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National Stocker Survey is a First

Collective effort characterizes a dynamic hard-to-define segment of the beef industry.

Stocker operators involved only in that segment of the cattle business are a rare breed. Those among that group who generate a majority of their income from stocker cattle are rarer still.

That may seem a rudimentary observation until you realize such characterization wasn't possible until the recent completion of BEEF magazine's National Stocker Survey (NSS).

“This is the first time we've been able to quantify who is involved in the stocker-cattle business and what drives their management and business practices,” says Dale Blasi, Kansas State University (KSU) Extension beef stocker specialist.

Blasi coordinated the involvement of 11 land-grant universities in preparing and analyzing the recently completed NSS (see “Survey partners,” page 22). Elanco Animal Health sponsored the extensive undertaking.

“We've had some information on a state basis, but nothing nationally and nothing as comprehensive as what this survey offers us,” Blasi says.

Thumb through the NSS “Overview and Detailed Summary,” and you'll find confirmation to what previous dogma and common sense suggest, but you'll also find plenty of surprises.

For instance, only 17.2% of stocker producers are defined by the survey as “pure” stocker operators, those involved exclusively in that segment of the cattle business. Far and away, cow-calf producers who also stocker cattle (CCS) are the largest segment of stocker operators (64.6%), followed by what are termed whole-cycle stockers (WCS) at 10.6% — producers involved from cow-calf through cattle feeding — and feedlot operations that also run stockers or background cattle (FS) at 4.8% of the survey population (Figure 1).

It's no secret some cow-calf producers retain their calves to grow. However, the survey highlights how many of them maintain stocker cattle as a separate enterprise, also buying calves to grow.

The NSS found 63.1% of CCS respondents say half or more of the calves they stocker come from their own operations, which means 36.9% of these operations are procuring half or more from someone else. Likewise, 44.7% of WCS operators say half or more of the cattle come from their own operations, meaning 55.3% of WCS operators are procuring half or more of the cattle they stocker and background somewhere else.

Size tells a story

Based on the operation types defined above, 52.3% of pure stocker operators say stocker cattle account for 50% or more of their annual gross income. That's the most of any operation type.

As common sense suggests, the larger an operation is, the more likely it is to depend on stocker cattle for annual income. 72% of operations running 2,500 or more head (all categories) say stockers account for 50% or more of their income.

Like other segments, however, stocker operations of that size are few and far between. 26.3% of pure stocker operations run more than 1,000 head (estimated annual marketings for 2008); 10.7% run 2,500 or more.

In fact, the average number of head owned/managed by pure stocker operators in 2008 (estimated) was 1,115 head, growing from an average of 875 head in 2002 (Table 1). As such, only 52.3% of these pure stocker operators say stocker cattle represent over half of their annual gross income; 29.5% of pure stocker producers also have off-farm employment.

Producer age is not a perfect barometer of operation size, either.

Operators (all categories) 35-44 years of age own/manage more cattle on average than the other age groups, growing from 809 head in 2002 to 1,054 head in 2008. However the highest percentage of operators (all categories) running more than 2,500 head are at least 55 years old (43.2%).

On one hand, the stocker industry has long been regarded as the most economically feasible entry point for young and new cattle producers. Relatively speaking, survey data confirms this as 41.2% of pure stocker operators have purchased/managed stocker cattle for fewer than 20 years. On the other hand, only 5.8% of pure stocker operators are younger than 34 years old.

Like other industry segments, the stocker/backgrounding business is equity intense. In the pure stocker operator group, 80.6% say they are sole owners of 94% of the cattle they manage. Conversely, the 15.8% of pure stockers involved in partnerships say 76.1% of the cattle they run are in partnership. 12.7% of pure stocker operators say they run cattle on a custom basis — 67.3% of the cattle they manage.

Quality drives purchase

Consequently, at first blush, it's surprising to see that desired profit per head ranks a lowly third in terms of determining the length of ownership/management in calves. On the other hand, though the stocker business is transient in nature, more liquid and easier to enter and exit, once pasture has grown or is leased, the only way to dilute costs is with more days and more pounds grown on it. That may explain why grazing period and desired selling weight rank ahead of desired profit in determining ownership length in a set of calves.

Moreover, profit and loss data is the most commonly collected performance measure reported by all operation types. 79.1% of pure stocker operators say they collect it, vs. 71.4% for FS, 69.9% for CCS and 65.6% for WCS.

How stocker operators aim to make a profit is another popular notion dispelled by the survey. Typically, the cattle industry regards stocker operators as those who sort-up, shape-up and straighten out the mistakes of others, by purchasing cattle below average market prices. According to the survey, 23.9% of pure stocker operators say they buy cattle below the average (straightening out someone else's problems), while 65.3% say they buy at market average and 10.8% say they buy over the market. When you consider that cutter bulls account for some of the purchases presumably below market average, this is even more surprising.

Significantly more WCS operations than the other categories report buying under the market (Figure 2). Larger operations are more likely to buy cattle in back of the market; 36.8% of operations running more than 2,500 head (all categories) say they do.

