Dr. Greg Halich, UK Ag Economist - 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 that more than half the cattlemen in Kentucky and the region 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.

The idea that 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 stating the average cost of a grazing day 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 $0.50 per grazing day for example, and we have 50 cows, we are saving $25 for each extra day that we graze the herd. Unfortunately, the economics behind this simple math breaks down upon closer examination.

The most important reason that this logic doesn’t hold is that 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 – they will be higher, possibly much higher. The most effective way I have found to help farmers understand this phenomenon without using lots of economic jargon is the following analogy: Think about picking apples out of one of those big standard sized trees that used to be popular in orchards, during a banner year when it is loaded with apples. Where do you start picking? You get all the fruit that 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 tippy 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 tippy 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 that you are proverbially and literally picking the low hanging fruit first, and then go on to the apples that are 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 and 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 that are hardest to reach, will likely be greater than the value of those apples. But if we used the average cost of picking an apple (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).

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 years ago was simply applying nitrogen to pastures to boost production. Today, with nitrogen costs 4-5 times higher than it was 15-20 years ago, learning how to establish and manage a good clover stand is 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 the Cooperative Extension Service in Kentucky 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. What next?

Well, 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, many 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 (foregone profit for the removed animals). So there would also be an indirect cost of reduced stocking rate in addition to the direct costs such as the 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 that our winter forage stockpile will be stretched further with fewer animals. This increases our grazing cost per day due to the foregone profit of the de-stocked animals as well as less total utilization of the total forage base (more will be wasted from the spring surplus with fewer animals keeping up with the heavy growth).

Thus the higher we continue to go in the Grazing Tree, the higher and higher the cost of a grazing day becomes. The average cost of a grazing day from the base pasture system (the low hanging fruit) has been long passed by. At some point, and that point will be different on every farm in Kentucky, the cost to graze an additional day will be greater than the benefit (reduced hay feeding day). For quite a few years in the cattle cycle, up until about 2010 or 2011, we could have profitably climbed a lot further up into the Grazing Tree than we can today. During that time, profitability for cow-calf farms was low at best, and losing money at worst. In a situation like this, reducing stocking rate is not much of a cost: If you are making next to nothing per animal, less animals will not change overall profit by much. But if at the same time you are significantly reducing cost per animal by feeding less hay, your overall profitability will increase.



Picking apples image 1The last two years, however, with profits of $300-500 per cow, reducing stocking rate comes at a very high cost. If we have to reduce stocking rate by just 10% to implement a particular practice, that is a $50 indirect cost per cow that we need to add to the direct costs of that practice. Thus the same practices, or the degree that we push them, that may have been economically viable for extending the grazing season in 2006 may not be economically viable today. 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 that many cattle farmers as well as extension specialists have failed to grasp.

*This article was adapted from Dr. Greg Halich’s proceedings from the 2016 Heart of America Grazing Conference. For all of the proceedings from this conference and the complete article from Dr. Halich starting on page 64, follow the link to:http://www.uky.edu/Ag/Forage/HOA%20Proceedings%20Draft%201.pdf.

Table 1 shows various base profits for 150 feeding days over variable costs ($0-$500 per cow) for the situation where net hay cost is $75/ton. For example, if the profit per cow was $250, reducing hay feeding days below 120 days reduces profits as fewer cows are within the system to extend grazing days. As profit per cow falls to $50, increasing grazing days lowers input costs as fewer cows are maintained improving profit margins.
Table 1 
Profit Change Compared to 150 Hay Feeding Days 
$75/Ton Net Hay Value (Price Less Nutrient Value)
Base Profit over Variable Costs (150 Hay Days)
Hay Feeding Days$0$50$100$250$500
150-----
120$2,093$1,733$1,373$293-$1,507
90$3,538$2,763$1,988-$337-$4,212
60$4,340$3,175$2,010-$1,485-$7,310
30$4,798$3,348$1,898-$2,452-$9,702
0$5,062$3,392$1,722-$3,288-$11,638
Note: 1300 lb cows spring calving