Field Day Slides

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Drought Management Economics of Culling
Decisions and Tax Considerations by Russ
Tronstad Dept. of Ag. Res. Econ.
520-621-2425 tronstad_at_ag.arizona.edu
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Outline of Issues
? Sale Date (May or Nov) and Sale Weight
(350-750 lbs) Considerations ? Supplement vs. No
Supplement ? Income Tax Strategies with Drought
Induced Sales ? On-line Culling Decision Support
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Sale Weights and Dates
? Trade-off between calf size and number of
cows. ? Calf size most profitable to
target? ? Alternative Seasonal Markets - prices
historically higher in spring. - match forage
availability to mkts.
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Calf Weights Evaluated
Sale Periods Considered Mid-May and Mid-November
Steers Weights 350 lbs. 450 lbs. 550 lbs. 650
lbs. 750 lbs.
Period Evaluated Jan. 1980 - Dec. 1998
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Supplement Best Seasonal Gains
Nov Sales SE AZ May Sales Central
Added Equiv. Calf Wgts. (daily gain)
AUM Cows/Yr. 75 - 350 1.5 -- 1.0 350-450 1.5
-- 1.0 450-550 1.75 .5/month .92 550-650 1.75 .6
/month .83 650-750 1.75 .7/month .72
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Supplement 2nd best seasonal gains
May Sales SE AZ Nov Sales Central
Added Equiv. Calf Wgts. (daily gain)
AUM Cows/Yr. 75 - 350 1.5(.90) -- 1.0 350-450
1.5(.90) -- 1.0 450-550 1.75(.90) .5/month .91
550-650 1.75(.90) .6/month .81 650-750 1.75(.90)
.7/month .69
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Supplement vs. No Supplement
Weight Gain (lbs./day)
SE Arizona
Central AZ
Supplement
Sale Date
Sale Date
Calf Wgts. May Nov May
Nov birth - 350 1.50 1.35 1.35 1.50
450 1.75 1.575 1.575 1.75 birth -
350 .75 .675 .675 .75 450 1.0 .90 .90 1.00
No Supplement
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Supplement Requirements
Nov. Sales SE AZ
50/50 Corn Cottonseed Meal
Sale Calf Birth Date Weight Calf /Cow May
10 350 0 0 Mar. 1 450 0 0 Jan.
1 550 0 100 Nov.10 650 0 200 Sept. 10 750 0 300
(lbs.)





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Supplement Requirements
May Sales SE AZ
50/50 Corn Cottonseed Meal
Sale Calf Birth Date Weight Calf /Cow Oct
. 20 350 0 0 Aug. 5 450 150 50 June
1 550 200 0 Apr. 1 650 250 50 Jan. 25 750 300 100
(lbs.)





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Revenues
Calves Weaned (weekly AZ cattle-fax
prices) - 50 sold as steers - 30 sold as
heifers Cull Cows (monthly AZ prices, Ag
Prices) - 16 of herd culled annually when
calves are sold. - 4 annual death loss
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Revenues by Class

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Cash Return / AUY SE AZ scenario
700-800 lb. calves
600-700 lb. calves
400-500 lb. calves
500-600 lb. calves
300-400 lb. calves
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Cash Return / AUY Central AZ
700-800 lb. calves
600-700 lb. calves
400-500 lb. calves
500-600 lb. calves
300-400 lb. calves
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General Conclusions
? Supplement Generally Pays - 10 to 40 per
grazing AUY. - highest dividend when May sales
has high gain -- higher spring prices. -
greatest risk with heavier weights ? 450 to 550
lb. calves most profitable - 350 lbs., high
prices but not enough wtg. - 650 and above
decrease in stocking rate
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Supplement Comments
? Average Results - what if calf prices are
higher than avg.? - what if corn prices are
relatively cheap? - what if in a drought, little
forage? ? Fertility (not incorporated) -
fertility offset lower rates of gain? ? Cost of
feeding supplement? - remote locations?
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Drought Induced Livestock Sales
? Deferred Sales Receipt Method. - defer sales
for up to 1 year. - all livestock potentially
eligible - excess sales (above 3 yr. average) -
required for area to be declared a
disaster area, or adjoining county. - income
from normal sales reported for this years
Schedule F while excess deferred to next
year.
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Drought Induced Livestock Sales
? Involuntary Conversion. - defer sales for up
to 2 years. - only breeding stock or dairy
animals eligible. - an equal or greater number
or replacement livestock must be
bought (not raised). - not required for area to
be declared a disaster area, use
rainfall reports or newspaper clippings,
etc. - Gains -- amended return for drought yr.
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Summary of Tax Issues
? Any assistance payments have to be declared in
the year received (drought year). ? Minimize the
odds of pushing yourself into a higher than
normal tax bracket. ? Tax professional, Internet
(IRS, FSA), extension, ...
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Economics of Culling Decisions
http//ag.arizona.edu/AREC/cull/culling.html
Expert System using Internet
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5 different inputs
Biological and Market Factors combined
Dual Calving Seasons Considered
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Culling Decision Rules Based on Inputs
Decision Rules
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Cost of Mistake Values
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Cost of Mistake Numeric Values
Cost of Preg. Test Replace with Bred Heifer if
Open
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Concluding Comments
? Herd Composition - complex and influenced by
many factors. ? Natural/Organic Beef? - scale
economies, limited consumer demand? ? Sole
Income from Livestock? ? Ranch Recreation (less
weather dependent?) - wildlife/scenic
tours - Indian heritage education