Financial Spreadsheet 40668 | Drought Strategies

Partial file snippet.

Sheet 1: Strategies

	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
		

		Strategies for Beef Cattle Herds During Times of Drought, v2011
		

		
 
		
		

		

		

		

		

		

		

		

	
	
		

		by:  Jeffrey E. Tranel, Rod Sharp, & John Deering
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Agriculture and Business Management Economists
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		     This 'decision aid' is designed to help cow-calf producers compare the financial consequences of alternative management strategies during times of limited grazing forage, e.g. drought. It is a guide only. Producers should consult with their lenders, tax practioners, and/or other professional before making any final decisions.
		

		

		

		

		

		

		

		

		

	
	
		

		COWS
		

		

		

		

		

		

		

		

		

		CALVES
		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Herd Size (head)
		

		

		

		

		

		100 
		

		

		

		Average Weaning Percentage
		

		

		

		

		94%
		

		

		

		Normal Number of Calves to Be Sold
		

		

		75 
		  head
	
	
		

		Average Cow Weight (lbs)
		

		

		

		

		

		1,200 
		

		

		

		Average Percent of Calves Sold
		

		

		

		

		75%
		

		

		

		

		

		

		

		

	
	
		

		Current Value of Cows (per cow)
		

		

		

		

		

		$850 
		

		

		

		Average Weight Currently (lbs)
		

		

		

		

		375 
		

		

		

		

		

		

		

		

	
	
		

		Number of Cows Culled in a Normal Year
		

		

		

		

		

		15 
		

		

		

		Average Weight at Weaning (lbs)
		

		

		

		

		600 
		

		

		

		

		

		

		

		

	
	
		

		Annual "Cow" Costs
		

		

		

		

		

		$500 
		

		

		

		Prices (per lb)
		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Adjustment Factor Following Drought
		

		

		

		

		

		0%
		

		

		

		Current
		

		

		

		

		$1.45 
		

		

		

		

		

		

		

		

	
	
		

		OTHER INFORMATION
		

		

		

		

		

		

		

		

		

		Expected at Weaning, This Year
		

		

		

		

		$1.32 
		

		

		

		

		

		

		

		

	
	
		

		Interest Rate for Borrowed Money
		

		

		

		

		

		6.50%
		

		

		

		Expected at Weaning, Year 2
		

		

		

		

		$1.25 
		

		

		

		

		Months
		Days
		

		

	
	
		

		Interest Rate for Invested Money
		

		

		

		

		

		1.25%
		

		

		

		Expected at Weaning, Years 3-5
		

		

		

		

		$1.20 
		

		

		

		2011 
		4 
		120 
		

		

	
	
		

		Average Tax Basis of Cows (per cow)
		

		

		

		

		

		$0 
		

		

		

		

		

		

		

		

		

		

		

		

		2012 
		12 
		360 
		

		

	
	
		

		Total Income Tax Rate (U.S. & State)
		

		

		

		

		

		19%
		

		

		

		DROUGHT ENDS:
		

		MONTH
		

		

		1 
		

		

		

		2013 
		1 
		30 
		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		YEAR
		

		

		2013 
		

		

		

		0 
		0 
		0 
		

		

	
	
		

		CURRENT MONTH (month of action)
		

		

		

		

		

		8 
		

		

		

		(it assumed that cows are replaced in December of year that drought ends)
		

		

		

		

		1 
		0 
		0 
		

		

	
	
		

		CURRENT YEAR
		

		

		

		

		

		2011 
		

		

		

		

		

		

		

		

		17 
		510 
		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		OPTION 1: PURCHASE ADDITIONAL FEED
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		Price
		

		

		

		Days of 
		

		

		

		Additional Costs
		

		

		

		

		

		

		

		

	
	
		

		
		You must make sure the ration is balanced for your cows.
		Ration 1
		

		

		

		lbs/day
		

		Per Ton
		

		

		

		Add'l Feed
		

		

		

		Per Cow  
		Per Herd  
		

		

		

		

		

		

		

		

	
	
		

		Hay
		

		

		

		22.00 
		

		$240 
		

		

		

		120 
		

		

		

		316.80 
		31,680 
		

		

		

		

		

		

		

		

	
	
		

		Other
		

		

		

		0.00 
		

		$0 
		

		

		

		315 
		

		

		

		831.60 
		83,160 
		

		

		

		

		

		

		

		

	
	
		

		Additional Cost ($/cow/day)
		

		

		

		

		

		2.64 
		

		

		

		510 
		

		

		

		1,346.40 
		134,640 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		OPTION 2: TRUCK PAIRS TO RENTED PASTURE
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Distance to/from Pasture (miles)
		

		

		

		

		

		 300 
		

		

		

		

		

		

		

		Additional Costs
		

		

		

		Actual Calves Sold (Option 2)
		

		

		73 
		  head
	
	
		

		Trucking Cost (per loaded mile)
		

		

		

		

		

		$4.00 
		

		

		

		

