June 13, 2001 | By: Aimee D. Heald
LEXINGTON, KY.

Careful planning and good decision-making skills are the keys to making a cattle operation profitable. Planning for the long term in an industry facing constant market and production changes is tricky.

University of Kentucky Agricultural Economist, Lee Meyer said a long-range plan must balance two key factors – market trends and production resources.

"A clear goal is a good starting point," Meyer said. "Do you want to make the most money, regardless of the type of enterprise, the level of risk and the investment? Or is there some balance and/or limits you want to set?"

Resources, such as number of acres, herd genetics, forage quality, cattle numbers and land productivity determine production level. Producers should ask themselves if they are willing to make the investment that will increase production capacity.

Since the beef industry is at the bottom of the cattle inventory cycle, and since cow slaughter has been up 10 percent so far this year, Meyer said producers need to breed more heifers just to hold cow herd numbers at their current level. Another key point is that beef demand has continued to rise in spite of a weaker economy.

"A strategy to take advantage of the cattle cycle should be carefully developed," Meyer said. "Every farm and farmer is different, so it's dangerous to generalize, but, there are a few guidelines that fit many operations."

First, Meyer suggests building the herd size, while at the same time preparing to see lower prices after three years. Second, producers should think about having two cattle enterprises – cow/calf and backgrounding.

"When calf prices decline, you'll have an option for your calves, since backgrounding tends to be more profitable when calf prices are down," he added.

Meyer also said producers should use cash from today's high prices to improve efficiency on their farms. They can put this cash toward better genetics, forages, fences, etc.

"The bottom line is most cattle managers have three or four cattle cycles to work through in their careers," he said. "Take advantage of the current opportunity because another one may not come along for some time."

Contact: 

Lee Meyer 859-257-7276