Risk Management and the Cost of Production

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  Risk Management and the Cost of Production. University of Florida Beef Cattle Short Course May 2-4, 2007 Dr. Curt Lacy Extension Economist-Livestock University of Georgia [email protected]/* */ Overview. Recent trends and projected profits for 2007 Ways to manage risk in 2007.
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Risk Management and the Cost of Production University of Florida Beef Cattle Short Course May 2-4, 2007 Dr. Curt Lacy Extension Economist-Livestock University of Georgia [email protected]/* */ Overview
  • Recent trends and projected profits for 2007
  • Ways to manage risk in 2007
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Nitrogen prices have increased 76% since 2002 Fertilizer Prices 1997-2006 University of Florida Beef Cattle Short Course May 2-4, 2007 Fuel Prices 1997-2006 Diesel prices are up 145% since 2002 University of Florida Beef Cattle Short Course May 2-4, 2007 Impact of Fuel & Fertilizer Prices on Cost of Production University of Florida Beef Cattle Short Course May 2-4, 2007 Projected Profits for 2007 Assumes 500 cows, 85% calf crop, 523# calf marketed in Aug-Sep High Return Producers Don’t Cheat On:
  • Animal health
  • Nutrition
  • Genetics
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Source: Cattle-Fax Managing Risk in 2007 and the Future
  • Determine your cost
  • Increase Calf Value (Revenue)
  • Higher price
  • More production
  • Reduce Cow Cost
  • Cull open cows
  • Cull unproductive cows
  • Examine replacement heifer alternatives
  • Reduce the Cost of Production
  • Evaluate economics of hay production
  • Evaluate economics of annual forages
  • Consider alternative feeds
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Know Your Cost
  • $/Cwt. Produced
  • $/Calf Marketed
  • $/Cow
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Increase RevenueCalf Value
  • Forward price part of your production
  • Short-term backgrounding/creep feeding
  • Retained ownership
  • Stockering
  • Custom-finishing
  • University of Florida Beef Cattle Short Course May 2-4, 2007 What You Can Sell for Today-Futures Based Price Projections Source: CME & www.beefbasis.com What You Can Sell for Today-Futures Based Price Projections University of Florida Beef Cattle Short Course May 2-4, 2007 Creep-feeding or Short-term BackgroundingSell 500# Calf in July vs. 650 or 750 August Reducing Cow Cost
  • Cull open cows
  • Cull unproductive cows
  • Evaluate replacement female economics
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Cull Unproductive Cows
  • Yeah Buts:
  • Must be able to match cows and calves
  • Based on average cow cost
  • Borderline young cows may get a pass
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Replacement Female Economics
  • Compare alternatives
  • Include the opportunity cost of heifers
  • Do whatever it takes to get second calf heifers bred
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Replacement Female Economics – Value of Getting 2nd Calf Heifers Bred $1,080 initial value, 7 years useful life, 7% interest Pasture and feed cost make up 63% of Variable Expenses Reducing the Cost of Production University of Florida Beef Cattle Short Course May 2-4, 2007 Reducing the Cost of Production
  • Reduce pasture cost
  • Hay production economics
  • Reduce feed costs
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Reducing Pasture Costs
  • Reduce pasture cost
  • Soil test
  • Alternative fertilizers
  • Legumes?
  • Rotational grazing?
  • Economics of annuals
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Average Yield Forage Production Risk University of Florida Beef Cattle Short Course May 2-4, 2007 Annual Economics University of Florida Beef Cattle Short Course May 2-4, 2007 Annual Economics University of Florida Beef Cattle Short Course May 2-4, 2007 Reducing Pasture Costs
  • Hay production
  • What are your costs?
  • Buy hay/reduce stocking rate?
  • Corn silage?
  • Baleage?
  • Irrigation?
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Costs of Producing Hay Cost Comparison of Hay and Silage 85% DM Hay, 35% DM Silage Reducing Feed Costs
  • Reduce feed costs
  • Forage test
  • Consider alternative feeds
  • Crop by-products
  • Cottonseed
  • Soy hulls
  • Molasses
  • DDG
  • Commodity feeds
  • Bakery products
  • Other manufactured products
  • CONFIRM INGREDIENTS OF BY-PRODUCTS
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Alternative Feedstuffs Economics Calculator
  • Excel spreadsheet
  • Users enter current or base feeding scenario and alternative feeding scenario
  • Users also enter cost info for additional facilities or equipment
  • Net returns for the alternative feeding scenario are calculated on per herd and per cow basis
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Decision-aids
  • Replacement Female Calculator
  • Marketing Alternatives Calculator
  • Alternative Feedstuffs Calculator
  • WWW.UGABEEF.ORG University of Florida Beef Cattle Short Course May 2-4, 2007 Summary
  • 2007 and the next few years will be challenging for beef cattle producers.
  • Don’t cheat on the important things
  • Health
  • Nutrition
  • Genetics
  • Marketing
  • High feed prices create economic incentives for “grass-weight” on calves and feeders.
  • Retaining ownership MAY be an alternative
  • University of Florida Beef Cattle Short Course May 2-4, 2007 Summary
  • Cows
  • Cull open and unproductive cows.
  • Compare replacement female alternatives.
  • Production Costs
  • Examine your pasture costs.
  • Revisit hay costs.
  • Consider other forage alternatives.
  • Look at alternative feedstuffs.
  • University of Florida Beef Cattle Short Course May 2-4, 2007
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