Overview of APHIS’ Indemnity Calculators

1. Overview of APHIS’ Indemnity Calculators Stephen L. Ott, Phd Livestock Appraisal-Indemnity-Compensation Specialist

2. Available Appraisal Calculators (Spreadsheets) • Beef • Breeding, Unweaned Calves, Feeder-Stockers, Feedlot • Dairy • Calves, Heifer Replacements, Milk Cows • Whitetail Deer • Fawns, Bucks, Does • Poultry • Broilers (meat & breeders), Turkeys (meat & breeders), and Table Egg Layers • Swine • Breeders, Market Pigs & Hogs

3. Steps in Determining Value via Sales Comparison Approach • Assess Asset Quality • Role of VS field personnel • Gather Sale Prices of Comparable Assets • Role of AICS • Field Personnel if doing own appraisal • Use publicly reported auction prices • Preferably USDA-AMS reported prices

4. Steps in Determining Value via Sales Comparison Approach • Adjust Value For Quality Differences • Appraisal calculators perform this function • Consequently, their appraisal values should be viewed as market based values

5. An Animal Located at Its Premise Will Have ____ Value When Compared to Its Upcoming Auction Barn Selling Price • Less • Same • More

6. Premise Valuation Adjustment • Auction Sale Prices: prices paid by buyers • Seller pays commission, yardage fees, check-off funds • Also animals must be transported to the auction barn

7. Premise Valuation Adjustment • Consequently, the net value received by an owner for selling an animal equals the selling price minus various marketing and transportation costs • This net value to the owner is what the calculators attempt to estimate

8. If a Ranch’s Business is Producing Beef for Direct Sale to Consumers, Then Animal Value Should Based Upon Its ____ Form • Live • Carcass or Meat

9. Form Matters • Calculators are for current condition of the animal at time of depopulation, i.e. live • Some producers will argue they should receive their planned future selling price • unweaned calves valued as weaned calves • beef steers valued at their direct sale meat value • cervids as the value charged for hunting them

10. Form Matters • This higher value desired is associated with a change in future condition • Lighter to Heavier • Unweaned to Weaned • Live to Harvested • Change in form has a cost • When additional costs are accounted current market value is obtained • This extra value could also be thought as revenue and APHIS doesn’t pay for lost revenue

11. Beef Calculator

12. Beef Calculator • Originally Developed by Dr. Darrel Peel, Beef Marketing Specialist, Oklahoma State University • For Commercial Herds • Breeding Values are function of national slaughter value for 500 lb cutter grade carcass with fixed regional adjustments • Feeder Values based upon Oklahoma market prices with fixed regional adjustments • Complete Revision for 2014 • Also for Commercial Herds

13. Breeding Females • Both Breeding Cows and Cow-Calf Pairs • Based upon regression analysis of USDA-AMS Oklahoma auction prices • Only Oklahoma auctions included quality and black hide parameters in their price reporting

14. Breeding Cows Regression Equation • Value ($/head) is a function of • slaughter value (weight x cull cow price), • age, • 400 lb feeder price, • pregnancy statue (1st, 2nd, 3rd trimester), • if high quality, • if black hide

15. Cow-Calf Pair Regression Equation • Value ($/pair) is a function • slaughter value (cow weight x cull price), • age, • calf value (calf weight x calf price), • if high quality, • if black hide

16. Breeding Females • Additional adjustments (from other data sources): • if open for breeding cow, • if pregnant for cow-calf pairs, • if breed registered, • regional differences

17. Breeding Females • User Data Entry: • cow weight and age, • calf weight (if applicable), • pregnancy status, • if high quality, • if black hide, • if breed registered, • region

18. Being Breed Registered Impacts Commercial Cow Value • Very little • < 5% • 5-10% • > 10%

19. Breeding Bulls & Cull Cow • Prices based upon USDA:AMS’ National Weekly Direct Cow and Bull Report • Cull cow grades: premium white, breaker (commercial), boner (utility), cutter (canner) • Bulls, single meat grade • Regional Adjustment • User Data Entry: weight, cull cow grade, region

