A griculture & B usiness M anagement Management Issues in 2003 For Beef Cattle Producers Jeffrey E. Tranel Agricultural & Business Management Economist

Cows Liquidated in 2002 Several cows sold in –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 Sold Funds 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? Production Market Financial Legal Human

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 the Cattle 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-Calf Colorado, CSU Livestock Enterprise Budget, 250 cows, $/Cow Steers = 555 $97.60 Heifers = 535 $92.46 Plus cull cows + bulls

Sept. 2002

2003 Projected

In 13 th Year of Cycle Current Cycle Longest on Record

Cattle Feeders Losing Money in 2002

Cattle Price Forecasts lb Steers LMICFUTURES+ BASISCO ‘02 Q $8.67$ 92 ‘03 Q $15.48$ 97 ‘03 Q $17.56$98 ‘03 Q $ 9.43$ 92 ‘03 Q $8.67$ 91

Cattle Price Forecasts lb Steers LMICERSFUT+ BasisCO ‘02 Q $0.42$83 ‘03 Q $0.75$81 ‘03 Q $0.06$80 ‘03 Q $0.48$83 ‘03 Q $0.42$82

1033e Decision Tool (An Excel Template)

Contacting Your ABM Economists Norm Dalsted (970) Dennis Kaan (970) Tim Bachicha (719) Rod Sharp (970) Jeff Tranel (719) Wendy Umberger (970)