Economics of Drought Management

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Economics of Drought Management

• Matt Stockton
• WCREC District Economist

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Options

• Find Alternative Feeds
• Reduce Feed Needs
• Do Nothing

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Drought Options

• Find Alternative Feeds
• Leased Grazing
• Drylot
• Hay Supplementation
• Energy and/or Protein Supplementation
• Wintering Crop Residue
• Finding Alternative Forages

• Reduce Feed Needs
• Cull Early
• Cull More Intensively (Reduce Numbers)
• Wean Early
• Do Nothing

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Principles

• Know Your Costs
• Manage Risks
• Preplan and Act Early

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Principles

• Know Your Costs
• Cash/Operational
• To be incurred in the Current Operating Year
• User historical information (records!!!!!)
• Some are easy to understand, quantify, and
  directly controllable (Purchasing Feed)
• Some are controlled indirectly but are just as
  costly (Decreased Production)

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Principles

• Know Your Costs
• Cash/Operational
• Long Term
• Usually in the form of decreased future
  production
• Decreased grazing rates in the future due to
  overgrazing
• Decreased re-breeding rates
• Hard to predict
• May last many years
• Usually higher than expected

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Principles

• Know Your Costs
• Manage Risks
• Prepare for the unexpected
• What are the chances of a drought
• How much is it worth to you to reduce risk
• More options mean more opportunities to react to
  the unexpected
• Options, like money, evaporate over time

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Principles

• Know Your Costs
• Manage Risks
• Preplan and Act Early

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Now Options

• Find Alternative Feeds
• Reduce Feed Needs
• Do Nothing

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Drought Management

• Find Alternative Feeds
• Leased Grazing

• Principles
• High Cash Costs
• No Long Term Costs
• Need to Commit Early for Availability (There is a
  risk that purchases will not be needed. Excess
  grass leased may be mitigated by taking in
  cattle.) Insurance

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Drought Management

• Find Alternative Feeds
• Leased Grazing
• Dry Lotting

• Principles
• High Cash Costs
• No Long Term Costs (maybe)
• May Not Require Early Commitment (if your not
  choosy)

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Drought Management

• Find Alternative Feeds
• Leased Grazing
• Dry Lotting
• Hay Supplementation

• Principles
• High Cash Costs
• No Long Term Costs (maybe)
• Probably Requires Early Commitment (Hay can be
  utilized over time.)

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Drought Management

• Find Alternative Feeds
• Leased Grazing
• Dry Lotting
• Hay Supplementation
• Energy and/or Protein Supplementation

• Principles
• High Cash Costs
• Overgrazing May Cause Some Long Term Costs
• Feed Can Probably Be Purchased As Needed

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Drought Management

• Find Alternative Feeds
• Leased Grazing
• Dry Lotting
• Hay Supplementation
• Energy and/or Protein Supplementation
• Wintering Crop Residue

• Principles
• Moderate to Low Cash Costs
• Increased Summer Grazing Pressure Could Impact
  Future Forage Production
• Early Commitment to Insure Availability May
  Increase Risk

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Drought Management

• Find Alternative Feeds
• Leased Grazing
• Dry Lotting
• Hay Supplementation
• Energy and/or Protein Supplementation
• Wintering Crop Residue
• Finding Alternative Forages

• Principles
• Costs of Finding and Working With New Feeds
• Increased Risk Associated With Unfamiliar Feeds
  (ie. Possible death loss and will the cows
  rebreed?)

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Options

• Find Alternative Feeds
• Reduce Feed Needs
• Do Nothing

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Drought Management

• Reduce Feed Needs
• Cull Early

• Principles
• Increase Cost for Pregnancy Test
• Potential Increased Income from Selling in a
  Higher Market
• Every Day Gained is One More Cow-Day of Feed
• No Long Term Costs

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Drought Management

• Reduce Feed Needs
• Cull Early
• Cull More Intensively

• Principles
• Some Production Loss
• Potential short term Increased Income from
  Selling in a Higher Market
• Every Day Gained is One More Cow-Day of Feed
• Perhaps More Efficiency in the Long Term

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Drought Management

• Reduce Feed Needs
• Cull Early
• Cull More Intensively
• Wean Early

• Principles
• Some Production Loss
• Potential Increased Income from Selling in a
  Higher Market
• Every 2 ½ Days a Calf is Weaned is One More
  Cow-Day of Feed
• No Long Term Effect

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Options

• Find Alternative Feeds
• Reduce Feed Needs
• Do Nothing

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Drought Management

• Do Nothing
• Overgraze

• Principles
• Production Loss
• Tremendous Long Term Costs from Future Grazing
  Reduction

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Drought Management

• Do Nothing
• Overgraze
• Reduced Cow Condition

• Principles
• Production Loss
• Potential Long Term Loss from Lower Rebreeding
  Rates
• Potential Reduced Prices if Cows Are Sold in
  Drought Liquidations
• Potential Reduced Income from Selling Cows in
  Poor Condition

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Conclusion

• Each operation is different so there is no Best
  solution
• A combination of actions may be more effective
  and less risky than relying on only one solution
• Doing nothing is the riskiest course of action

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Thank You

• Questions?