Building Economics Into Your Cover Crop Cattle Operation

0:00 Primary objective at the ranch is to produce a quality yielding carcass that we can sell on a value add grid marketing based price program. So that's what we're about. We do that primarily through our bull genetics. So the heart of our operation is around our bulls. We really run our ranch based on two KPIs: one is our cost of gain. We do that across all weight sectors or calves, and the second is what's our expected return on carry to move that calf to the next weight class.

0:54 We're three years into no till and cover crop and we feel like we're beginning to integrate that into our economics pretty well. So I'll discuss that with you today as far as what kind of performance that we're achieving. Here's some of the profile data about us, a little bit. Our bulls are in the top 30% of the ACSI database. We do have a small group of bulls we're in the top 4% that we're studying to see if that makes sense to pay that much money for a bull.

1:35 We have shifted with cover crops. We shifted to fall and spring calving. So we tried to line up our forage because one of the things we want to do is do forage optimization, and cover crop has helped us do that. It's also kept within the boundaries of our cost of gain guidelines that we'd like to have for those calves. We have a 60-day breeding season.

2:00 We handle our dries pretty much by moving a cow that's dry down one cycle, and particularly if she's got a good BCS and maybe we've let her go down a little bit. Otherwise, if she misses two, she's out. We try to spend a lot of time on how we market our cattle, and I'd like to have a lot of options as to where we can unload them, whether it's early in the season post weaning or whether we take them on to finish line. We like to achieve a 25% return on carry for that calf. Today's market, of course, does not really allow you to do that.

2:38 So we'll talk a little bit about that. Our preferred method is to move that calf into a finishing pen and marketing through the US Premium Beef program out of Kansas City, part of National Packers. If we have to sell that calf before time because we can't project our ROI on the carry, we're trying to build enough carcass data so we can go to those quality feed lots and still sell that calf as a premium. Sometimes we're doing that and sometimes we're not doing it. Primarily we need more data.

3:17 You can see a little bit about our acreage numbers. The thing that's not on there is we got a little difficulty with geography. We're running 38 miles east west, 18 miles north south, so it's a little difficult, but some constraints on us as far as rotation and those kind of things. Here is a set of our current stockers that we just moved to wheat.

3:45 We're just finishing the VAC program and looking them over and getting them to weight. This particular set of calves out of the pre-con pin we had a cost of gain of 60 cents, which is a little higher than we normally would like. They were in the precon pin about 30 to 45 days. We'll decide next week on what to do with these cattle whether we want to push them on forage for more gain, whether we want to take them to a lot. Right now that's probably not going to make much sense. We may graze out some items here.

4:24 Here is a group of cattle they're currently over in Oklahoma. These particular calves ran this summer on our cover crop and did very well on that. These current calves are gaining about 4.04 pounds a day and the cost of gain on those cattle is about 76 cents. We hope that we can have about 80 to 85% of these calves do a Yield Grade one and two. They'll probably go to USDA probably in the next month. Today they weigh about 1340. In this particular group we've got a weight variance of about 12% high, 12% low. So we like to keep that 60-day calving so we can keep a pretty uniform calf. We'd like to keep that within 10%. We got a little out of that. We had some smaller calves, we had some heavier calves in this time. Based on historical elements we think we achieve that yield grade on these calves. That we're not chasing marbling and quality grade. We're only, we don't think we're smart enough to do that, but we think we can get the yield grade one and twos about 80 to 85% of those cattle to meet that objective.

5:48 What I'll talk about today is a little bit about how we got started, the lessons learned and we've got a bunch of them, things that I wish I would have known day one, because I feel like we got tripped up because we had too high of ignorance level about some of these things. Comment a little bit on what current plans we have because we don't know enough to manage our cover crop portfolio, and I'll talk about that in a minute, and then a little bit on how we want to measure success in this operation.

6:25 Our operation, like yours, revolves around water. Here are our water metrics for Archer and Young County. I want to go through a couple things with you. It was predominantly water that got me into no-till because we went through those droughts and those were really tough times for us. Then we got a great rain and I stood in my rubber boots in one of our secondary ditches on the ranch watching all that water leave the ranch and going to the next ranch. At that point in time I said, you know, this isn't fun. We've got to change the way we think about water and we've got to queue up water, whether it's storage for water for cattle, because we had to sell cattle during that drought because quite frankly we got tired of taking the tractor out and pulling dead cattle out of.

