Low feed resources during winter are the primary driver of culling, but the widespread drought that is slowly expanding into the deep South is also driving historic beef cow liquidation. As we approach prime culling season (September through December) and continue to cull to manage through drought conditions, it is important to be strategic, and to keep the economics of culling in mind rather than heading to the sale with whatever was easy to load that day.
Remember that profit per head is simply;
Profit per head = Total Revenue per head minus Total Cost per head
Any traits or performance issues that make a cow cost more or generate less revenue should be factored into keeping or culling her. Knowing the details of a cow’s performance when culling is a prime example of the need for good, cow level records. It’s also important to remember that culling can serve as an opportunity; if done strategically, culling can reshape the genetic profile of your herd and increase its profitability over time.
What are the factors influencing a cow’s revenue generation? The number one factor is her ability to wean a live calf. If she has ever failed to wean a live calf, she is already behind in terms of paying for herself and statistically is more likely than the remainder of the herd to fail to wean a live calf again. These cows should be near, if not at the top of the list for culling. Beyond raising a live calf to weaning weight, matching the appropriate calving season, stage in productive life, and progeny traits like low weaning weight can all influence revenue and should be considered when culling.
Cull cows can also generate revenue through their own sale. Cull cow values are at historic highs. Combined with the expectation of high feed costs through the upcoming winter, some marginal cows may even be worth consideration for ‘another career,’ as my animal science colleague likes to say.
Finally, don’t forget to factor in individual cow’s costs. Cows that need assistance during calving, cows that have structural or confirmation issues that might impact their ability to breed, and cows with temperament problems should all warrant consideration come time to go to town.
Incorporating a price risk management plan into our operation has been difficult for many ranch businesses, even considering larger sized operations. Ranchers face many risks associated with cattle pricing, as we have seen these last years after disruptions in supply chains. Past events emphasize the importance of incorporating a price risk management plan as one of our management strategies to minimize economic losses, lock margins, or reduce the risk of business failure.
The USDA Livestock Risk Protection Feeder Cattle (LRP) program is an important tool to reduce price risk in our operations by setting a floor price for our cattle. An analysis made with the last ten years of data for stocker prices shows that this tool provides floor prices and, in many cases, above the October market value (Premium purchased in May, 30 weeks endorsement, at a 98% price level coverage). Producers can choose between different price coverage levels and buy the insurance up to 52 weeks before selling their cattle.
During the summer of 2019 and winter of 2021, the USDA made a few changes to the program. These modifications reduced the premium paid by producers, delayed the premium payment to the end of the endorsement period, and made it available in all states and counties. Payments due at the end of the period are a cash-flow advantage compared to buying a Put Option in the futures market.
The LRP program is available for most ranchers since it does not require a minimum number of cattle to be insured. Small ranchers with even one cow could make use of it. Most importantly, both cow-calf and stockers operations can benefit from this program.
Producers from the southern region have significantly increased the use of LRP as a price risk management tool compared to 2020, as shown in Table 1. In 2022, producers will have insured 1.4 million head through the LRP program. For more information on LRP, please check the USDA Fact Sheet (Livestock Risk Protection Fed Cattle | RMA (usda.gov)). If you are interested in buying the insurance, the USDA website lists approved livestock agents and insurance companies.
Table 1. LRP – Quantity of Cattle Insured in the Southern States (Heads). Source: USDA – RMA
Large-scale ecosystem benefits tend to drive policy interest in cover crops. However, incorporating cover crops in a farm management plan will also require them to generate on-farm returns. To date, findings of their ability to generate profits have been mixed with inconsistent results across several studies. However, returns in a broad sense of cover crops include potential impacts on risks in addition to their effect on profits. A year of substantial loss savings can offset or justify years of minimal to slightly decreased net profit outcomes. Especially true in areas where crop prices are countercyclical to yields. Therefore, if or how cover crops help manage risk is an important consideration for their inclusion in a farm management plan.
Cover crops and their ability to reduce soil erosion and provide increased root infiltration into the soil have been studied in the context of managing specific risks, extreme wet and extreme dry (drought) conditions. Roughly 83% of total crop insurance losses in the Mid-South were related to one of these two events with 70% being excess moisture related and the majority of those from prevented planting. Regarding extreme moisture risks, most studies indicate that cover crops reduce crop damage under specific conditions. Where nutrient leeching is an issue, which may be a feature on some irrigated fields, cover crops, particularly grass cover crops, have been found to reduce corn yield losses during extreme moisture events because of higher available carbon during the growing season. A study in Northeast Mississippi showed reduced effects of excess moisture in corn-soybean rotation fields. However, some studies also show that cover crops can create early season planting challenges getting the cash crop planted in wet fields. The additional time required to terminate the cover crop may not allow sufficient time to get the cash crop planted and established. This is especially true in conventional tilling systems and where planting green (planting the cash crop in a living cover crop) is not possible.