		

		

		

		Per Cow  
		Per Herd  
		

		

		

		Actual Selling Weight (Option 2)
		

		

		540 
		  lbs
	
	
		

		Pasture Rent (per AUM)
		

		

		

		

		

		$25.00 
		

		

		

		Trucking Pairs to Pasture
		

		

		

		48.00 
		4,800 
		

		

		

		Expected Calf Sales
		

		

		$59,400 
		

	
	
		

		Days on Rented Pasture (per year)
		

		

		

		

		

		 120 
		

		

		

		Trucking Cows to Home
		

		

		

		36.00 
		3,600 
		

		

		

		Actual Calf Sales
		

		

		$52,034 
		

	
	
		

		Additional Calf Death Loss, Year 1 (hd)
		

		

		

		

		

		 2 
		

		

		

		Pasture Rent
		

		

		

		100.00 
		10,000 
		

		

		

		

		

		

		$7,366 
		

	
	
		

		Adjustment for Calf Weaning Weights
		

		

		

		

		

		-10%
		

		

		

		Other Costs
		

		

		

		3.00 
		300 
		

		

		

		Pairs Per Truck (40,000 lbs)
		

		

		26 
		

	
	
		

		Total Other (not rent) Costs
		

		

		

		

		

		$300 
		

		

		

		Lost Revenues (calf sales at weaning)
		

		

		

		73.66 
		7,366 
		

		

		

		Cows Per Truck (40,000 lbs)
		

		

		34 
		

	
	
		

		Total Days of Drought
		

		

		

		

		

		510 
		

		

		

		Interest
		

		

		

		4.05 
		405 
		

		

		

		Trucks Needed to Ship Pairs
		

		

		4 
		

	
	
		

		Total Months of Drought
		

		

		

		

		

		17 
		

		

		

		Total
		

		

		

		264.71 
		26,471 
		

		

		

		Trucks Needed to Ship Cows
		

		

		3 
		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		OPTION 3: SELL PAIRS & REPLACE COWS
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		Reduced Operating Costs, Year 1 (per cow)
		

		

		

		

		

		$100 
		

		

		

		

		

		

		

		Additional Costs
		

		

		

		Expected Calf Sales, Current Year
		

		

		$59,400 
		

	
	
		

		Operating Costs, Year 2 (total)
		

		

		

		

		

		$5,000 
		

		

		

		

		

		

		

		Per Cow  
		Per Herd  
		

		

		

		Actual Calf Sales
		

		

		$51,113 
		

	
	
		

		Operating Costs, Years 3-5 (total)
		

		

		

		

		

		$5,000 
		

		

		

		Reduced Calf Sales This Year
		

		

		

		82.88 
		8,288 
		

		

		

		

		

		

		$8,288 
		

	
	
		

		Selling Costs (per cow)
		

		

		

		

		

		$20 
		

		

		

		Reduced Operating Costs, This Year
		

		

		

		100.00 
		10,000 
		

		

		

		

		

		

		

		

	
	
		

		Cost of Replacement Animals (per cow)
		

		

		

		

		

		$1,000 
		

		

		

		Additional Costs for Selling Cows
		

		

		

		20.00 
		2,000 
		

		

		

		Expected Calf Sales, Year 2
		

		

		$56,250 
		

	
	
		

		It is assumed that cows are replaced on last day of the second year after they are sold. For example, cows sold in 2011 are replaced on 12/31/2013.
		

		

		

		Interest on Cow Sales Revenues
		

		

		

		(3.54)
		(354)
		

		

		

		Expected Calf Sales, Year 3
		

		

		$54,000 
		

	
	
		

		

		

		

		Total, Year 1
		

		

		

		199.33 
		19,933 
		

		

		

		Cow Sales
		

		

		$85,000 
		

	
	
		

		

		

		

		Revenues from Cow Sales
		

		

		

		(722.50)
		(72,250)
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		Interest Income, Years 2+3
		

		

		

		(25.01)
		(2,501)
		

		

		

		Initial Money Invested
		

		

		85,000 
		

	
	
		

		

		

		

		Expected Calf Sales, Years 2+3
		

		

		

		1,102.50 
		110,250 
		

		

		

		Interest Income, Year 1
		

		

		354 
		

	
	
		

		

		

		

		

		

		

		

		

		

		

		Reduced Operating Expenses, Yrs 2+3
		

		

		

		(900.00)
		(90,000)
		

		

		

		Interest Income, Year 2
		

		

		1,067 
		

	
	
		

		

		

		

		

		

		

		

		

		

		

		Replacement Cows
		

		

		

		1,000.00 
		100,000 
		

		

		

		Interest Income, Year 3
		

		

		1,080 
		

	
	
		

		

		

		

		

		

		

		

		

		

		

		Total, Years 2 & 3
		

		

		

		454.99 
		45,499 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		Total for 3 Years
		

		

		

		654.32 
		65,432 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		SELL COWS
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		NORMAL 
		BUY 
		RENT 
		