7:25 Moles so I said we're going to change two things we're going to change how we up water and we're going to change how we Farm and try to get more water retention and since that time on the ranch we've built two 3 acre lakes an 8 acre lake we just finished an 18 acre lake two months ago 3 months ago and we're now working on a 22 acre lake which is the maximum you can have in the state of Texas so we've got a rethinking about our water.

8:00 On the place now if you look at some of those graphs you'll see that we got a little lucky spell around May we get a spike typically we can get that cover crop in get it started with some moisture and then look over there in September we get a pretty good spike now you'll see throughout the conversation today I've got a great love hate relationship with sun hemp. I love it I hate it one of the things I hate about it is I'd like to make the decision myself long about August September about what I want to do with water on that cover crop well with sun hemp we've only got two chainsaws on the ranch and that's just not enough chainsaws to terminate something sun hemp and we've got to figure out what to do with that because that sun hemp's hard to terminate glyphosate won't do it it keeps on going and it keeps on using that water that I may not wanted to use.

9:00 So we use this water chart to determine how we want to regulate that cover crop and I want to focus a little bit on the economics because when I looked at the noil and the and the cash cover crop I said well if it's that good how can I monetize it and that's what we've tried to do and to give you a little bit an idea we had a real estate appraiser out not too long back and he looked at our 18 acre lakes which by the way filled up in two rains and he thinks that that 18 acre lake will add about a million dollars of asset value to that ranch I've got about $100,000 in fuel and a lot of time on my beum sitting there building it but we built it I came to Eden Oklahoma bought a Garfield SC scraper for $27,000 and built that lake with tractors we already had.

10:10 As far as how we got started we already had a couple years of commitment thanks to Jim Johnson about putting rape seed and rat seed our wheat to help us with a soil compaction getting the root down so we put on a noil drill we bought a sprayer because we didn't have one we already had the tractors we didn't have a GPS rig and we had to do that and got a few other things the biggest thing is Jim helped me with my cover crop because I didn't have a chance of knowing how to put those species together and quite frankly still don't here's a couple of our rape seed on the top radish on the bottom.

10:58 That we have in wheat, we use about a half a pound to 3/4 of a pound seed per acre, and that's really helped in the soil compaction arena, no question about it.

11:13 Here is the Jim Johnson special that Jim put together and it's a great base. I've got some questions that I want to research this year on it and I'll talk to you about that. But you can see the percentage of legumes and grass is about 54% grasses. I'll go through some of the criteria, and hopefully we can together throughout the next couple years figure out how to better manage these portfolios. The three gentlemen right here at this table are all my colleagues in Mercer County and they helped me get into this crazy game. And they, who would like to have better mechanisms, know what are better companions, what are better competitors in this same space. But we use about 6% bras as the rest of it. Broad leaves, we had fair luck. We had a couple questions that we couldn't answer, which I'll talk about a little later, but that's how we got started.

12:17 Here's a rig we use to seed. This year we were late. We didn't get in, couldn't get in those fields until 5th of June to put seed down, which is 30 days later. And we really wanted wet conditions. We use infero liquid for both about four pounds of peat for wheat and then we use it for liquid occulant for the cover crop as well. So we like that. That's in for a delivered there on the seeder, and we have had no problems on the seating side of the no-till.

12:56 Here is the germination of that seed bed. This particular picture was taken mid-July, so that's about 6 weeks of growth, that would be typical germination in most of our fields that we got.

13:19 Now we completely restructured our grazing program around forage, and this is now what our schedule of forage looks like for the year. And this is where we got good economic impact and marginal cost of this cover crop to help us with our forage. I'll go through the economics of it in just a moment as well. So you can see we swing in, they're starting with wheat. We swing in for those calves. We put them on precon pins 30-45 days. We'll wait on two things. We want to see the calves are all straightened up from a med point of view. We want to see how that wheat's doing. So we'll vary a little bit on maybe when we turn them out on wheat, depending on moisture and depending on the health of the calves. Otherwise, we'll start that wheat operation, and we'll again watch the market. Depend on what we want to do with those calves. We raise our own hay, so come 15 February we've got to save off a little bit of that forage for our hay and take those cattle off. Otherwise, we'll determine what we want to put weight on them. There, now our cost of gain for forage is 40, so you can begin to see how we play for the economics.

