Even though the cattle industry continues to round up good prices for cattle, Steve and Morita Schoeneberg of Louise, TX, wrestle with higher input costs in their operation.
The Schoenebergs operate a 600-head cattle ranch on about 1,800 acres along the Texas Gulf Coast, southwest of Houston. While they grow most of their own forage, they feel the effects of high fuel and fertilizer prices.
"More and more with the cost of everything, I feel we are just spinning our wheels," said Morita, who attended the 54th annual Texas A&M University Beef Short Course while her husband stayed home to work the ranch.
The Schoenebergs feel the effects of the three Fs—feed, fuel and fertilizer—as Texas cattle ranchers deal with lower profit margins despite higher cattle prices.
That theme was repeated several times during the beef course held on the central Texas campus Aug. 4-6.
According to the Standardized Performance Analysis (SPA), a program administered by Texas A&M to examine the financial health of ranches, the total cost to maintain each female in a herd in 2007 was $590.33, and the 2007 cost per cwt. of weaned calves was $116.90. Stan Bevers, professor and extension economist for Texas A&M based in Vernon, TX, said costs accelerated since 2002, and he believes costs will rise more in 2008.
"You look at the increasing costs of inputs over the last six months or so, especially if you look at corn prices, and we most likely will have over $600 costs per cow for 2008," Bevers said.
In an analysis of 71 herds in eastern Texas and the Panhandle completing the SPA program since 2003, the largest cost for cow/calf producers is purchased feed. Feed averaged $80.38 per breeding female, or about 14.5 percent of total operating expenses in 2007. This includes supplements, forages and minerals purchased. The cost is influenced considerably by high corn prices, he said.
Corn’s price is viewed much differently by cow/calf producers than by corn farmers in the Midwest. While many cow/calf producers blame ethanol and its boom for higher prices, other factors affect feed prices, said Steve Amosson, professor and extension economist with Texas AgriLife Extension.
"Ethanol seems to get all the headlines of why we have higher prices, but oil prices, exchange rates and speculative funds all also have an effect on increased feed costs," Amosson said.
Oil prices are by far the number one problem that faces all of agriculture, he said. To the cattlemen, ethanol represents a thorn in their side. But what could be ethanol’s saving grace, at least to the cattle industry, is distillers grain. With more corn going to ethanol production, there will be more distillers grain for the cattle industry. Other livestock feeding enterprises, such as hogs and poultry, cannot use the product as readily as cattle feeders.
"Distillers grain is a positive part of the game for cattlemen," Amosson said.
Fertilizer prices doubled
Another input that affects ranches’ bottom lines is fertilizer. Most fertilizer prices for Texas cattlemen have at least doubled in the last several years. These costs are set to increase, with little hope for a significant decline in the immediate future, said Vincent Haby, Texas A&M System Regents Fellow and professor of Texas AgriLife Research located in Overton, TX.
Diammonium phosphate (18-46-0), the basic fertilizer used in many blends for grass in Texas, retails for as high as $1,300 a ton, and potash (0-0-60) fertilizers costs up to $825 a ton, Haby said. Even sulfur (S) has recently increased by $350 to sell for $725 a ton and is expected to increase in the third quarter of 2008.
"The rising price of fertilizer has some Texas cattle producers deciding they can no longer afford to apply them to their grass," he said.
Ranchers can eliminate or reduce fertilizer used on grass to cut input costs, but that can reduce land productivity. Haby suggested producers carefully consider the economics of not fertilizing. Use soil test recommendations to fertilize at an efficient level without over-fertilizing. If producers do reduce the fertilizer application rates, they should be ready to reduce livestock numbers.
"You just have to lower the number of cattle on that grass if you reduce the application rate; there is no way around this," he said.
As with many ranching operations in the eastern part of Texas, the Schoenebergs stockpile winter feed. They plant ryegrass and allow the cattle to winter graze this forage. This eliminates feed, mainly hay, costs.
Part of their land includes grass and hay land that is under center pivots. She said they are at the point of not wanting to run the pivot because of the ever-increasing cost of fuel. They also debate whether to continue to fertilize their grass as they had in the past. Every year, the cost to fertilize their pastures increases and they have to do something to cut into their rising input costs.
"I think in the long run, we will have to reduce our cow numbers," Schoeneberg said. "I know it seems backwards, but if you reduce some of your production, you are going to do better to make a profit and ... that is what we are trying to do."
As for the future, Schoeneberg hopes as they alter how they operate the ranch, they will survive a challenging time to ranchers. Raised a city girl and married into the ranching business, she has tried to learn as much as possible about the industry to operate as efficiently as they can.
The Schoenebergs have three adult sons, but all three have jobs away from the family ranching business and show no interest in returning to the ranch someday. She understands why they would want to pursue other careers, given that cattle ranching in Texas is not a very easy job, especially now with such high input costs.
"I have hope for the future, but the way it is going currently, we are heading down one spooky trail," she said. — WLJ