Fertilizer Cost Ails Stockers This Year

Annual analysis shows reversal for cow-calf, stocker operations.

Published on: Jul 23, 2009

Last year when Noble Foundation economist Job Springer did his nitrogen-to-beef analysis, nitrogen was so high it was more profitable to not fertilize and to cut cow numbers, but stocker operators could still use the golden input.

 

Oh what a difference a year has made.

 

Springer's analysis early this summer on operations with introduced forages showed cow-calf operations, with calf prices still relatively strong and nitrogen about half what it was last year, could again afford to put on nitrogen.

 

Summer-forage stocker operations, however, looked like they would be better off cutting stocking rates and not applying nitrogen. Despite the lower cost of nitrogen they face this year, they are being squeezed by tight lightweight calf supplies and relatively weak demand for beef.

 

All this could change at any time, of course, with shifting fertilizer and calf prices.

 

To make his calculations, Springer uses a composite of parameters from the Noble Foundation database of clients in northern Texas and Southern Oklahoma. Those on introduced forage have a bermudagrass base. From those numbers he created a theoretical operation with 100 acres of bermudagrass pasture, an 82% calf crop, and steers weaned at 550 pounds and heifers 500 pounds. He assumed nine months of fertility and grazing and three months of purchased hay.

 

His numbers for stocker operations also include a bermudagrass base.

 

These should provide at least an opening point for thinking about profitability next spring, considering nitrogen-induced yields on warm-season grasses are relatively similar. For the fall and winter, remember that cool-season forages are less-efficient converters of nitrogen fertilizer.

 

Under Springer's scenario for cow-calf operations, assuming nitrogen and calf prices are the same as they were in mid June, he figures a breakeven price on urea around $650 per ton. If urea goes higher, it would produce a loss; lower it could produce increasing levels of profit. (See cow-calf chart.)

 

"Fertilizing for the cow/calf operation looks to be profitable and urea prices could go up another 50% and still be cost effective," he said in early summer when he made the calculations.

 

His figures for stocker operations function on value of gain and nitrogen costs. His figures indicated in early June a stocker operation would need to earn nearly 80 cents per pound in value of gain to pay current nitrogen prices.

 

In his stocker-nitrogen chart, the first column shows possible value-of-gain scenarios, the second column shows corresponding breakeven prices, and the next two columns show corresponding nitrogen prices by cents per pound and by the ton for urea.

 

Grass stocker operators last summer were seeing value of gain at 95 cents per pound and higher. Early this summer, Springer said it was running about 78 cents.