Alternative actions to be considered, evaluated for drought, fires
October 3, 2012
Ranchers who have been affected by the recent drought or fires will generally have to consider some difficult decisions. Some of these decisions will primarily affect costs and revenues in the coming year while others will affect a ranchers "bottom line" for several years. The first thing that must be carefully evaluated by any rancher that has been affected is the need for and supply of forage. This evaluation involves not only the total amount of forage (tons, AUMs) that is needed but when it is available or needed. This evaluation will vary by firm or operation because the need for and the supply of forage is generally unique to a particular operation. After the need for and supply of forage has been evaluated, ranchers have one of two alternatives if forage demands are greater than the amount available at any point in time. They must either reduce demands or increase the supply of feed available. Some alternatives that ranchers may want to consider are as follows:
Increasing the supply of forage by 1) Purchasing additional feed which might include hay, straw or other storable feeds;
2) Sending animals to areas where feed is relatively abundant (this may be hard to find this year);
3) Rent pasture or rangeland (CRP, vacant allotments, private, etc.);
4) Plant and harvest a crop of grain forage (e.g., oats) if time and water are sufficient; and
5) Plant forages in areas that have been burned for future needs.
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Reducing the demands for forage by 1) Weaning calves early;
2) Selling cows particularly any that need to be culled earlier rather than later;
3) Selling additional cows but retaining additional heifers (the heifers will require less hay and forage resources in the current year); and
4) Placing animals in a feed lot for a period of time.
Let's consider the alternatives of early weaning of calves as well as selling cows to be culled earlier than normal in a little more detail. Both of these actions will reduce fall range and pasture needs and may also help reduce cow nutritional needs this winter. Research has consistently shown that early weaning of calves lowers the nutrient requirements of the cow. In years like this, when range conditions have deteriorated, cows with a nursing calf will likely lose weight and body condition between now and when the calf is traditionally weaned. That weight and condition will have to be replaced sometime before calving if acceptable reproductive performance is to occur.
Let's consider the cow culling and marketing decision first and then consider what to do with early weaned calves. If you have lost range resources and those will remain absent for two to three years, I would suggest a fairly aggressive culling of your cows. The first cows to be culled should be those that are open. You may also want to consider culling older and less productive cows. A 1,100 pound cow that is in reasonably good condition, body condition score 5, was selling for around $.75 per pound or $825 per head at the end of August/beginning of September. If that same cow loses 50 pounds, and drops a body condition score, by mid-November, the seasonal decline in cull cow prices and the price for lower body condition will likely yield a price of about $.60 per pound or only $630 per head. If this occurs, the decline of $195 per head results in a clear advantage to selling any cull cows now versus delaying sales until November. If some older cows are pregnant, they can currently be sold for about $1,300 or more depending upon age and quality and provided you find buyers that have ample feed.
Early weaned calves do not have to be sold early. Removing the calf from the cow and putting it in a drylot reduces the pasture requirement. It is generally less expensive to feed a calf in a drylot than it is to feed a cow additional forage and maintain the calf on the cow when forage sources are limited. A ration of 13 pounds of alfalfa and 3 pounds of corn grain per day, should have this calf gaining 1.75 pounds per day and result in the same 550 pound steer in November as keeping the calf on the cow. If alfalfa can be purchased for $180 per ton and corn for $7.50 per bushel feed cost would be $1.57 per day to get the calf to November. The added returns from selling cull cows now instead of November ($195 per cow) can be used to purchase the alfalfa and corn.
If you traditionally wean a 550 pound steer calf around Nov. 1, that calf will probably weigh about 445 pounds at the beginning of September. A 445 pound steer in Nebraska at the end of August sold for around $1.80 per pound, or about $800 per head. A 550 pound steer in November will likely sell for about $1.65 per pound, or $910 per head. If calves are fed 60 days the cost per head would be $94 ($1.57 *60). The net from selling in November would be $816 ($910-94) compared to $800 from a Sept. 1, sale. Using my values for feed costs the decision of when to sell the calves is not that critical of a decision. I would suggest that you consider your costs before making the decision.
All of these alternatives, as well as other alternatives, have tax as well as economic consequences. You probably need to consult your tax accountant about how forced sales of livestock can be treated for tax purposes.