14:37 Come out of the precon pin at a cost of 50 cents. I go to forage with a cost gain of 40 cents. I go to G Oklahoma with a cost of 76 cents. So you can see how I can begin to play off various factors of where I want that cow, where I want that calf to be from a weight point of view, whether I want to get off early on the train and this market. We got a little help today, so I don't know what we'll do with them at this stage.

15:07 And then we'll pick up the next bunch of calves, put them in the precon pin and again determine when we can get that cover crop in. And of course we will either follow the bor or if we graze those cattle out, we'll go right in there right after graze out and get that cover crop in. So it gives us 8 months of good forage there. We really like that. That's really working well for us and good forage economics. I can put weight on at 40 cents. I'll do that all day long.

15:48 This particular picture is 140 acres. I had, I can't recall if these are heifers or stalkers. That looks like a stalker there. And this is grazing. I think they were, this is late August, so they were just about got this thing grazed out. And you can begin to see some of my weeds because one of the things I've got to figure out is a little bit of weed management. So you can see some of the weeds there. This is primarily pearl millet that's left. They do not like pearl very well. And I first thought, well, that's a bad deal, there goes pearl millet out. And then I realized these particular cattle we sold them at $1.86, and it's pretty easy to get at dollar 80 cents. They're pretty easy to make a decision to leave them on the grazing one more day. So we tried to graze this thing out and we kind of liked the fact that they didn't eat this millet and that we could still get that biomass there.

16:51 All those were stalkers. This is the heifers. We had heifers on another one. This again is about late August and they've been on here a while on this particular picture. This is a set of our stalkers. This was 80 stalkers on 170 acres and this is after they'd been in there 30 days. That's what that looks like. You can tell they've already had all the millets off, had all the gos off. They go after those. We planted corn, and that was the first thing to go. So you can see they've picked this over pretty good so far. And this was one calf per two acres.

17:47 So what that boils down to as far as lessons learned that perhaps can help you is we were just too darn ignorant on agronomy. You know, looking back on it, I shouldn't have started knoll when I did because I didn't know what I didn't know. But we didn't know why we were doing what we were doing and I think we had a false comfort zone. And boy, today was fantastic for me to understand that.

18:20 And the fact is, I really didn't know what business I was in. Let me make the points: you know, 10 years ago if you'd said 'what's your business,' I said 'well, we're in the cattle business,' and left it at that. Well, you can't be successful just being in the cattle business today. If you ask me what my business is, I say we're in animal reproduction business, we're in herd management business, and we're in the carcass creation and marketing business. So it's more specific, more directed, that you can succeed at.

18:53 What business are we in in no-till? I submit that we're in the microbiology manufacturing business. And once I understood the science behind that, of the things that went over today, I felt like I began to know what business I was in. Because if we don't—in my case, if I didn't have enough knowledge of that science and that scientific microbiology process—how in the Dickens am I going to influence it and manage it? Because if you don't understand it, you can't manage it. And we didn't manage it because we didn't know enough.

19:35 There's a lot of help out there. I tell you, too, that I like you mentioned Christine Nichols today, Keith. Dr. Christine Nichols out on YouTube—she is smart. I love her. Dr. Elaine Ingram, very good. So there's a lot of stuff out there. What Keith did today was great for me.

19:55 As far as my expectations from cover crop—of course we had a wet year—but it blew my expectations away. I never thought it would be a major forage contributor for our cattle, and it turned out to be fantastic. We were very conservative about it. I want to do some more things on this mix and figure that out. And then when I look at my own ignorance and I went out and studied, you know, I found out in the late 1980s, soil science said we had three or four normal ingredients for essential plant nutrients. That's all, 1980: three or four nutrients. Today, when you go out to the textbooks, it's 42. There are 42 nutrients. So look how much soil science we've gained since 1980.