The youngest producers (younger than 35 years old, all categories) are also significantly more likely to buy cattle below the market average (35.3%) than older producers.

In fact, stockers of all operation types and lengths of tenure say buying high-quality cattle is a chief tool for managing market risk. Historically high cattle prices and the relative tightness of calf supplies might have skewed current reality away from traditional norms.

In the pure stocker group, 66.1% of respondents say they focus on low-cost management to manage market risk. Buying high-quality cattle is a management tool used by 58.4%. Futures contracts are the next most frequently utilized (25.8%), followed by purchasing cheap cattle (21.6%).

As well, 30.4% of pure stocker operators utilize retained ownership through the feedlot for risk management. Compare that to 26.2% of the CCS group, 54.4% of those in the WCS category and 75.7% of the FS group. The older producers are, and the more time they've spent in the business, the more likely they are to retain ownership through the feedlot on half or more of their cattle.

Whether or not they retain ownership through the feedlot, 14.3% of the pure stocker respondents say they receive feedlot data on 50% or more of their cattle; 5.5% say they receive carcass data on half or more of the cattle.

Though in the minority, a segment of stocker producers also aim some of their cattle toward value-added production, be it the natural market, age-verified, genetic-based or something else. 6.7% of pure stocker operators say their cattle are geared toward value-added programs, that's about half as many as in the other categories (14.7-19.2%). Likewise, as cattle numbers increase, operations are less likely to manage cattle for value-added programs, or as large a percentage of their cattle for those programs.

On the other hand, the youngest producers are most likely to aim for value-added markets: 17.7% of those younger than 35 say half or more of their cattle are intended for value-added; 11.8% for those aged 35-44; 14% for those 45-64; and 14.6% for those 65 and older.

Among respondents (all categories) indicating more than half their cattle are owned/managed with value-added programs in mind, 37.5% say 51-75% of the cattle they buy and manage are intended for value-added programs; 62.5% say 76-100% are intended to go that direction.

Though it's not surprising to find a low percentage of stocker operators managing for value-added programs, it is surprising too that so few of those stocker programs heavily vested in the strategy (managing more than half of their cattle with value-added intent) require certification of necessary attributes to make cattle eligible for specific programs via Quality Systems Assessment (QSA) or Process Verification Programs (PVP).

Among pure stocker operators who own/manage some cattle with value-added intent, 62.2% require source verification; 51.4% require age verification; 37.8% require genetic verification. Yet, only 19.1% require that verification come via a QSA or PVP.

Health risks

Another survey surprise is how little health risk stocker operators report, compared to long-held beliefs and experiences. In other words, lots of stocker producers would be tickled pink to enjoy the numbers reported in the survey.

Among pure stocker respondents, 43.1% say their typical pull rate due to bovine respiratory disease (BRD) within the first month is less than 5%; 12.3% say it's more than 20%; 43.5% of pure stocker respondents say their typical death loss within the first 90 days, due to all causes, is less than 1%; and 9.4% say it's more than 4%.

On average, pure stocker respondents say 27.5% morbidity due to BRD is considered high-risk; 15.1% is considered medium risk; and 6.6% is considered low risk. By those definitions, pure stocker operators say of the cattle they receive, 37% are considered high risk; 56.6% medium risk; and 58.2% low risk.

Operations running 2,500 or more head (all categories) say 31.5% morbidity due to BRD, on average, is considered high risk; 16.5% is considered medium risk; 7.1% is considered low risk. These operations say 35.9% of the cattle they receive are high risk; 43.8% are considered medium risk; 49.5% are low risk.

On average, 26.9% of those running 2,500 head or more say their typical pull rate due to BRD within the first month of arrival is less than 5%; 21.8% say it's 5-10%; 27.7% of producers say it's 11-20%; 23.5% say it's more than 20% (Figure 3).

Death loss within the first 90 days, due to all causes, is less than 1%, according to 33.3% of those running 2,500 head or more. 51.7% say it's 1-3%; 15.0% of these producers say typical death loss is 4% or more (Figure 4).

Youth apparently is as tolerant of health risk as larger operations are. Producers younger than 35 say high risk for BRD is 30.2%; 15.8% is medium risk; 6.9% is low risk. These producers say 39.4% of the cattle they receive are high risk; 48.1% are considered medium risk; 64.4% are low risk.

On average, 59.1% of operators younger than 35 say their typical pull rate due to BRD within the first month of arrival is less than 5%; 19.4% say it's 5-10%; 6.5% of producers say it's 11-20%; 15.1% say it's more than 20%. Death loss within the first 90 days, due to all causes is less than 1%, according to 57% of producers younger than 35. In this group of producers, 37.6% say it's 1-3% and 5.5% say typical death loss is 4% or more.

As logic suggests, the larger an operation is, the more likely it is to receive more cattle from longer distances. 17.1% of operations with 2,500 head or more report the typical length of time purchased calves are hauled between collection point and processing facility is more than 14 hours; 13% say it's 10-14 hours.

