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Previous issues of the BEEF Cattle letter

Issue # 545

July 11, 2007

Forage Focus: Summer Grazing Management - Rory Lewandowski, Extension Educator, Ag/NR Athens County

Grazing management during the summer months generally calls for slowing down the paddock rotation, finish clipping any remaining seed heads from paddocks, and working paddocks back into the rotation that may have been set-aside during the spring flush. Grazing management during a summer drought involves all of this…and more. Let's examine in a bit more detail each of these steps.

Rotation Speed: Slowing down the paddock rotation is just another way of saying provide adequate rest periods for the forage plant. A basic grazing principle is to insure that a grass or legume plant has time to recover from defoliation due to grazing or clipping before it is once again subjected to the stress of defoliation. The length of time required for that rest or recovery period is dependent upon growing that plant back to a height where root reserves have been replenished. The following table provides some guidelines taught and used in grazing schools regarding starting and ending grazing heights for some common pasture species/mixes:

In a drought situation such as we are currently experiencing, re-growth rates of plants can range from very slow to nil as some plants may have gone into dormancy. Rotation speeds need to reflect plant re-growth rates. In order to protect plants and not over graze paddocks, rotations are currently at 45 days plus, for those fortunate enough to have pasture left. In some cases, the best thing to do is to stop the rotation completely, and hold the livestock in a sacrifice area and feed hay. The temptation is that as long as there is any green pasture growth to disregard the beginning grazing height guideline and let livestock graze. However, because there is less forage available, the rotation through paddocks with this practice is speeded up and soon, if rains don't arrive, all of the pasture paddocks are over grazed.

Once a plant is over grazed root growth stops and roots begin to die back. In addition, because there is no longer leaf area providing a shaded soil surface, soil temperatures begin to climb. Cool-season grass roots prefer a soil temperature of between 50-65 degrees for optimum root growth. Once soil temps get above 70 degrees, around 50% of the roots are lost on established plants. With the sunny 90-degree days we have experienced, exposed soil can easily exceed 70 degrees F. When rains do return, an overgrazed paddock is likely to capture less of the rainfall as compared to a paddock that has maintained some leaf canopy and is less likely to be able to resume growth due to root dieback and high soil temperatures. Many of these paddocks will not have significant growth again until fall, or in extreme cases, next spring. In contrast, paddocks that have not been overgrazed are more likely to resume growth with a summer rainfall and get back into a rotation.

Clipping Seed heads: I have seen pasture paddocks that still have seed heads on them. Should these be clipped off? This is a tough call in a drought year. Normally the return for clipping seed heads is to restore the plant to vegetative growth, but in a drought plants aren't growing. There might even be an argument made that the seed heads are providing a shady cover. My opinion on this is to manage the plant for vegetative growth and future rainfall. Clip the plants to the target ending grazing height.

Adding paddocks: What can be done to add paddocks or forage into the rotation? By this point in a drought, most graziers have included any paddocks that had been dropped out during the spring growth flush. What about hayfields? Even though re-growth after first cutting may not be enough for a second cutting, it may be enough for a grazing pass. Remember that grazing is always the most economical method of harvesting forage.

In a drought year, the producer may have to take some steps that would not be done ordinarily. If everything possible has been done to add paddocks or hayfields into the rotation and forage is still short then stopping the rotation and feeding hay may be necessary. However, are there things that can be done to get some late summer or fall forage from paddocks that are currently non-productive? This would help to insure that hay stocks would be available for later winter use.

For those graziers with some fairly level land, some of the alternative forages mentioned earlier in this newsletter should be considered. Sudangrass and sorghum-sudangrass hybrids are warm season annuals that like high temperatures and can produce some good tonnage under limited moisture once the seed is germinated. Earlier articles in this newsletter had a lot to say about the use of oats. Graziers should give serious consideration as to how they might incorporate some oats into their forage plan in this drought year. Oats no tilled into an overgrazed paddock in mid to late July could provide some good grazing by late August. In this situation, the perennial pasture grasses would recover as the oats are grazed down.

Pasture management in a drought year is difficult. Those graziers that can develop a plan to locate additional pasture resources or utilize alternative forages, while maintaining the discipline to prevent paddocks from being overgrazed will reap both short term and long-term benefits.