20:46 And the interesting thing is today arsenic is not listed in those books as an essential plant ingredient. It is an essential micro nutrient. So I feel like the whole industry is beginning to take a lot of momentum. You know, I challenge Jim and the Noble Foundation to help us producers get smarter about the things we need to know. And thank you, Keith, for your science-based stuff this morning.

21:23 The thing that I want to understand about science is not so we can feel smart, but to feel like how can I influence it and manage it? Because that's what I couldn't do with my cover crop and no-till. I said 'gee, there it is,' now we just sit back and watch it. And I called Jim and I've got a slide here I want to show, and I let Jim look at it and he said 'gosh, I never thought about that.' And that is: I look at this as a portfolio of seeds that we've got to figure out how to get a matrimony in. And what is my role in all that?

22:01 Because I didn't know what my role was. I knew we had to put carbon but I didn't know what combination. I knew we had to do some roots and I knew basic principles but I didn't know enough to go in and pull the strings and leverage and influence all that process. I did understand the sod disturbance on the fungi. My disc is now collecting rust in the shed, but the cover crop species to me is a big huge world with a lot of possibilities and I think we're going to need some more help to get those things managed.

22:39 Here is one of our root structures in mid-July on one of our brassicas. For example, one of my questions on brassicas is, do we do less, do we do more? I like that root, but are they really a threat to the thyroid problems of the cattle? I don't know.

23:01 Here's another route that was taken in late August. So we've got some unbelievable root structures. I'll show you a little bit more about the root structures in a moment. Here's an eye-level shot with about six feet high, late August. We had not yet grazed this, so you can see there's an unbelievable amount of mass there, and there's my friend Mr. Sunflower that we've got to either do more of or less of.

23:37 So I see now that I'm in the biological manufacturing business. I've got a ranch and cattle over here. I've got a biological manufacturing plant over here that's a few inches underground, and that helps me rethink a little bit about what I need to do because that's science-based stuff. Just like I've got on my manager's telephone all the BCS charts and we go out and we test each other on BCSs. We'll look at the calf and we'll say, okay, give me the BCS that calf, and we'll study it and determine whether we're right or wrong because we want, for example, we want our cows about four and a half, we want our heifers about five and a half, we want our bulls a little in excess of six. And I want that manager every day to be looking at those BCSs out there. I want every day be looking at our biological manufacturing facilities and see how we can better influence it with better types of inputs.

24:41 This is a sunflower hemp root. So you can see this is the love side of my sunflower hemp. I love those roots and do they have some whopping roots? Fantastic plant.

24:59 I'm not going to go through this slide. We've had a lot of biology today. The thing that I missed is the difference between pool nutrients and the nutrients that are available to the plant and what we can do. For example, I have a little bit of a problem at first understanding how I can manage the carbon-nitrogen ratio. I'll get into a little bit more of that, but we can determine the rate of mineralization by decisions on how we want to manage that portfolio.

29:15 Get Jim to help with this. Is this getting too complex to manage his portfolio of cover crop seeds because there's so many possibilities? Is the good news. The bad news is well there's room for a lot of mistakes because these are all the things that I want. And of course I'm a grazer so I'm going to go a little bit on the bias side of grazing but I also want seed separation, weed separation. I want nutrients. I want roots because I got a lot of cattle out there slamming down on that ground and I want those roots. So I want a lot of stuff out of this. I've already got wheat which is a high C/N ratio so I want to get good decomposition rates. I want maturity at the right time and I want to control maturity instead of having Sun control it for me. So I want to get a lot of these benefits from cover crop and I don't think that I'm smart enough to do that. So I think we're going to have to have some material and I think the lease is right this morning. You know I went out there try to find material to understand these things but she's right it's not there in the cover. Your website Keith is about the best there is.