20. Feeders & Stockers • Prices from Oklahoma auction markets • Steers: Medium & Large, No. 1; 300 – 1000 lbs • Heifers: Medium & Large, No. 1; 300 – 950 lbs • Price for 950-1000 lbs is imputed • Bulls: Medium & Large, No. 1; 400 – 750 lbs

21. Feeders & Stockers • Adjustments • Regional Differences from Peel’s feeder cattle calculator • Holstein Steers: 75% of Beef Steer prices • No adjustment for black hide, already top quality • User Data Entry: weight, sex, region, if Holstein

22. Feeders & Stockers: Unweaned Calves • Useful if need to split pairs, value cow as breeding female and calf as unweaned calf • A slide factor from analysis of light weight calves at Dodge City, KS auction is used to adjust feeder prices • Adjustments for regional differences • No adjustment for quality or black hide • User Data Entry: calf weight and sex, region of country

23. Fats or Feedlot • National value for animals 1000 - 2000 lbs • Prices from AMS’ National Weekly Direct Slaughter Cattle Report—Formulated and Forward Contract • Cattle type: beef steers, beef heifers, dairy steers & heifers • Grade: choice & select • Prices adjusted downward if carcass weight is greater than 900 lbs • Data Entry: number head in each cattle type, weight, and grade categories

24. Dairy Calculators

25. Milk Cow Calculator • Has been in use for several years • Five major revisions, plus minor adjustments • Last major revision: May, 2013 • Earlier version reviewed by Dr. David Anderson, Professor and Extension Economist, Texas A&M University

26. Appraisal Value of a Dairy Cow • Appraisal value is based upon expected value of future dairy production plus current cull value • It is determined through a combination of sales comparison and income appraisal methodologies

27. Total Expected Milk Production • Expected remaining lactations • Based upon published analysis of Dairy Herd Improvement (DHI) data • Total Expected Milk Production (lbs/ cow) = expected remaining lactations x DHI average milk production (lbs / cow) for both Holsteins & Jerseys

28. Value of Expected Calf Production • Expected number of calves a function of expected number of remaining lactations • Adjusted for stillborns and death loss at calving • Expected Value ($ / cow) = expected calves x calf price (avg. of male & female) • Calf prices from Dairy Replacement Calculator

29. Milk Production Premium • Total milk production premium ($/cow) = Springer price (Holstein & Jerseys) – avg. cull value (Holstein & Jerseys) – value of expected calves to be born • Per pound milk production premium = total milk production premium ÷ total expected milk production of DHI avg. Holstein or Jersey

30. Individual Cow Appraisal Value • Appraisal Value ($/head) = • + Value of expected milk production • Per pound milk production premium x 305 ME milk production x expected remaining lactations • + Value of expected calf production • expected births x newborn survival rate x calf price • + Salvage (cull) value • Current weight x cull cow price • Cull cow price is function of both weight (discount for being light) and quality grade

31. Adjustments • Other breeds use their own weight, but use Holstein per pound milk production premium and calf value • Milk production is adjusted to reflect the impact butterfat content has on milk price • Increase calf value if have a positive Predicted Transmitting Ability Net Merit score (Merit $) • Generally for breed registered cows • Two Regions: East and West of Mississippi River

32. Price Inputs • Springer Holstein Heifer • Most common of dairy cow prices • 19 Auctions across the country • Assume prices are for Holsteins unless stated otherwise • Cull cow price ($/cwt) • From USDA-AMS’ National Weekly Direct Cow and Bull Report of carcasses 500 lbs and up

33. User Input Parameters • The Milk Cow Calculator is very user data intensive • 11 user entered parameters • Good News: the calculator has default values for every input parameter • Some default values are a function of breed and lactation