Potential of CRP Warm Season Grasses for Hay - Bob Hendershot, State Grassland Conservationist USDA NRCS Ohio

The acres seeded to native warm season grasses for the Conservation Reserve Program (CRP) can be utilized for hay and grazing under three different scenarios; managed hay and grazing, emergency hay and grazing and as a mid contract management practice. In all cases the CRP looks at hay and grazing as improving the conservation cover to improve the wildlife habitat not just to provide feed for livestock. Not all CRP practices are eligible for haying and grazing. Those eligible practices are CP1, CP2, CP4B, CP4D and CP10. The practices must have been seeded before October 2005 for cool season grasses and before August 2004 for the native warm season grasses. Haying and grazing is also only allowed once very three years on any one area of the field. The field can be divided into three part and thus have an area that could be utilized for haying and grazing every year. Haying and grazing is not allowed until after July 15. There is also a 25 percent reduction in the annual rental payment on those acres hayed or grazed. The same acres can not be both hayed and grazed and only one cutting of hay is allowed. Approval to hay or graze CRP acres must obtain from the FSA County Committee in writing, and a revised Conservation Plan needs to be developed with NRCS.

The newer warm season grass plantings for CRP are about one-half the seeding rate that would be used for forage production. These areas will not yield like forage managed stands. They will have about one-half the predicted yield for each soil type or forage suitability group. Most of these newer plantings are primarily bunch grasses like Big Bluestem, Indiangrass and Little Bluestem. These stands will have higher quality because they mature much later in the growing season. Older stands will have more switchgrass which will be thicker and have a higher yield but lower quality due to its earlier maturity. Harvested at the boot to early head stage, quality can be good, but like all grasses when the seed head emerges quality falls quickly.

Late July switchgrass will have a protein level between 8 to 10% with a TDN between 55 - 60%. Big Bluestem and Indiangrass in late July will be 12 to 14% protein and 60 to 65 TDN. They will be 6 to 8% protein and 50% TDN when the seed heads are fully emerged. Conventional laboratory procedures developed to predict the forage quality of cool season forages grossly underestimates the feed quality of warm season grasses by nearly 20%. Beef cattle utilize the fiber components of warm season grasses better than the fiber found in cool season grass and better than sheep. Warm season grasses also have a higher component of bypass protein. If your animals have not eaten warm season grasses before it will take some time from them to adjust to the new forage. Warm season grass large round bales will store better and have less spoilage than cool season grass hay bales because of the composition.

"Take care of the grass and it will take care of the livestock." New Zealand Farmer's Proverb

That Doesn't Make Any Sense - Nevil C. Speer PhD, MBA, Western Kentucky University (reprinted with permission on 7/9/07 from CattleNetwork.com)

Summer is here! The fed market's decline since mid-May leaves no doubt the beef complex is now in the midst of seasonal fundamentals associated with heat and sunshine. Recall the market saw a near-term peak of $98 in mid-May. However, since then fed cattle value declined weekly through the end of June: the market receded $15/cwt over the course of just six weeks. And the first half of the year ended on a sour note with light sales - northern trade established itself at $83-4 while southern feedyards refused to deal at that level and held out for steady money. The second-half of the year opened on a brighter note with negotiations ending at $87-90 (mostly $90) with solid volume in both regions.

Does July's bounce mark 2007's summer lows? Some market observers have definitively cited June's action to mark the bottom. Only time will tell. The more important question now for participants becomes whether the beef complex will gain some ground in coming weeks or if the market will experience an extended flat spell. Much of that will be directly dependent upon the direction of the wholesale market.

Fed prices plunged between mid-may and late-June as the bottom fell out of wholesale market. Choice cutout values plummeted over $25 since mid-May; $10 of that came during the last week of May. Meanwhile, the Choice-Select spread has narrowed from $13 to $6-7. Historically, July and August are not friendly to beef demand - and recall last year cutout values had difficulty getting traction following a significant contra-seasonal June rally. Economic pressures and consumer attitudes are key as the market transitions into the 3^rd-quarter.

On a positive note, the Merc provided the late-summer / early-fall outlook with a friendly boost in recent days. CME's August Live Cattle staged an impressive rally of late gaining nearly $4 in just 7 trading days through July 6 - $92.50 marks the contract's highest levels since late-May. Perhaps more importantly, the October and December contracts underpinned that general sentiment with both contracts making positive moves and currently trading around $97. At the very least, the recent futures rally provides some renewed opportunities for risk management.

June's Monthly Market Profile concluded with a hypothetical reference: "when the market gets back to normal". That's seemingly been an elusive target during the previous decade. The beef complex has navigated through various events which have altered typical market expectations from year to year.

That trend began in earnest with $5 corn which dramatically disrupted normal placement patterns and subsequently required several years to work through. Following a stint of relative normalcy the market was forced to deal with the ripple effects of the September 11 attacks. Most recently, BSE has presented a whole new realm of market dynamics. Amidst those sources of turbulence the industry has also wrestled with widespread drought. And demand has been a moving target: trending upwards to a near-term peak in 2004 and has since declined. All the while, the feeding and packing sectors have responded with constant transition and adaptation.

