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Shane Ruff Graduate Student Department of Agricultural and Applied Economics University of Wyoming

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. Ranch Assumptions. 400 cow/calf pair 280 yearlings

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Shane Ruff Graduate Student Department of Agricultural and Applied Economics University of Wyoming

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  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?

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