30:33 You know we got two kinds of employees on the ranch. We got first kind of employee that rides a horse throws a rope and carries a sharp knife. This is my other employee now in my microbiology manufacturing process because if you'd showed me this picture two three years ago I'd said well that's somebody's root graveyard that they photographed but boy I sure don't look at that today as a root graveyard. I look at that as high energy going into all that biological process. And here's the thing that I want. When you study good science and if we can get this portfolio right on this thing we can increase our microb activity by 2,000 times. That's got a big economic impact. It's got a big yield impact. It's got a big grazing impact and to me that's a real big deal. So I think we've gotten to the point where we understand the potential now. I've got to get it refined in understanding that cover crop portfolio and here is how I'm kind of taking a shot at managing my cover crop portfolio that Jim had put together for me. I've listed across the top all the things I want. You know soil compaction alleviation. You know test nutrient producer on P. Nitrogen scavenger on N. Nitrogen. How much of a user of nutrients is it or is it going to give me nutrients or I have to give it nutrients? I want to be very sensitive to the drought resistant and is it a high water usage? For example a BMR corn we had this year I want to question that. I don't know if I want that high usage in there for water. You know is it really worth it? I question this year my soybeans. I question K. I questioned the Peet and the percent we had. I want to verify that and of course from old by Sun I have no idea how to evaluate that value of Sun. My brassicas seemed okay. My buckwheat seemed fine. I've had a bad

32:45 I've got a bias against anything that may bring me some acid problem. We moved a bunch of cows across a pasture to not the joining pasture but one pasture over, and in 20 minutes we lost three cows. So that gives you a bias. So I think there's a lot we can do on this thing. As I mention the carbon and nitrogen ratio, I like to keep that around 20-25 so I can determine what that composition rate is on that biomass, and those are the questions I have, but that's the method that I'm kind of using to better manage that portfolio.

33:31 When you are GPS auto steer and you're out there seeding, it gets pretty boring because there's nothing to do. So one of the things that I did is I started observing my weeds and where my weeds were located. Back to my old buddy sunflower, guess what? I never saw a weed within 10 to 12 inches of a sunflower plant, and yet the weeds would grow up right in the middle of my melons. I had three kinds of millet weeds all over the place in some of those millet plants, but never around the sunflower. Well, I never heard of the word heliopath before, but I came back after sitting on that tractor seat and watching all that, and I looked at research and sure enough there is some research out there on weed suppression management. But I talked to Jim, I talked to Keith a little bit, and apparently this is kind of iffy. It needs to be more research. So for those of you that are academics in the audience, I hope you all in the research industry will grab this thing, run it a little forward, because there's something here. There's something about that chemical microbial resistance factor on weeds, and I want to understand that better. I've got a couple of fields that were more weedy than others, and I'm trying to research that and study on how to achieve a better solution on those.

35:03 As far as how I want to measure success, first and foremost for me is yield of that forage. We've achieved that. I don't have any question on that. Grain economics, I got that down. I like 40 cents a cost of gain. I can handle that. I'd also like to find my first worm on that place, and I've owned it over 20 years. I've never dug up one worm on one shovel. That shows you how good I was at destroying that soil. I was really proficient when I killed that soil. Weed presence, I couldn't say that I've got an overall weed problem. I've got a couple of fields, a couple sections of those fields where I don't like the weed presence. I think it's compaction. I think we've got a lot of need for more oxygen down there so I can get better germination. We had a couple of areas, maybe 15 to 40 acres, where I did not get the germination on my cover crop that I would have liked. So I've got to study that and see that a little better. I really like the returns that we've gotten from no-till. We've met all of our objectives and we got a few to boot.

36:16 One of them this year came, I told you we couldn't get in the field the 5th of June, it's still too wet from my neighbor's disc. We went in, so anyway, I was talking to Glenn over lunch. He likes his John Deere single disc. I've got the great PLS dual disc in 600 acres, we did three times, stick disc and had to go take the disc off, get the mud off. And he said he doesn't have to do that with his John Deere single disc, but anyway we were in there sewing. We ran about two shifts with GPS auto steer. You can do at night, so we had a rain forecast and we knew we had 3 days. We said let's get in and get out. When we got in, our neighbors were too wet to disc. When we got out, it was too wet for our neighbors to disc. We got a rain, they haven't got their weed in, so we got a lot of advantages out of that whole structure, economics, and everything else here is four or five years of test on the four fields that we've got from organic matter.

