Texas A&M, OSU tool helps producer make
Texas AgriLife Extension Service and Oklahoma State University have developed a decision aid to help cattle producers make difficult culling decisions caused by extreme drought.
The Cow Bid Price Calculator, a spreadsheet program, is available agfacts.tamu.edu/~lfalcone/newweb/droughtmgmt.htm.
“This is the latest in a string of these types of problems due to drought, much like what we saw in the spring and summer of 1996, again in 1998, as well as 2006, 2008 and 2009,” says David Anderson, Texas AgriLife Extension livestock economist, College Station.
“However, market conditions and expectations of future prices were much different than today,” he adds.
Anderson notes that in the spring of 1996, producers were faced with the lowest prices since the mid-1970s, along with grain and forage prices “that were historically very high, and set to move higher.
“Today, cull cow and calf prices are much stronger even though we face higher grain and forage prices,” Anderson says. “What is the same now as in 1996 are the economical and financial analysis tools, and how they should be used to make a sound disinvestment or investment decision for breeding cattle.”
Larry Falconer, AgriLife Extension economist in Corpus Christi, says beef cattle producers are facing some big decisions now because of the drought:
• Whether to keep or sell a cow.
• How much feed they can afford to buy in order to keep a cow or heifer.
“These decisions hinge on the expected value of each animal in a herd when compared to what the market is offering for that animal,” Falconer says.
“These decisions can be analyzed with this tool. Deciding on what a cow is worth in a herd is not always simple when comparing what you have to pay for the same age and quality cow over the scale at your local auction barn.”
The decision aid uses data on calf crop percentage, weaning weight, steer, heifer and cull cow price, annual operating costs per cow, and financing information. By entering this data, a rancher can determine the expected net present value of the cow to use in making a culling decision.
“The use of these tools can provide benchmarks to calculate what might be best to do with the hand that you as a cattle producer have been dealt,” Falconer notes.
“This analysis should be carried out for your particular situation, because the ‘right’ answer depends on the cost structure for your ranch and what you expect prices to be.”
Fannin is with Texas A&M Agriculture Communications, College Station.
This article published in the October, 2011 edition of THE FARMER-STOCKMAN.