Destocking Strategies During Drought - University of Georgia by fjzhangxiaoquan

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									Livestock Management and
Marketing Considerations in
  Dealing With Drought

  Dr. Curt Lacy and Dr. John McKissick
    Extension Economists-Livestock
           University of Georgia
Three Biggest Mistakes Cattlemen
Make During a Drought
1.   Do nothing hoping it rains or that additional
     land can be rented or hay purchased.
2.   Early weaning AND marketing calves hoping
     that cows won’t have to be liquidated.
3.   Once culling begins, saving young cows (less
     than 4 yrs) instead of more productive (4-7
     yrs) cows.
     Adapted from Gill and Pinchak. “Destocking Strategies During
     Drought” . TX A&M University.


                 Livestock Management & Marketing
                     Considerations in a Drought
The Basics
1.    Most cattlemen have a finite amount of money to put
      into an operation.
2.    Money comes from 3 places:
     1.   Cash on hand
     2.   Sales of assets (feed inventories, cows, equipment, real estate)
     3.   Borrowed capital
3.    Assets-Liabilities = Equity
4.    EQUITY IS OUR MOST
      IMPORTANT FINANCIAL ASSET

                    Livestock Management & Marketing
                        Considerations in a Drought
Suggested Operating Procedure (SOP)
for Cattlemen in a Drought
1.   Wean early (60 doa+)
2.   Segregate and feed animals by nutritional
     needs
3.   Cull cows
4.   Precondition/stocker calves

BE LOOKING FOR WAYS TO CUT COSTS

             Livestock Management & Marketing
                 Considerations in a Drought
Marketing Order
1.   Open cows (old)
2.   Open cows (young)
3.   Unprofitable cows
4.   Replacement heifers
5.   Current calf crop
6.   Marginally profitable cows
7.   3-7 year old cows

             Livestock Management & Marketing
                 Considerations in a Drought
Short-Term Profitability (Cash-flow)
Net Cash Flow = Revenue – Expense – Payments
Net Cash Flow = Calf Sales + Cow Sales – Feed Costs – Other Costs – Pmts
Where calf sales or cow sales = Wt. X Price


Drought Math
400# calf X $1.15/# = $460
1,100 pound cow x $0.48/# = $528
Cost per day = $1.00/day for calf gaining 2#/day
Cost per day = $1.40/day for dry cow to maintain weight



                   Livestock Management & Marketing
                       Considerations in a Drought
Cost-cutting Guidelines
1.   There is a difference in cutting costs and
     cutting corners.
2.   Focus on $/Cwt. not $/cow or total $$.
3.   Identify the largest costs in the operation
     that can be changed.
4.   Identify ways to reduce these costs.
5.   Don’t cut the important things (nutrition,
     health, genetics).

              Livestock Management & Marketing
                  Considerations in a Drought
Cull Unprofitable Cows
Annual Cow Profit  Calf Value - Total Cow Cost
Annual Cow Profit  (Calf Weight x Calf Price) - Total Cow Cost

   Yeah Buts:
       Must be able to match cows and calves
       Based on average cow cost
       Borderline young cows may get a pass




                Livestock Management & Marketing
                    Considerations in a Drought
Marketing Strategies
for Cows and Calves
What Determines Cow Value
1.   Percent Lean Meat Yield
2.   Live weight




            Livestock Management & Marketing
                Considerations in a Drought
  Marketing Classifications of Cull
  Cows
Classification         Lean               Body          Premium
                   Percentage of         Condition     (Discount)
                    Trimmings             Score        2002-2006
Cutter/Canner          85%+                   1-3      ($3.50/Cwt.)


Boning Utility        80-85%                  4-6         Base


Breaking Utility   Less than 80%              7+       ($2.00/Cwt.)




                    Livestock Management & Marketing
                        Considerations in a Drought
Cull Cow Marketing
                                                   SEASONAL PRICE INDEX -- UTILITY COWS
   When                                                     Southern Plains, 1997-2006
       Before October 1             Index
                                    1.15
   What                            1.10

       Cows in good flesh (BCS     1.05
                                    1.00
        4+)                         0.95

       Cows without obvious        0.90

        defects                     0.85
                                    0.80

   How                                      Jan       Mar     May       Jul


                                                                     Avg. Index
                                                                                  Sep     Nov




       Local market
       Direct????
            Live weight
            Carcass basis


                     Livestock Management & Marketing
                         Considerations in a Drought
Increasing Income
Calf Crop
   Short-term backgrounding/creep feeding
   Retained ownership
       Stockering
       Custom-finishing
   Forward price part of your production




                Livestock Management & Marketing
                    Considerations in a Drought
What is the Market Offering Today-
Futures Based Price Projections
         $110.00

         $105.00

         $100.00
$/Cwt.




          $95.00

          $90.00

          $85.00

          $80.00




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           500# calf       650# Feeder        750# Feeder      Live Cattle



                       Livestock Management & Marketing
                           Considerations in a Drought
         What is the Market Offering Today-
         Futures Based Price Projections
         $750.00

         $700.00

         $650.00
$/head




         $600.00

         $550.00

         $500.00

         $450.00

         $400.00
                   Feb   Mar    Apr   May    Jun    Jul     Aug   Sep   Oct   Nov

                   500# calf    650# Feeder        750# Feeder


                         Livestock Management & Marketing
                             Considerations in a Drought
         What You Can Sell for Today-Futures
         Based Price Projections
         $1,300.00
         $1,250.00
         $1,200.00
         $1,150.00
         $1,100.00
$/head




         $1,050.00
         $1,000.00
           $950.00
           $900.00
           $850.00
           $800.00




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                                     Live Cattle


                         Livestock Management & Marketing
                             Considerations in a Drought
Forward Pricing Part of Your
Production
   Producers with 50,000# or more can use
    futures.
   Can use video auctions either through local
    markets or other to forward price calves up
    to 90 days.
   Forward cash contract with order buyers
    and feedyards.


              Livestock Management & Marketing
                  Considerations in a Drought
Computer Decision-Aids
   Alternative Feedstuffs Calculator
   Marketing Alternatives Calculator
   Budgets
       Cow-calf
       Stockering
       Custom Finishing




                Livestock Management & Marketing
                    Considerations in a Drought
Dealing With The Drought Summary
1.   Keep in mind where we are in cycle – Better to do
     good job with fewer cattle than HA job with a lot!
2.   Cull all LIKELY non-productive mature cows (10yrs
     plus, open etc.)–remember relation between nutrition
     and putting a calf on the ground. Keep the productive
     factory in place - 4 to 7 year old cows.
3.   If they ain’t growing, they need to be going! Can wean
     60 days plus.
4.   Put emphasis on things will get you more NET money
     –Marketing, Management records (vaccinations,
     implants, feed products, etc.), Performance records. A
     SHARP PENCIL.


               Livestock Management & Marketing
                   Considerations in a Drought

								
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