In terms of operation type, 9.4% of pure stocker operators say the typical haul is 10-14 hours; 5.1% say more than 14 hours.

The challenge of how to effectively employ testing for calves persistently infected with bovine viral diarrhea virus (PI-BVDv) has most stocker operators waiting, according to NSS.

16.2% of pure stocker respondents say they test over half the cattle they buy for PI-BVDv, compared to 15% of CCS, 20.4% of FS, and 22.6% of the WCS group.

Most unnerving is the fact that 8.8% of the pure stocker operators who test and find calves positive for PI-BVDv market them through the local auction without identifying them as such. That's similar for the other operation types. Ironically, 16.2% of those aiming half or more of their cattle at value-added markets dispose of PI-positive calves by taking them to the local auction without identifying them as such.

Input costs a chief concern

Looking ahead the next five years, stocker operators in all categories view the input cost of feed as their most limiting factor to stocker business competitiveness.

That may be one reason for another surprise in the survey. 47.4% of pure stockers claim to utilize at least some limit-feeding (feeding a fixed level of feed based on body weight) in their operations. Of those, 36.8% utilize it with 75% or more of their cattle.

The high number could certainly stem in part from the wide array of definitions for limit-feeding. It's high enough, though, to suggest limit-feeding is becoming entrenched in the business. Here again, high feed prices climbing higher might have something to do with the number.

For pure stocker producers, after feed costs, the next most risky limiting factors in order are potential return on investment, other input costs besides feed, weather and cattle-health problems.

For value-added respondents, feed costs pose the greatest competitive risk in the next five years, followed by potential return on investment, non-feed input costs, weather and land prices.

Across all ages and categories, the most commonly cited risks to competitiveness during the next five years are feed costs, other input costs, potential return on investment and weather. Of similar concern to producers 54 years old and younger, are land prices and availability for lease.

Based on tenure, the same can be said about the major risks being feed costs, other input costs, potential return on investment and weather. Producers in business 21-40 years are also most concerned about land-purchase price; producers with 6-30 years are also most concerned about land-lease prices.

The “pure” stocker operator

Compared to other operation types, “pure” stocker operators — those devoted exclusively to stockering cattle — are more likely to:

  • Have an off-farm job.

  • Run cattle year-round.

  • Rely on stocker cattle for a larger portion of their annual gross income.

  • Run lightweight cattle.

  • Run cattle in Texas, Oklahoma or Kansas.

  • Buy cattle from the Southeast.

  • Be more risk tolerant.

  • Handle higher-risk cattle.

  • Rely on visual evaluation to assess bovine respiratory disease (BRD) risk.

  • Process cattle the day of arrival or the day after.

  • Implant.

  • Place into grass traps before moving to pasture.

  • Place directly on pasture.

  • Feed a free-choice ionophore.

  • Use injectable antibiotic for mass treatment.

  • Use a veterinarian only in an emergency or once/year.

  • Collect group weights at arrival/processing, between arrival/processing and shipping and at shipping, as well as group morbidity rates.

  • Pull more cattle in the first month for BRD.

  • Have more death loss in the first 90 days due to all causes.

  • Treat for a broader range of illnesses.

  • Limit feed.

  • Forward-contract, use in-state and out-of-state order buyers and send direct to a feedlot.

  • Rely on USDA reports, order buyers and other stocker producers for market information.

  • Buy high-quality cattle, forward-contract inputs and outputs, to manage market risk.

Compared to other operation types, pure stocker operators are less likely to:

  • Farm row crops.

  • Run cattle intended for value-added marketing.

  • Require certified verification via QSA or PVP.

  • Test pre-shipment for persistent infection with bovine viral diarrhea virus.

  • Use nonsurgical castration.

  • Feed a complete receiving ration.

  • Consult with a veterinarian once/month or on every load of cattle.

  • Collect cost-of-gain and feed-efficiency data.

  • Receive carcass data, regardless of retained ownership.

  • Utilize retained ownership to manage market risk.

Survey partners

The landmark 2007 National Stocker Survey is the product of an inestimable investment of time and expertise from a number of individuals. They include:

  • Dale Blasi, Kansas State University

  • Bruce Bye, Elanco Animal Health

  • Kevin Dhuyvetter, Kansas State University

  • Terry Engelken, Iowa State University

  • Scott Grau, Penton Media

  • Greg Highfill, Oklahoma State University

  • Max Irsik, University of Florida

  • Wes Ishmael, BEEF Magazine

  • Bill Mies, Elanco Animal Health

  • Vern Pierce, University of Missouri

  • Matt Poore, North Carolina State University

  • Walt Prevatt, Auburn University

  • Justin Rhinehart, Mississippi State University

  • Jason Sawyer, Texas A&M University

  • Nevil Speer, Western Kentucky University

  • Matt Sutton-Vermeulen, CMA

  • Ron Torell, University of Nevada

Special thanks to Elanco Animal Health, whose sponsorship made the National Stocker Survey possible.