For 36 years, Walt Prevatt coached producers on ways to squeeze a profit from their cattle operations. Now, the retired ag economist is practicing those same principles, starting with flexibility, on the operation he owns and runs with wife, Peggy, and son, Chris.
"A lot of people don't recognize how important flexibility is in marketing and production," says Prevatt, who says he started his Alabama cattle business on the back of what most in the business would consider "thin" cows.
"Our grass wasn't good enough for stockers, but it was for thin cows," he says of the farm in Pine Apple. Prevatt purchased the former hunting property in 2011. It was in foreclosure, overgrown with head-high weeds and only fenced on one side. To put it simply, the place needed work.
After fencing the perimeter, the Prevatts bought the first cows in fall 2012. There was a small, run-down orchard, maybe a quarter of an acre, that had been fenced to keep animals out. They started out by buying just 12 to 14 cows at a time and used this area to train and graze them in designated areas, with a strand of electric fence strung across one side of the orchard, deworming them and turning them out.
THIN COWS START A BUSINESS
When the Prevatts started the operation at Pine Apple, they were still living in Auburn. Arriving on the farm on Friday, they used Polywire and step-in posts to give the cows enough stockpiled fescue to last until Sunday. Then, they'd move the wire to give the cattle five more days of grass.
With the 120 acres they had fenced, along with minerals, they put 250 to 300 pounds of gain on each of 65 cows.
"It was amazing the difference the weight gain made in the appearance of those thin cows," Prevatt recalls.
For three years, while they worked fences, built facilities and improved forages, the couple continued to buy thin cows, put weight on them and sell them.
"Twenty to thirty percent of them were pregnant, so we'd get little bonuses. We liked that," Prevatt adds. He explains that any "bonus" heifer calves were the start of Peggy's cow herd, which now numbers 40 cows and is on leased land. While they both enjoy the cow/calf enterprise, growing it large enough to be a main enterprise wasn't economical.
"We have 270 grass acres, and the most we can run is 120 head of mama cows. That isn't enough to be an economic unit," he explains.
FORAGE AND SUPPLEMENTS
Chris Prevatt, Walt's son, is also an ag economist, who works at the University of Florida. He has a special interest in forages and puts his expertise to use on the home operation.
When the Prevatts bought the farm, it was a mix of tall fescue, dallisgrass, johnsongrass and clovers. Since then, they've added Red River and Quick N Big crabgrass, which flourishes in the summer and helps dilute the toxin in the fescue.
On half the land, they stockpile the fescue and use it as standing hay during the winter. On the other half, they drill in a mix of winter annuals and small grains including rye, ryegrass, oats, triticale, vetch, clovers and brassicas.
The key to success on the forage front is the same as on the cattle side: flexibility.
Prevatt admits, "I was a ryegrass person and didn't see the value in a mix. But, it worked well to raise forage quality and spread out forage production over a longer grazing period."
He has also seen the value in switching supplements.
"We used to use a lot of whole cottonseed when it was $165 a ton. Now, it is $325 to $350 a ton," Prevatt explains. The couple changed over to soy hulls for $212 a ton. Because of their high-quality and abundant forages, they only supplement about 2 pounds per head per day. Most years, they don't feed any hay.
ADDING ON STOCKERS
Stockers brought a new stream of income to the Prevatts' cattle business.
"With stockers, we easily run 250 head and get out three, maybe four, truckload lots," Prevatt says. "I'm a firm believer in board sales; I helped organize a dozen of them. However, you have to have a truckload unit to sell."
That reasoning gets a thumbs up from Oklahoma State University (OSU) Extension livestock marketing specialist Derrell Peel. "When and where you sell, along with larger lots that are uniform, all add value. There is lots of data to back that up."
Prevatt buys most of the stockers, 10 to 20 head at a time, at auction markets within a 100-mile radius of the operation. He also buys direct from a few local producers. He typically buys 250- to 400-pound black-hided or Charolais-cross calves in the fall, aiming to sell in the spring and summer at around 900 pounds.
While stockering male calves has worked well, the last couple of years, the Prevatts have switched primarily to heifer stockers. They target a sale weight of 750 pounds. Their decision isn't completely based on margins. About 70% of the males he bought were bulls, and the Prevatts do their own processing.
"It was too much of a job to castrate them," he says. "Plus, Peggy gets the cutbacks on the heifers for her herd."
In 2021, the Prevatts adapted from a fall-spring backgrounding program to a winter-fall program. Last year, they weren't able to plant winter grazing until November, so Prevatt delayed buying until late winter and early spring.
So far, the change has worked, he notes, explaining the key has been the abundant forages in 2021 that have helped keep the cost of gain low.
This ability to quickly adapt to markets and environmental changes, OSU's Peel says, is another plus for stocker operators.
"There is some opportunity for profit virtually every year. In general, stocker operators have the flexibility to change different parts of their operation, whether the size of the animals they buy or sell, the length of time they own them, the time of year they have them or whether they buy steers or heifers," he says. "It may also be a function of quality. They may buy No. 1 animals and take advantage of increased gain, or buy animals that are lower in quality but more of a bargain.
"Walt really understands the economic drivers and is truly flexible."
CALCULATE THE COSTS:
If there is one practice Walt Prevatt preached more than any other during his Extension career, it is knowing costs. Today, he sticks faithfully to that rule and says it makes a difference in profitability year in and year out.
This year, for example, with Prevatt's winter-bought stocker heifers, the breakeven is $125 per cwt, about $946 a head. If that seems a bit on the high side, remember, ag economists assign costs to things others tend to let slide.
Here's how Prevatt pencils it out. The average cost of the heifers and trucking is $590 per head. Cost of gain is $356 per head including everything from dewormers to vaccines to fertilizer to marketing. What helps make the Prevatts low-cost producers is that they own the land, use their own money to finance the operation and do their own labor.
Prevatt locked in a price on those heifers early-June 2021, when the November feeder cattle futures price hit $163.25. The estimated basis for their feeder heifers in November was at minus $20 per cwt. That provided an expected cash selling price of $143.25 per cwt.
The price objective was already set at $142 per cwt, or $1,076 per head. So, when Prevatt pulled the trigger at $143.25 per cwt, he knew he'd exceeded costs of production.
"There is so much volatility in cattle markets today," he says. "Every day we record the feeder cattle futures price in our spreadsheets, and we add our futures basis for heifers or steers to get our expected cash price at sell time. Equipped with our cost-of-production information, we calculate a break-even price and set a price objective. Daily, we pay attention to our break-even price and price objective."
Prevatt stresses that if you have an opportunity to hedge in a profit, you better take it. "We hedged our feeder heifers in July for November delivery. Currently, we're sending in margin money, but that's OK. We protected a reasonable profit. There was too much risk ahead of us with higher feedstuff prices, the drought out West, trade issues and COVID."
You won't hear wife and partner, Peggy, giving him a hard time about the margin calls. "We work too hard to lose money," she says.
However, for those inevitable wrecks, they have a "buyer's remorse fund" included in their budget. They put $30 a head into savings during the good times.
"Then, when we have that wreck, we can dip into it," Prevatt adds.
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