In NRCS Zone 4 cover crop regions, the effects of cover crops in drought conditions seemed to be more consistent. The findings suggest that cover crops reduced soil compaction, increased root infiltration, and in general, led to increased water availability for the cash crop, reducing drought damage. More studies are needed in the mid-south, but a few studies observing farmers in the Midwest during the 2012 drought saw farms with cover crops experiencing an eleven (11) percentage point increase in yields relative to farms without cover crops.
Overall, cover crops show potential for risk management, particularly for managing drought risk. However, outcomes appear to be highly related to the suite of management practices on the farm, such as the cover crop variety used, whether combined with no-till, the ability to plant green, and the planting dates of the cash crop in question. In the mid-south, a cover crop before planting cotton or soybeans may be more feasible than a cover crop before planting corn when considering planting dates and early season weather risks. Nevertheless, where risk management rather than yield is the goal, a conversation with a local agronomist may help determine whether cover crops may be a good consideration as a long-term risk management tool on your farm.
Mid–South Causes of Indemnities Crop Insurance: 2015 – 2020
Source: RMA Summary of Business
References:
Bergtold, J., Ramsey, S., Maddy, L., & Williams, J. (2019). A review of economic considerations for cover crops as a conservation practice. Renewable Agriculture and Food Systems, 34(1), 62-76. doi:10.1017/S1742170517000278
Bharat Sharma Acharya, Syam Dodla, Lewis. A. Gaston, Murali Darapuneni, Jim J. Wang, Seema Sepat, Hari Bohara, Winter cover crops effect on soil moisture and soybean growth and yield under different tillage systems, Soil and Tillage Research, Volume 195, 2019, 104430, ISSN 0167-1987, https://doi.org/10.1016/j.still.2019.104430
Blanco-Canqui, H., Shaver, T.M., Lindquist, J.L., Shapiro, C.A., Elmore, R.W., Francis, C.A. and Hergert, G.W. (2015), Cover Crops and Ecosystem Services: Insights from Studies in Temperate Soils. Agronomy Journal, 107: 2449-2474. https://doi.org/10.2134/agronj15.0086
Chalise, K.S., Singh, S., Wegner, B.R., Kumar, S., Pérez-Gutiérrez, J.D., Osborne, S.L., Nleya, T., Guzman, J. and Rohila, J.S. (2019), Cover Crops and Returning Residue Impact on Soil Organic Carbon, Bulk Density, Penetration Resistance, Water Retention, Infiltration, and Soybean Yield. Agronomy Journal, 111: 99-108. https://doi.org/10.2134/agronj2018.03.0213
G.S. Marcillo and F.E. Miguez, Corn yield response to winter cover crops: An updated meta-analysis, Journal of Soil and Water Conservation May 2017, 72 (3) 226-239; DOI: https://doi.org/10.2489/jswc.72.3.226
The rise of income levels, increased availability of nutritional information, and the pursuit of a healthier lifestyle have generated a shift in the preferences of American consumers over the past few decades. This has led to a steady supply of specialty crops throughout the year to meet a growing and more sophisticated consumer demand. However, due to seasonal patterns and specialization in the production of fresh fruits and vegetables, it is necessary to rely on imports from different regions of the world to provide U.S. customers with a more stable supply and less volatile prices of these products.
A selected group of fruits and vegetables (i.e., tomatoes, peppers, onions, apples, avocados, grapes, berries, and citrus) was considered to analyze their annual patterns of domestic supply, as well as their corresponding prices and imports from both the Northern and Southern Hemispheres of the continent. On average, between 2015-2019, the annual domestic production of these crops targeting the fresh market represented a total economic value of $11.37 billion, and an additional $11.74 billion were imported each year (USDA-NASS, USDA-FAS). The data used consisted of monthly imports from 2015 to 2019 obtained from USDA-FAS and monthly movements of local produce from all domestic districts (excluding imports and exports) obtained from USDA-AMS. For prices we used the corresponding USDA-AMS monthly average prices at Terminal Markets (wholesale prices). Weighted averages were used to combine subcategories within a crop to reflect a common unit of measure.
The overall supply and observed price throughout the year of the selected crops are presented in Figure 1. Note that for some crops there is strong seasonality in their domestic supply, with peaks in different months depending on the crop analyzed. Avocados and berries have a peak of domestic production during summer, while grapes, apples and citrus show a steady increase of production from fall. For most of the analyzed crops, the imports from different regions are required to maintain a stable and sufficient supply through the year. Imports from North America (i.e., Mexico and Canada) are the main source of fresh vegetables and fruits when local production is insufficient to meet the domestic demand. North America’s imports are particularly important for tomatoes, avocados, and peppers. For some other crops such as grapes and citrus, the imports from South America play an important role in maintaining produce availability and price stability during the year. The prices for each crop show an expected pattern according to the total supply of those products and to some demand considerations. Particularly, relatively higher prices are observed during the off-season of local produce.
The market information summarized in this article could be used by local specialty crop producers and retailers to identify fundamental patterns in the availability of fresh fruits and vegetables and determine the existence of price effects derived from variations in the overall supply. This information could also help local growers design better production and marketing strategies aimed to reduce marketing risk by aligning production decisions with more favorable market conditions.
