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Picking apples off the grazing tree: When grazing isn’t profitable

Greg Halich for Progressive Forage Published on 30 August 2017
Cattle in a pasture

Will grazing more and feeding less hay always increase profitability? There are many cases where cattle farmers could graze more days profitably.

I would guess more than half the cattlemen in the upper South, the area I live in, could find ways to do so. But the statement is not universally correct, and we need to evaluate the specific situation to determine if increasing grazing days will pay off on a particular farm. This article will provide the basic logic for this argument, and subsequent articles will provide the specifics and analysis.

The idea we can be more profitable by grazing more days and feeding less hay is a powerful one – and at first glance seems reasonable. I have seen figures showing the average cost of a grazing day in some study and then comparing this to the average cost of a hay-feeding day.

The average hay-feeding day is shown to be considerably more expensive (correctly), and thus the argument goes that, by each additional day we can graze, we will save the difference.

If this difference is 50 cents per grazing day, for example, and we have 50 cows, we are saving $25 for each extra day we graze the herd. Unfortunately, the economics behind this simple math breaks down upon closer examination.

The most important reason this logic doesn’t hold is: As we push the envelope and graze more and more days, those last few days grazing will not be at the same cost as the average cost of grazing for a normal grazing season – they will be higher, possibly much higher.

The apple tree analogy

The most effective way I have found to help folks understand this dynamic is with the following analogy: Think about picking apples out of a large tree during a banner year when it is loaded with apples. Where do you start picking? You get all the fruit you can easily reach from the ground, correct?

This is where you can pick most efficiently. Pretty easy – what do you do next? Well, you might get on your toes and go around the tree and get a few more. Were you as efficient, in terms of apples picked per minute, as you were when your feet were firmly planted on the ground? No, not quite.

Then what? If you grew up picking apples, you will probably know to gently pull down some of the longer, flexible branches to reach more apples, right? Are you as efficient here as on your toes? Again, not quite. The cost to pick those apples has increased again.

So you have picked all the apples you can by pulling branches down. What do you do next? Depending on your coordination and dexterity, you either get a ladder or you climb up into the tree to start working on the rest. Are you going to be as efficient in either case as you were previously? Definitely not.

The point of this analogy is: You are literally and proverbially picking the low-hanging fruit first and then go on to the apples harder and harder to reach. Thus, we start by picking the fruit that has the lowest cost and, as we work up into that tree, the cost per apple keeps increasing.

Would you pick every last apple on that 30-foot-tall tree? Probably not. Why? Because the cost of some of the apples, the ones hardest to reach, will likely be greater than the value of those apples. But if we used the average cost of picking an apple (which was calculated when we were picking on the ground) as our guide for what we should do, and not the actual cost to pick those last apples, it would tell us to pick every last apple (i.e., graze 365 days a year).

Where’s the low-hanging fruit?

Think of grazing in this same light: the grazing tree. What are most livestock farmers going to do first to increase the number of grazing days and reduce the amount of hay they need to feed? The low-hanging fruit 20 years ago was simply applying nitrogen to pastures to boost production.

Today, with nitrogen costs four to five times higher, learning how to establish and manage a good clover stand is likely the new low-hanging fruit. This is probably the lowest-cost method of increasing grazing days.

What’s next on the grazing tree? Realizing that everyone’s grazing tree looks a bit different, the next lowest-hanging fruit is probably learning how to implement effective rotational grazing.

These first two areas are where cooperative extension has made great strides, in my opinion. Both are relatively low-cost methods to increase grazing days. But, unfortunately, at some point we run out of apples at this level.

Next-tier fruit

What next? In the upper South, we could stockpile fescue: Set aside pasture in early August to build up forage reserves and defer this grazing into late fall and winter. This will buy us additional grazing days. Unfortunately, most cattle farmers won’t have excess pasture production in August to remove a portion of it from the rotation.

If they did, they would be understocked for much of the grazing season, which is a cost of its own (forgone profit for the removed animals). So there would also be an indirect cost of reduced stocking rate in addition to the direct costs of stockpiling and added nitrogen. Thus, our cost to graze additional days keeps increasing.

To increase grazing days further, beyond applying nitrogen and stockpiling, we would likely have to reduce stocking rates even further so our winter forage stockpile will be stretched further with fewer animals. Again, this increases our grazing cost per day due to the forgone profit of the destocked animals.

Thus, the higher we continue to go in the grazing tree, the higher the cost of a grazing day becomes. The average cost of a grazing day (the low-hanging fruit) has been long passed by. At some point (and that point will be different on every farm depending on specific circumstances), the cost to graze an additional day will likely be greater than the benefit of reduced hay feeding.

The tipping point

From around 2005 to about 2010, we could have profitably climbed a lot further up into the grazing tree than we can today. During that time, profitability for cow-calf operations was low at best and potentially losing money. In a situation like this, reducing stocking rate is not much of a cost.

If you are making next to nothing per animal, fewer animals will not change overall profit by much. But if, at the same time, you are significantly reducing your cost per animal by feeding less hay, your overall profitability will increase.

In 2014, profits reached (and in soame cases exceeded) $500 per cow. Reduced stocking rates in years like this come at a very high cost. If we reduced our stocking rate by 20 percent to implement a particular practice, that would be a $100 cost per retained cow (reduction in base profit) we need to add to the direct costs of that practice.

Thus, the same practices, or the degree we push them, that may have been economically viable for extending the grazing season when profitability was low may not be economically viable when profitability is high.

Put another way: You are better off having a relatively low stocking rate and reducing the hay fed per cow when profitability is low and having a relatively high stocking rate and increasing the hay fed per cow when profitability is high. This, I’m afraid, is a concept many people have failed to grasp.

So how far up in the grazing tree should we go today? We will analyze specific situations to help answer that question in the next installment of this series.

In the meantime, you can watch a video that goes into greater detail on the economics of extended season grazing and includes the birth of the grazing tree (picking apples in Shenandoah National Park, an overzealous park ranger and Sir Isaac Newton’s Universal Law of Gravitation) online (The cents of grazing and hay feeding).  end mark

PHOTO: Does grazing extra days always save money? A close examination of the math reveals a tipping point where it actually becomes less profitable. Photo by Paul Marchant.

Greg Halich is an associate extension professor of agricultural economics at the University of Kentucky. Email Greg Halich.

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