Agriculture

1
Agriculture Business Management

• Management Issues in 2003
• For Beef Cattle Producers
• Jeffrey E. Tranel
• Agricultural Business Management Economist

2
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?

3
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

4
Typical Partial Budget

• Positive Outcomes
• Reduced Costs
• Increased Returns
• Total Positive

• Negative Outcomes
• Reduced Returns
• Increased Costs
• Total Negative

Positive Negative Net Impact
5
How Did the Drought in 2002 Affect Your Cattle
Operation?

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

6
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?

7
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.

8
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?

9
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.

10
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?

11
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).

12
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

13
Should You Replace the Herd?

• 1033e Election?
• Resources Available?
• Risks?
• Production
• Market
• Financial
• Legal
• Human

14
1033e Election

• Qualified taxpayers
• may make or not make election to
• recognize additional capital gains
• when they file their 2002 income tax return.

15
Should You Get Back into theCattle Business?

• Personal and family issues.
• Business risks.
• Range/pasture recovery.
• Financing alternatives.
• Profitability.

16
Personal Family Issues

• Age
• Health
• Stress
• Personal Goals

• Family Goals
• Equity Management
• Personalities

17
Business Risks

• Production risks.
• Marketing risks.
• Financial risks.
• Legal risks.
• Human risks.

18
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

19
Profitability?

• Production expenses.
• Price of replacement animals.
• Outlook for cattle prices.

20
Cost Returns for Beef Cow-CalfColorado, 2000-01
Steers 555 lbs _at_ 97.60 Heifers 535 lbs _at_
92.46 Plus cull cows bulls
CSU Livestock Enterprise Budget, 250 cows, /Cow
21
Sept. 2002
22
2003 Projected
23
Current Cycle Longest on Record
In 13th Year of Cycle
24
Cattle Feeders Losing Money in 2002
25
Cattle Price Forecasts500-600 lb Steers
26
Cattle Price Forecasts700-800 lb Steers
27
1033e Decision Tool(An Excel Template)
28
1033e Decision Tool(An Excel Template)
29
1033e Decision Tool(An Excel Template)
30
1033e Decision Tool(An Excel Template)
31
Contacting Your ABM Economists

• Norm Dalsted
• [phone]
• ndalsted_at_colostate.edu
• Dennis Kaan
• [phone]
• dkaan_at_colostate.edu
• Tim Bachicha
• [phone]
• slvfrma_at_colostate.edu

• Rod Sharp
• [phone]
• rsharp_at_colostate.edu
• Jeff Tranel
• [phone]
• jtranel_at_colostate.edu
• Wendy Umberger
• [phone]
• wumberger_at_colostate.edu

http//www.coopext.colostate.edu/ABM/
32
Thank You!

• jtranel_at_colostate.edu
• www.coopext.colostate.edu/ABM/Present