from canner/light cull cows will go to ground beef so the cutout price is highly reliant upon the ground beef price. On the other hand, breaker cull cow cutout price tends to be relatively more stable because they have more merchandisable cuts.
    As with most commodities, there is seasonal price variation driven by a combination of supply and demand. Prices for all quality grades of cull cows tend to peak in the summer months – approximately in July – where there is still relatively strong demand for ground beef, strong demand for beef products in food service, and relatively lower supply of cull cows on the market. However, each year market conditions change that may result in higher prices for one quality grade more than another and in different times of the year. Between 2002-2021, there has been an average of $5 per cwt. premium for Breakers relative to Boners and a $5 per cwt. premium for Boners relative to Cutters but the average price received each year varies. These changes in price suggests that culling and “retaining to feed” decisions need to be adjusted each year.
Culling decisions
    Typically, producers will follow the following thought process for culling decisions:  identify cows with low production re-cords, bad disposition, phy-sical impairments, older mature cows, and non-pregnant females. Culling is a multi-dimensional decision when producers are considering what to do with their cows and heifers. They have options to sell or retain for a later sale, they can rebreed for a later calving season, or they can rebreed for a later calving herd. These decisions also need to consider the cow age, cow body condition, feed resources available, market conditions, value they can get for those females, and then determine if a terminal breeding system may be a better option for rebreeding considerations.
    Alternative strategies to help make culling decisions include early pregnancy detection, early weaning options, and or rebreeding for alternative systems. Incorporating early pregnancy detection (no earlier than 35 to 45 days to prevent early fetal loss) can identify the productive and nonproductive females in your herd. Using detailed individual records kept on each cow can help you identify cows that have consistently weaned calves that rank in the bottom 10-25% of your herd. Another option for spring calving herds is to sell non-pregnant cows later in the summer, capitalizing on higher markets and reducing the lactational demand in the cow. Rebreeding open females for a fall herd is another option and then selling any open females into a heiferette market.
    Ultimately, know who your candidates are for culling and have good records to utilize to make those decisions. Capital-izing on early culling opens more marketing opportunities compared to post pregnancy check culling when market prices are low. Be strategic and identify good candidates to rebreed, feed, or sell when market prices are best.
Cull cow diet
considerations
    Careful consideration must be made for the cost of the diet against the value of the gain when trying to move cows up in body condition score or hit a seasonally higher market. Corn-stalk residue grazing with protein supplement or grazing annual forages can be economical feed resources but should still be evaluated considering the value of the gain. A 1150 lb. mature cow in a body condition score 4 (1-9 scale) who is 4-8 years old grazing cornstalks and fed 2.5 lb. of dried distillers’ grains (DDGS) is likely to gain 1 BCS in 30 – 40 days. If cornstalks cost $20/acre and an acre lasts the cow 60 days and DDGS is $160/ton delivered, that’s $10.56 for 60 days of supplement and $20 for grazing, then it cost $30.56 in feed to move her from a BCS 4 to a 6. It is likely that the change in the value of the cow is more than $30.56. However, the price of cull cows and the price of feed can vary. Therefore, feeding decisions need to be evaluated yearly.
    Total mixed rations can be an economical feed source when commodities are priced low but may not result in a net profit when commodities are high. Table 1 shows the diet costs differences in the same diet when commodity prices are relatively high vs. relatively low. When commodity prices are high, producers need to carefully evaluate whether the added feed will return a net profit on the cull cows.
    Feeding cows to white fat is a rather expensive diet option and therefore, a direct marketing opportunity should be explored for those cows to maximize profit. A minimum of 90 days is generally required to achieve white fat using a diet that is 60-80% corn on a dry matter basis depending on the amount of co-product (such as distillers grains) included in the diet. Thin cows selected for a finishing diet can easily eat 30-35 lb. of feed on a dry matter basis. Therefore, diet costs in 90 days can be substantial. Marketing cows fed to white fat through the local sale barn will not result in a premium paid for the white fat and so recouping that feed cost is likely through that marketing channel.

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