37:34 You can see there, I've got a 1999 starting, so from 1999 to 2014 you can see boy I was really proficient at tearing up that soil on that ranch and we were headed to zero for organic matter. Then we picked up no till and all of a sudden we picked up two deal points there on that Northwest Field Green Field. Good progress on the rest of the two fields. Notice the purple line, the pH on all those fields that are heavy that are going positive is about 6.8. That purple line there is the South field that has got a pH of 5.8. That's where I got my lowest germination and look at the organic matter. I can't explain it, it's going backwards, so we've got to figure out, we got to figure that one out.

38:33 This is the graph that I showed Keith when I said that cover crops were no-brainers. Here is a sample of the economics. Seed cost, ocula cost, diesel cost, $31 an acre, about $97 per cow, a stalker that I had there this year. I had 177 in that particular grazing unit. We grazed it just 40 days, probably should have done a little longer. We do have scale, so we do a lot of random weighing on our stalkers because we want to know how much they're gaining and why and why not. So we weighed a sample, was estimated for the group at 2 and a 12 pounds. We sold those stalkers at $180. I calculated value a gain at $135, so there you go, there's your economics, $17,50 cost, $23,895 return. That's a 39% return.

39:33 Now how does that compare to my wheat this year? I spent $92 ahead for wheat cost. Now I to tell you a little bit about the math here. I do not allocate fertilizer cost to the cover crop. I allocate 100% of my fertilizer over on the wheat so that you can kind of see where I allocated that. But this year we're projecting at $200, $21 value lift on the revenue for our stalkers. If we get that, that's going to be 240% return. So again, apples oranges because I could have stayed on that cover crop.

40:10 Further we were just kind of feeling ourselves around trying to figure out. And of course I don't have seed cost over on wheat because I combine my own wheat, but if you look through that, we got about a 4 cost of gain as I mentioned at about 40 cents, and I like that. That'll work for us.

40:33 As far as where do we go from here, I've definitely got to understand better these specific traits on what works and what doesn't work. I'm going to start researching and experimenting this year. We're going to take a couple of our fields, put a steel post and in them and change rates on the cedar, changing that population for seed on those fields. I talked this morning and I think we're going to have cover crop, maybe send us a couple of few extra bags of U of ochre, which I've never heard of, because it's got a deep root, Keith said, and or Brian said. And I might just at the seed tender when we get ready to put it in cedar, I might just add that ochre for a few fields just to try that and see what happens.

41:27 As previous speaker said, we rotate wheat in north Texas. Wheat, then wheat, and then wheat. That's what I did for 20 years. Next fall we're going to go in with rye, triticale mix, perhaps oats as well. And we, I want to do a better job on weed management. I don't know that I've got a CIA problem, but it just drives me nuts to go out there and see those big, high weeds. So I've got to figure out how to better achieve a portfolio mix that's going to do that.

42:03 So I hope that's given you some ideas about the economics of how we've incorporated this stuff into our cattle operation. As I mentioned, we've got to go back next week and figure out what to do with these calves. I don't think it's going to make sense to finish him out. One of the things that I showed you, that group over in Gman, we always keep one load over in G because I keep data and we bled those calves in G last week. We've already got DNA on our bulls, so I've got Method Genetics in St. Joe, Missouri doing the parentage for my calves now. So when we get that stuff out of us beef, we'll take each one of those carcasses, tie back to our bulls in this particular group. We've got those two new bulls in the 4% range. I want to see if it makes sense to pay that much money for a bull if I can get that carcass data.

43:01 So we've got a, we measure every calf that goes out of that feed lot and we tie it back to a bull and we can discriminate on whether or not those bulls are paying for themselves or not. Because what I basically have done is I've doubled my bull cost, but I've gone to using them twice a year. So basically I got the same bull cost you have, but I got better bulls. So is that going to work for that better carcass? So far it has, because the last group 89% of our heifers graded out yield grade one and two. So we're succeeding and we're making the progress towards that quality goal where we can try become a little bit more of a market maker versus a market taker.

43:52 So I hope that's helped you and given you some ideas about maybe what you can do in some of your operation. And Ro, have you changed your mind on that price? Thank you.