34. Milk Production Parameters • Lactation • 305 ME production (lbs) • 305 ME Milk Butterfat (%) • Days-in-milk • Alternatively: Have calculator determine 305 ME based on: • Daily Milk Production (lbs) • Herd Milk Production Avg. (lbs / cow) • Milk Butterfat (%) • Days-in-milk • Lactation

35. Cull Cow Parameters • Current weight (lbs): • Cull price is reduced for cows having carcass less than 500 lbs • Default cull weights are function of breed and lactation • Quality grades: premium white, commercial (aka breaker), utility (aka boner), or cutter/canner • Default values: 1st lactation: commercial; 2nd lactation: utility; 3rd lactation and greater: cutter

36. Pregnancy Status • Probability will be pregnant by 280 days-in-milk • If open too many days-in-milk, then pregnancy probability begins to decline • Value less than 100% reduces number of expected future lactations • Default 100% if < 180 DIM, then declines to 0% by 280 DIM • 0% probability implies the cow will be culled at end of current lactation

37. Breed Registered Parameters • If registered, initial value is increased by $50 • Value of improved genetics is reflected in milk production and value of calves sold • Net Merit $ Value • Positive value increases calf value • Default value is $0

38. Dairy Replacement Calculator • Price Inputs • Holstein springers, Holstein short-breds, Holstein bull & heifer calves, beef feeder prices • Appraisal values are linear Interpolation between above values • With increases for being weaned and bred • Breed Adjustment based upon relative appraisal value of 1st lactation, 0 DIM cows • East and West Regions

39. Poultry

40. Poultry • Value Determined Using Income and Cost-of-Production Appraisal Methodologies • Based upon industry cost and productivity data supplied by Agri-Stats, a benchmarking company • Wholesale meat – egg prices from USDA:AMS • 10% of gross margin is allocated back to bird value

41. Poultry • Tables of Values are Generated • Day-of-age for meat birds • Week-of-age for breeders • Broilers: Meat & Breeders • Turkeys: Meat & Breeders • Table Egg Layers • User Data Requirement: bird type, number of head, age

42. Swine Calculators

43. Piglets & Feeders • Prices • 10 -12 lb early weaned pigs • Assume 11 lb • 40 lb feeder pigs • USDA-AMS’ National Direct Feeder Pig Report • Value: linear interpolation between 11 lb piglet and 40 lb feeder • Assumed Quality: No. 1 & 2 • Discount if No. 3 or 4 • User Data Entry: number of animals in each weight - quality category

44. Grower-Finishers & Slaughter Hogs • Grower-Finisher Value • Price: USDA-AMS’ Weekly Direct Swine Report • National Negotiated Live (slaughter) price • Base weight: 240 lbs • Linear interpolation between 40 lb & 240 lb values • Slaughter Hog Value • Weight x Slaughter Price • Discount if No. 3 or 4 Quality • User Data Entry: number of head in each weight – quality category

45. Breeding Females • Income Approach • Sow value function of expected number of weaned piglets produced and their value • Cost based upon Iowa State University Extension farrowing budget • Positive gross margin generates a premium for breeding gilts • 10% of gross margin is allocated back to gilt value • Also value of weaned gilts • Use value of weaned gilts to determine value of sows in multiplier herds

46. Breeding Females • Values Generate • Commercial Herds: Gilt – 9th Parity • Multiplier Herds: Gilt – 6th Parity • Price Inputs • Early Weaned Piglets • Sow Slaughter Prices • Corn & Soybean Meal Prices • User Data Entry: number of females in each herd type – parity combination

47. Final Thought • Calculators Are a Work-in-Progress • Changes Due To: • Data Availability • Alternative – Better Approaches to Determining Value • Seedstock Animals • Feedback from Users

48. Stephen L. OttAppraisal-Indemnity-Compensation Specialist970-494-7239 (office)970-2178692 (cell)Stephen.L.Ott@aphis.usda.gov