The Hundred Dollar Difference How to Increase Efficiency and Profit on Your Operation

By Dusty Abney, Ph.D. Cargill Animal Nutrition

In a recent conversation with a well-respected customer, we talked about the downstream effects that market changes were having on feeding cattle. Shifting directions, he asked, why do I see a hundred-dollar difference per head in profit, depending on the custom cattle feeder? To be clear, he doesn’t just feed one pen of cattle; he has fed cattle for decades and may place them in as many as eight or more yards in three or four states in any given year.

It would have been easy to brush him off with a vague answer about the yard’s proximity to ingredients, the health of their cattle, and a special focus on ration formulation. However, our conversation about his experiences discounted those factors and we ended up talking more about the operational aspects instead.

That conversation made me wonder, why is there such a wide variety in profit margins in the cattle business? That disparity isn’t just limited to feedlots. Cow-calf and stocker operators also have a wide spectrum of profitability and plenty of opportunities to improve. It’s important to understand that what I’ll discuss in this article are areas where everyone wins. None of these ideas will require new equipment, infrastructure or a product.

How to Achieve The Hundred-Dollar Difference

Begin by asking yourself, where would your time and energy best be focused? This is the perfect example of when an outside perspective can be beneficial. Your traditional focus has gotten you this far, but is that where you should be spending your time? Really ask yourself, what am I not a subject matter expert in? For a lot of producers I work with, that area is nutrition.

The next step is probably the hardest one of all — actually, reaching out for help. Admitting we need help is never easy, but it’s almost always the action that results in improvement.

Ingredient cost and availability, animal health, and a good ration are important factors that affect profitability. Realistically, there’s very little we can do about where a yard is located and what ingredients are available, much less what the market prices are for them.

Animal health is an area where a lot of time, energy and money is spent to maximize performance. Examining the latest in vaccines or antibiotics takes up a lot of mental real estate for us. Health is something that will reassert itself frequently, even if we don’t want to spend a lot of time thinking about it. We talk about health a lot because it’s important, but the results of improving health are only seen in the animals who are ill or might reasonably become sick. Some of The Hundred-Dollar Difference is made by a doctoring crew, but not most of it.

We must remember not to let actions we are forced to take in times of drought or other trials (i.e., supply chain disruptions) become our new standard operating procedure. Sure, you got away with not feeding your cows a free-choice mineral for a month when you didn’t have time to get it done. However, the medium or long-term effects of any nutritional shortage will ultimately come back to assert themselves. We all know any negative outcome will happen at the worst possible time.

Thanks in part to the smallest cow herd in the U.S. since the early 1960s, we are poised to see profitability in all the segments of the cattle industry. After the hardships and challenges of the last few years, that’s welcome news. I believe that we should have a plan in place for where and how that money will be reinvested in your operation before it happens. It’s easy to think about buying a new pickup, but will that investment be what helps drive your profitability in the inevitable lean years? Would you be better served to spend some money on infrastructure instead?

Ration quality is probably the easiest place to have an impact over the shorter term, but rations can’t be formulated in a bubble independent of how the operation is managed on a day-to-day basis. Balancing a diet without understanding the capabilities of the facilities and employees is a recipe for disastrous results in health, performance and profitability. This is true whether it’s a 50,000-head feedyard or a 25-head cow-calf operation.

How and What Cattle Are Fed Affects Every Animal Every Day

There are more dollars to be gained in the area of operations than several of the other areas combined. It doesn’t matter how great a ration is, or how many dollars per dry matter ton the nutritionist saved you if you can’t read/call bunks, mix, and deliver that diet as efficiently and consistently as possible. It’s often the case that a mediocre diet executed well by a great crew can outperform a great diet that isn’t.

While there isn’t room here to go into detail about operational efficiency, it’s another area that benefits anyone who improves it, regardless of how they contribute to the beef industry. Because feed is one of our most expensive inputs, how we handle and distribute it is of great importance. For instance, the loss of feed, also known as shrink, can cause the actual money you spend on nutrition for your cattle to skyrocket. No matter how careful you are, shrink occurs every time feed is handled or moved. Being more intentional in how we store, move, and deliver feed can greatly reduce shrink.

Even great operations have a shrink of about 5%-10%. Consider the effect of a 15% shrink on a feed or ingredient that originally cost $300 per ton. We now have 85% of what we paid for, which means that our real cost is more than $350 per ton ($300 ÷ 0.85 = $352.94).

Remember that everything we feed experiences shrink. It doesn’t matter if it’s an ingredient like distillers’ grains, hay or silage. In fact, sometimes shrink happens just through improper storage. Consider haylage or bailage in those pretty, white plastic bags that are becoming so popular. Harvesting that material at the wrong moisture content, not sealing it well, or allowing the bag to become torn after stacking it can all cause a significant amount of loss. Forage is expensive, so do your best not to add to that cost by carefully considering shrink.

Forage shrink might not seem like a big deal; however, it costs our industry a huge amount every year. In the winter, most cow-calf operations rely heavily on stored forages. It’s easy to see how that could have negative effects on their bottom line. Feedlot operators might not take forage shrink as seriously because it’s a smaller percentage of the dry matter they feed. Those folks should remember that, on a cost of gain basis, forage is the most expensive part of their diets. Losing more than necessary to shrink will only exacerbate that.

This is where developing a strong relationship with your nutritionist is of huge importance. Once a nutrition professional understands your goals and your constraints, they can work to develop not just rations, but a feeding plan to help you get the most out of what you have. A great nutritionist will explain their recommendation and spend time with you and your team to help achieve your goals. The bulk of The Hundred-Dollar Difference lies in the teamwork between your team and your nutrition professional, and how well you perform within the feeding plan you develop together.

That sounds great, but the difficult part of it is executing the plan once the nutritionist leaves. You will probably find that doing a good job in feeding operations will prompt your nutrition professional to get even more nitpicky on their next visit. That’s praise from them, of a sort, because they see that you have the capability to continuously improve.

Many nutritionists will put your operation through a bit of a qualification process to make sure you have the skill required to handle a diet that is less “safe.” If your crew hasn’t proven themselves able to do that, then the training wheels tend to stay on. Every team has limits to their skillset. It’s one aspect of a nutritionist’s job to push and teach your team to get better. When that improvement happens, everyone wins.

Hitting all the marks on how, when, and what you feed isn’t fun, but it is profitable. Remember that it affects every animal every day, for better or for worse. Keep in mind that if you procrastinate about discovering and fixing these issues, you are still making a decision. You just decided not to improve and will have to live with the consequences.

While there aren’t many hundred-dollar bills waiting to be scooped up with ease on your operation, there are plenty of fives, tens and twenties to find if you seek to understand. Which end of The Hundred-Dollar Difference do you want your operation on?