Figure 1. Supply and Price Seasonality of Selected Specialty Crops, Average 2015-2019
Research into cover cropping has shown some benefits to soil health and conservation. However, adoption of cover cropping has been relatively low due in part to uncertainty about its profitability. When considering whether to adopt this practice it is important to understand the associated costs.
Seed and planting cost make up the bulk of additional costs of cover cropping. Table 1 shows examples of the cost of planting various cover crops from prices obtained in Mississippi. Seed costs range from $18.00/ac for oats to $43.80/ac for Austrian winter peas. Planting costs are estimated at $11.68/ac including direct expenses as well as indirect equipment costs (estimates derived from the Mississippi State Enterprise Budgets assuming a 20’ grain drill). Total costs of cover cropping range from $29.68/ac to $55.48/ac. Your costs will vary depending on local conditions, seeding rates, and equipment. In some cases, an additional herbicide application is also needed to terminate the cover crop.
Table 1. Costs of Cover Cropping
Crop
Seed Cost $/lb
Seeding Rate lb/acre
Seeding Cost $/ac
Planting Cost $/ac
Cover Crop Costs $/ac
Austrian winter pea
0.73
60
43.80
11.68
55.48
Crimson Clover
1.80
20
36.00
11.68
47.68
Cereal Rye
0.39
60
23.40
11.68
35.08
Tillage radish
2.40
8
19.20
11.68
30.88
Oats
0.36
50
18.00
11.68
29.68
Rye+Clover (89/11 Mix)
0.45
50
22.36
11.68
34.04
For cover cropping to be profitable there needs to be a positive yield benefit to offset the added costs. However, research has shown that cover cropping may have no effect on yield or in some cases decrease yield. The impact on yield is highly dependent on which crop is being grown. Spencer et al. (2021) found that Austrian winter pea and cereal rye decreased corn yield by 37 and 45%, respectively, in the first year of implementing cover crops. In subsequent years there was no significant differences in yield found. But, net returns were significantly reduced in 2 out of the 4 years examined. Bryant et al. (2020) found that, relative to reduced tillage-subsoiling, a cereal rye cover crop had no impact on soybean yield but a radish cover crop reduced soybean yield by 12%. However, these results are atypical for what is usually observed in soybeans under cover cropping. Regardless, the lack of a positive yield response led to lower net returns under both the cereal rye and radish cover crops in that study. Lastly, Denton et al. (2021) found no yield response from cover cropping in cotton. This led to lower net returns of $20.34/ac to $124.64/ac under cover cropping. These studies show why cover cropping may not be profitable in the Mid-South.
One way to help alleviate the lack of profitability would be to secure Environmental Quality Incentives Program (EQIP) payments. As shown in Table 2, payments vary from state-to-state and by cover crop. Producers are only eligible for payments on land that is not currently under cover cropping. There are also limitations on payment amounts and duration. More information on your specific state’s EQIP payments can be found at: https://www.nrcs.usda.gov/wps/portal/nrcs/detailfull/national/programs/financial/?cid=nrcseprd1328426
Table 2. Environmental Quality Incentives Program Payments for Cover Cropping 2021
Alabama
Arkansas
Louisiana
Mississippi
Oklahoma
Tennessee
Texas
Practice
EQIP Payments $/ac
EQIP Payments $/ac
EQIP Payments $/ac
EQIP Payments $/ac
EQIP Payments $/ac
EQIP Payments $/ac
EQIP Payments $/ac
Cover Crop-Basic (Organic and Non-organic)
$52.36
$50.22
$50.05
$51.73
$48.60
$52.14
$33.74
Cover Crop-Multiple Species (Organic and Non-organic)
$64.02
$61.75
$61.71
$63.26
$60.25
$63.79
$41.51
The results discussed here may differ from what is found on your farm. When deciding whether to adopt cover cropping it is important to test if the practice is profitable on a small area first. Once it is determined if it is profitable for you then larger scale adoption can be implemented. Your local NRCS office can also help with additional information about obtaining EQIP payments.
References
Bryant, C.J., Krutz, L.J., Reynolds, D., Locke, M., Golden, B.R., Irby, T., Steinriede, R., Spencer, G.D., Mills, B.E., & Wood, W. (2020) Conservation Soybean Production Systems in the Mid-Southern USA: II. Replacing Subsoiling with Cover Crops. Crop, Forage & Turfgrass Management. http://dx.doi.org/10.1002/cft2.20058
Denton, S.D., Dodds, D.M., Krutz, L.J., Varco, J.J., Gore, J., Mills, B.E., & Raper, T.B. (2021). Impact of Cover Crop Species on Soil Physical Properties, Cotton Yield, and Profitability. Journal of Cotton Science. 25:68-78.
Spencer, G.D., Krutz, L.J., Locke, M., Gholson, D., Bryant, C., Mills, B.E., Henry, W., & Golden, B. (2021)Corn productivity and profitability in raised, stale seedbed systems with and without cover crops. Crop, Forage & Turfgrass Management. http://dx.doi.org/10.1002/cft2.20142