Therefore, market outlook based strictly upon historical data is tenuous. Moreover, the further you reach back the more distorted future prospects can become. During the past ten years the complex has largely been, and continues to be, in uncharted territory. Case in point: 2007.

That said, I'd argue that 2005 and 2006 were relatively tranquil. The illustration below serves as confirmation: the trend line represents multiple regression solutions for the fed market versus the actual spot market on a weekly basis (R²=.90). In practical terms, derived solutions differed from the actual spot market values by an average of $1; in other words, the statistical model was within a buck of the actual market, on average, for any given week during the two year period outlined.

Let's now turn our attention to 2007. The large data points reflect the actual spot market plotted against estimates derived from the 2005/2006 analysis. Markers below the trend line are indicative of weeks in which the spot price was below the calculated expectation; data points above the line indicate weeks in which the market outperformed the derived solution.

Note that the error - failure of the market expectation to equal the actual market - is much larger in 2007 than in 2005/2006. In fact, it's nearly 2.5X greater than the previous two years in terms of absolute values. Stated another way, determining fed steer value has not substantively changed in '07 from '05/'06 yet the market is behaving less predictably.

But is it the same? Clearly, volatile wholesale values have influenced weekly negotiations - it's difficult for both sides to comfortably bargain fed steer/heifer value when boxed beef prices are bouncing around. However, from my perspective another very important contributor has been in play. Namely, the cumulative effects of winter weather and higher corn prices upon the feedlot sector. I discussed the importance of that influence in January (Winter + Corn = ???) and followed up in February noting "…divergent competitive positions within the [feedlot] sector…[which] represent the rapidly declining ability to make sector-wide assumptions with regards to performance and profitability." The gap between winners and losers in a zero-sum commodity business widens when operating conditions change and/or become challenging. That difference may be manifesting itself within the market and partially explain some of this year's aberrations.

Some background about commodity businesses may provide some insight. Over the long run, the "winners" in a commodity business typically focus on profitability with an effort to make continuous improvement: controlling costs and increasing efficiency across all enterprises which comprise the business. That's considerably different from the traditional commodity, buy-low-sell-high mindset. More specific to the feeding sector and this discussion, marketing decisions are made within the framework of a larger, disciplined strategy: selling cattle is not a separate entity from the rest of the business - it occurs within a comprehensive system which accounts for all the profit drivers incremental costs, flow scheduling and commitments, risk management, etc… The winter/corn scenario outlined above, and the ensuing profitability separation within the feeding sector, has influenced market negotiations.

The fed market is typically established by the seller(s) who pull the trigger first and agree to make sales. As conditions become difficult, those with more profitable strategies and disciplined execution are increasingly able to set the pace each week. Feedyards which comprehensively focus on profitability have remained on the offensive when it comes to weekly bargaining - they're negotiating on their terms and within the context of their business plan. More competitive feedyards have the luxury of pulling the trigger (being the market maker) or laying back in a wait-and-see mode (as was the case at the end of June). Conversely, when operating conditions become difficult feedyards with more of a commodity mindset become focused strictly on maximizing revenue as the means to maintain positive cash flow thereby putting them on the defensive - they've been forced into waiting for the market to come to them (market takers) either in hopes of higher prices or having to settle for lower prices in order to move inventory.

That explanation provides some of the reason for weeks in which the market was seemingly nonsensical as spring progressed; especially those weeks in which cattle feeders apparently threw the towel in early and left some money on the table. It also underscores an important economic tenet: sellers do not compete with buyers; sellers compete with sellers - buyers compete with buyers. (A faction of readers may respond by arguing that the processor is to blame for any shift in market dynamics. However, producer share of wholesale value and packer margins haven't substantially changed this year versus the previous two.)

Most important here are the implications of this discussion: the "winners" are widening the gap within the feeding sector - their advantages are two-fold: a) overall strategy puts them ahead from a cost standpoint, and b) when conditions become tough they're able to leverage more control of the market. Creating distance changes relative competitive positions within the sector and could induce some important transitions going forward (especially when considering that access to capital is ever-increasing just to maintain operations). Food for thought!

EDITOR's NOTE: Nevil Speer will be one of the featured speakers at the August 24 and 25 "Handling, Feeding, and Marketing Cattle for Profit"program being hosted in Ross County, Ohio by OSU Extension. Find more details in next week's BEEF Cattle letter.

Visit the OSU Beef Team calendar of meetings and upcoming events

BEEF Cattle is a weekly publication of Ohio State University Extension in Fairfield County and the OSU Beef Team. Contributors include members of the Beef Team and other beef cattle specialists and economists from across the U.S.

All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status. Keith L. Smith, Associate Vice President for Ag. Admin. and Director, OSU Extension. TDD No. 800-589-8292 (Ohio only) or 614-292-1868

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