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 - PowerPoint PPT Presentation
Economic Performance of Converting From a Cow/Calf/Yearling System to a Stocker Operation as a Response to Brucellosis
Economic Performance of Converting From a Cow/Calf/Yearling System to a Stocker/Yearling Operation as a Response to BrucellosisShane RuffGraduate StudentDepartment of Agricultural and Applied EconomicsUniversity of Wyoming400 cow/calf pair 280 yearlingsAll calves are retained in operationAll 180 steers in yearling operation100 heifers in yearling, 80 in cow/calf as replacementsRanch AssumptionsCalves are received in yearling operation in fall, 550 lbs. for steers and 500 lbs. for heifersSold the following September at 977 lbs. for steers and 927 lbs. for heifersDeeded land, BLM and Forest land are used for grazingRanch Assumptions Cont.I assume in the ranch model that the cow/calf/yearling enterprise produces enough hay to feed all animalsAs the enterprise transitions, and there are less cows, there is extra hay to sellPure stocker steer budget sells all hayRanch Assumptions Cont.3 ranch modelsCow/Calf/Long-Yearling EnterpriseBase model to transition from400 cow/calf pair and 280 yearlingsTransition to: long-yearling enterprise Nov. 1 to Sep.1pure stocker steer enterprise (2 types)May 1 to Sep. 1Ranch ModelsYearlings run Nov. 1 to Sep. 1Cull 15% of the cows each year Translate that 15% back into yearling operation (Total AUs)7 year transition periodHeifers in yearling operation are spayedEnd with 841 yearlingsAll hay for feeding is produced by enterprise
Transition Model #1Long-Yearling EnterpriseAll cattle are sold up frontRevenue from cattle sales accounted for in year one of transitionPure stocker steer operationPurchased in spring, sold following fall (Sep)Steers are purchased at 600/700lbs in springSold at 846/946 lbs. in fall (Sep)End with 919/833 stocker steersAll hay from hay enterprise is sold
Transition Model #2Stocker Steer EnterpriseAll models are estimated out to 7 yearsCulling 15% of cow/calf herd each year takes 7 years to fully transitionThis way they can be compared accurately over the long-run
Ranch ModelsHistorical calf prices and native hay pricesCalf Prices 99-10Hay Prices [email protected] simulationSimulates likelihood of these historical prices occurringShows a range of expected profitPrice RangesNo ownership costs are factored inPaying yourself (owner labor)DepreciationOperating Loan (interest)TaxesAll enterprises include haying operationNo risk of contracting brucellosis in herd
Return over Variable costsCow/Calf/Yearling EnterpriseEnterprise has low chance of losing money.
Cow/Calf/Yearling Return Over Ownership Costs
Cow/Calf/Yearling Enterprise No Hay
Enterprise can expect to lose money 14% of the timeYearling Enterprise
Enterprise has a low chance of losing money (3%). Wider range of profit and lower average compared to base herd (cow/calf/yearling)Yearling Enterprise No Hay
Enterprise can expect to lose money roughly 5 out of every 10 yearsStocker Steer Enterprise 6-846 Yr. 1 Hay
Stocker Steer Enterprise 6-846 Yr. 1 No Hay
Stocker Steer Enterprise 600-846 lbs. Years 2-7Potential 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.
Stocker Steer Enterprise 6-846 No Hay
Enterprise can expect to lose money roughly 7 out of every 10 yearsStocker Steer Enterprise 7-946 Yr. 1 Hay
Stocker Steer Enterprise 7-946 Yr. 1 No Hay
Stocker Steer Enterprise 700-946 lbs. Years 2-7
Higher profit potential, higher loss potential. Lower average than base herd.Stocker Steer Enterprise 7-946 No Hay
Net Present Value
Stocker Steer enterprise has potential to earn larger profit but also larger lossMay have to survive one or more years of negative profitDepends on risk attitude of producerHow much risk are you willing to take?High risk of brucellosis vs. low risk of brucellosis infectionPreliminary results have shown early years of transition are most profitable
ConclusionsTax implicationsRaised breeding livestockTaxed as ordinary incomeHas potential to raise tax bracketPurchased livestockCapital gains taxes applyConclusionsTax implications of whole herd liquidation vs. culling 15% of herd each yearCompleted ThesisExcel document allowing producers to enter their own values in comparison to mineExtension Bulletin
For the futureQuestions?