1 / 19

Economic Impact of Transitioning to a Stocker/Yealding System Due to Brucellosis: Ranch Models Comparison

This study examines the financial implications of converting from cow/calf to stocker/yealding systems as a response to brucellosis. The analysis compares different ranch models, taking into account various factors like cattle sales, hay production, and risk management strategies.

wgrace
Download Presentation

Economic Impact of Transitioning to a Stocker/Yealding System Due to Brucellosis: Ranch Models Comparison

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Economic Performance of Converting From a Cow/Calf/Yearling System to a Stocker/Yearling Operation as a Response to Brucellosis Shane Ruff Graduate Student Department of Agricultural and Applied Economics University of Wyoming

  2. Ranch Assumptions • 400 cow/calf pair • 280 yearlings • All calves are retained in operation • All 180 steers in yearling operation • 100 heifers in yearling, 80 in cow/calf as replacements

  3. Ranch Assumptions Cont. • Calves are received in yearling operation in fall, 550 lbs. for steers and 500 lbs. for heifers • Sold the following September at 977 lbs. for steers and 927 lbs. for heifers • Deeded land, BLM and Forest land are used for grazing

  4. Ranch Assumptions Cont. • I assume in the ranch model that the cow/calf/yearling enterprise produces enough hay to feed all animals • As the enterprise transitions, and there are less cows, there is extra hay to sell • Pure stocker steer budget sells all hay

  5. Ranch Models • 3 ranch models • Cow/Calf/Long-Yearling Enterprise • Base model to transition from • 400 cow/calf pair and 280 yearlings • Transition to: • long-yearling enterprise • Nov. 1 to Sep.1 • pure stocker steer enterprise (2 types) • May 1 to Sep. 1

  6. Transition Model #1Long-Yearling Enterprise • Yearlings run Nov. 1 to Sep. 1 • Cull 15% of the cows each year • Translate that 15% back into yearling operation (Total AU’s) • 7 year transition period • Heifers in yearling operation are spayed • End with 841 yearlings • All hay for feeding is produced by enterprise

  7. Transition Model #2Stocker Steer Enterprise • All cattle are sold up front • Revenue from cattle sales accounted for in year one of transition • Pure stocker steer operation • Purchased in spring, sold following fall (Sep) • Steers are purchased at 600/700lbs in spring • Sold at 846/946 lbs. in fall (Sep) • End with 919/833 stocker steers • All hay from hay enterprise is sold

  8. Ranch Models • All models are estimated out to 7 years • Culling 15% of cow/calf herd each year takes 7 years to fully transition • This way they can be compared accurately over the long-run

  9. Price Ranges • Historical calf prices and native hay prices • Calf Prices 99-10 • Hay Prices 83-12 • @Risk simulation • Simulates likelihood of these historical prices occurring • Shows a range of expected profit

  10. Return over Variable costs • No ownership costs are factored in • Paying yourself (owner labor) • Depreciation • Operating Loan (interest) • Taxes • All enterprises include haying operation • No risk of contracting brucellosis in herd

  11. Cow/Calf/Yearling Enterprise Enterprise has low chance of losing money.

  12. Yearling Enterprise Enterprise has a low chance of losing money (3%). Wider range of profit and lower average compared to base herd (cow/calf/yearling)

  13. Stocker SteerEnterprise 600-846 lbs. Years 2-7 Potential for higher profits, also larger loses. Lower average than base. Enterprise loses money 22% of the time (2 out of 10 years). Producer has to plan for years where there is a loss.

  14. Stocker Steer Enterprise 700-946 lbs. Years 2-7 Higher profit potential, higher loss potential. Lower average than base herd.

  15. Net Present Value

  16. Conclusions • Stocker Steer enterprise has potential to earn larger profit but also larger loss • May have to survive one or more years of negative profit • Depends on risk attitude of producer • How much risk are you willing to take? • High risk of brucellosis vs. low risk of brucellosis infection • Preliminary results have shown early years of transition are most profitable

  17. Conclusions • Tax implications • Raised breeding livestock • Taxed as ordinary income • Has potential to raise tax bracket • Purchased livestock • Capital gains taxes apply

  18. For the future • Tax implications of whole herd liquidation vs. culling 15% of herd each year • Completed Thesis • Excel document allowing producers to enter their own values in comparison to mine • Extension Bulletin

  19. Questions?

More Related