Agriculture & Business

Management

Management Issues in 2003

For Beef Cattle Producers

Jeffrey E. TranelAgricultural & Business Management Economist

Cows Liquidated in 2002

• Several cows sold in 2002.– Estimated 15-20% of all beef cows sold.– Estimated 50+% of beef cows sold in some areas.

• Some herds were moved to pasture in other states.– Primarily Tx, Ok, Ne, Ks, Mo.

Shall they return?

Drought and Livestock

• No good strategies-all are expensive

• Using Partial Budgets to Compare Options– Truck cow/calf pairs to grass– Feed (drylot) at home– Sell and buy-back pairs– Early wean calves, sell cows-drylot calves,

buy-back pairs

Typical Partial Budget

Positive Outcomes– Reduced Costs– Increased Returns

– Total Positive

Negative Outcomes– Reduced Returns– Increased Costs

– Total Negative

Positive – Negative = Net Impact

How Did the Drought in 2002 Affect Your Cattle Operation?

1. Maintained Herd.• Profitability in 2002? Future?• Conception rates?• Forage resources?• Family?• Other?

Maintaining the Cow Herd- Reason For Not Liquidating -

• Genetics

• Adapting to the environment

• Sufficient feed resources

• Financial considerations• Debt greater than sale value of cow?• Insufficient equity resources.

• Personal?

Maintaining the Cow Herd- Purchasing Feed -

• Availability of feed?• Cost of feed?• Cost of transporting feed?• Availability & cost for feeding?• Considerations

– Make every effort to reduce costs.– Get the “most mileage” from available feeds.– Supplement low-quality feeds correctly.– Balance rations for animal needs.– Account for feed cost, nutrient value, palatability.

Maintaining the Cow Herd- Trucking Animals to Grass -

• Availability of pasture?• Transportation costs?• Pasture lease rates?• Length of time?• Death loss and other health problems?• Trust of leased pasture manager?

Early Weaning Calves

• Calves can be weaned at 120 days of age.

• With proper management and feeding, can equal weight of calves raised on cows.

• More efficient to feed calf directly than through the cow.

• Improved and earlier conception rates.– Re-breeding may improve 10-25%.

How Did the Drought in 2002 Affect Your Cattle Operation?

2. Sold Part of Herd. 3. Sold Whole Herd.

Profitability in 2002? Future?

Conception rates?

Forage resources?

Family?

Income Taxes? Additional Capital Gains Taxes?

Other?

Decision Aid: What to Do With My Cows?

An Excel spreadsheet designed to help the user decide whether it may be best to:

Feed different rations.

Truck cattle to pasture.

Early wean and sell cows.

Sell herd (make 1033e election).

If Cattle SoldFunds Need to be Available to:

Replace livestock

• Escrow Account

• Debt Reduction with Contingent Liability

• Low Risk Investment

• Reduce Operating Debt (line of credit)

Pay taxes

• Pre-pay term debt

• Use for operating expenses

• Use for family living

Should You Replace the Herd?

1033e Election?

Resources Available?

Risks?ProductionMarketFinancialLegalHuman

1033e Election

Qualified taxpayers may make or not make election to recognize additional capital gains

when they file their 2002 income tax return.

Should You Get Back into theCattle Business?

• Personal and family issues.

• Business risks.

• Range/pasture recovery.

• Financing alternatives.

• Profitability.

Personal & Family Issues

• Age• Health• Stress• Personal Goals

• Family Goals• Equity Management• Personalities

Business Risks

• Production risks.

• Marketing risks.

• Financial risks.

• Legal risks.

• Human risks.

Financing Alternatives

• Commercial Banks/Farm Credit Services

• USDA/Rural Development

• Federal & State Assistance Programs – Colorado Department of Agriculture– Farm Service Agency– Risk Management Agency

• Family

Profitability?

• Production expenses.

• Price of replacement animals.

• Outlook for cattle prices.

Cost & Returns for Beef Cow-CalfColorado, 2000-01

Total Gross Revenue 411.92 Feed 181.90 Vet & Medicines 24.35 Livestock Supplies 8.94 Marketing 11.83 Machinery & Equipment 25.94 Labor 8.60 Land 47.11 Finance 89.57 Total Cash Operating Expenses 398.24 Non-Cash Costs (Depreciation) 48.00 Total Expenses 446.24

Net Receipts (34.32)

CSU Livestock Enterprise Budget, 250 cows, $/Cow

Steers =

555 lbs @ $97.60

Heifers =

535 lbs @ $92.46

Plus cull cows + bulls

COW-CALF RETURNS AND CATTLE INVENTORY

U.S., Annual

-100

-50

0

50

100

1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

$ Per Cow

95

100

105

110

115

120

125

130

135

Mil. Head

Cow-CalfReturns

CattleInventoryJan 1

Sept. 2002

COW-CALF RETURNS AND CATTLE INVENTORY

U.S., Annual

-100

-50

0

50

100

1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

$ Per Cow

95

100

105

110

115

120

125

130

135

Mil. Head

Cow-CalfReturns

CattleInventoryJan 1

2003 Projected

TOTAL CATTLE INVENTORY BY CYCLEU.S., January 1

60708090

100110120130140

1 2 3 4 5 6 7 8 9 10 11 12 13

Mil. Head1938-49

1949-58

1958-67

1967-79

1979-90

1990-02

C-N-4007/19/02

In 13th Year of Cycle

Current Cycle Longest on Record

A V E R A G E R E T U R N S T O C A T T L E F E E D E R SF e e d i n g 7 2 5 L b . S t e e r s , S . P l a i n s , M o n t h l y

- 1 7 5

- 1 2 5

- 7 5

- 2 5

2 5

7 5

1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2

$ P e r H e a d

C - P - 2 21 0 / 2 4 / 0 2

L a t e s t D a t a : S e p t e m b e r 2 0 0 2

Cattle Feeders Losing Money in 2002

Cattle Price Forecasts500-600 lb Steers

LMIC FUTURES + BASIS CO

‘02 Q4 86-90 83.45 $8.67 $ 92

‘03 Q1 91-95 81.45 $15.48 $ 97

‘03 Q2 93-98 80 $17.56 $98

‘03 Q3 94-101 82.5 $ 9.43 $ 92

‘03 Q4 90-98 82 $8.67 $ 91

Cattle Price Forecasts700-800 lb Steers

LMIC ERS FUT + Basis CO

‘02 Q4 77-79 77-81 83.45 -$0.42 $83

‘03 Q1 78-81 79-85 81.45 -$0.75 $81

‘03 Q2 79-83 82-88 80 $0.06 $80

‘03 Q3 80-84 82.5 -$0.48 $83

‘03 Q4 79-85 82 -$0.42 $82

1033e Decision Tool(An Excel Template)

1033e Decision Tool(An Excel Template)

1033e Decision Tool(An Excel Template)

1033e Decision Tool(An Excel Template)

Contacting Your ABM Economists

Norm Dalsted(970) 491-5627

ndalsted@colostate.edu

Dennis Kaan(970) 345-2287

dkaan@colostate.edu

Tim Bachicha(719) 852-2871

slvfrma@colostate.edu

Rod Sharp(970) 245-9149rsharp@colostate.edu

Jeff Tranel(719) 549-2049jtranel@colostate.edu

Wendy Umberger(970) 491-7261wumberger@colostate.edu

http://www.coopext.colostate.edu/ABM/

jtranel@colostate.eduwww.coopext.colostate.edu/ABM/

Present