		REPLACE  
		DO NOT  
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		CONDITIONS 
		FEED 
		PASTURE 
		

		12/31/2013
		REPLACE  
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		Current (Applicable) Net Worth
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		Cows
		

		

		

		

		

		

		

		85,000 
		85,000 
		85,000 
		

		85,000 
		85,000 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Calves
		

		

		

		

		

		

		

		408 
		408 
		408 
		408 
		408 
		408 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Cash
		

		

		

		

		

		

		

		(40,000)
		(40,000)
		(40,000)
		

		(40,000)
		(40,000)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Total
		

		

		

		

		

		

		

		45,408 
		45,408 
		45,408 
		

		45,408 
		45,408 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		2011 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		Revenues from Calves
		

		

		

		

		

		

		

		59,400 
		59,400 
		52,034 
		

		51,113 
		51,113 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Operating Costs (typical + adjustments)
		

		

		

		

		

		

		

		(50,000)
		(81,680)
		(76,471)
		

		(40,000)
		(40,000)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Profits
		

		

		

		

		

		

		

		9,400 
		(22,280)
		(24,436)
		

		11,113 
		11,113 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Taxes (SE, US Income, CO Income)
		

		

		

		

		

		

		

		2,952 
		0 
		0 
		

		3,489 
		3,489 
		

		

		

		

		

		

		

		

	
	
		

		

		

		After Tax Income
		

		

		

		

		

		

		

		6,448 
		(22,280)
		(24,436)
		

		7,623 
		7,623 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Capital Sales - Cow Sales
		

		

		

		

		

		

		

		0 
		0 
		0 
		

		85,000 
		85,000 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Capital Gains (@ 15%)
		

		

		

		

		

		

		

		0 
		0 
		0 
		

		0 
		12,750 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Ending Net Worth
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		Cows
		

		

		

		

		

		

		

		85,000 
		85,000 
		85,000 
		

		0 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Cash
		

		

		

		

		

		

		

		6,448 
		(22,280)
		(24,436)
		

		92,623 
		79,873 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Total
		

		

		

		

		

		

		

		91,448 
		62,720 
		60,564 
		

		92,623 
		79,873 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		2012 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		Revenues from Calves
		

		

		

		

		

		

		

		56,250 
		56,250 
		49,275 
		

		0 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Operating Expenses
		

		

		

		

		

		

		

		(50,000)
		(145,040)
		(80,000)
		

		(5,000)
		(5,000)
		

		

		

		Days on rented pasture in Year 2 equals days in cell X18, rather than the value used for Year 1 (cell I35)
		
	
		

		

		

		Interest Income/Expenses
		

		

		

		

		

		

		

		81 
		(1,448)
		(1,588)
		

		1,158 
		998 
		

		

		

		
	
		

		

		

		Profits
		

		

		

		

		

		

		

		6,331 
		(90,238)
		(32,313)
		

		(3,842)
		(4,002)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Taxes (SE, US Income, CO Income)
		

		

		

		

		

		

		

		1,988 
		0 
		0 
		

		0 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		After Tax Income
		

		

		

		

		

		

		

		4,343 
		(90,238)
		(32,313)
		

		(3,842)
		(4,002)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Purchase Replacement Females
		

		

		

		

		

		

		

		0 
		0 
		0 
		

		0 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Ending Net Worth
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		Cows
		

		

		

		

		

		

		

		85,000 
		85,000 
		85,000 
		0 
		0 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Cash
		

		

		

		

		

		

		

		10,791 
		(112,518)
		(56,750)
		

		88,781 
		75,872 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Total
		

		

		

		

		

		

		

		95,791 
		(27,518)
		28,250 
		

		88,781 
		75,872 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		2013 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		Revenues from Calves
		

		

		

		

		

		

		

		54,000 
		54,000 
		54,000 
		

		0 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Operating Expenses
		

		

		

		

		

		

		

		(50,000)
		(57,920)
		(52,500)
		

		(5,000)
		(5,000)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Interest Income/Expenses
		

		

		

		

		

		

		

		135 
		(7,314)
		(3,689)
		

		1,110 
		948 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Profits
		

		

		

		

		

		

		

		4,135 
		(11,234)
		(2,189)
		

		(3,890)
		(4,052)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Taxes (SE, US Income, CO Income)
		

		

		

		

		

		

		

		1,298 
		0 
		0 
		

		0 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		After Tax Income
		

		

		

		

		

		

		

		2,837 
		(11,234)
		(2,189)
		

		(3,890)
		(4,052)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Purchase Replacement Females
		

		

		

		

		

		

		

		0 
		0 
		0 
		

		100,000 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Ending Net Worth
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		Cows
		

		

		

		

		

		

		

		85,000 
		85,000 
		85,000 
		

		100,000 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Cash
		

		

		

		

		

		

		

		13,628 
		(123,752)
		(58,938)
		

		(15,109)
		71,820 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Total
		

		

		

		

		

		

		

		98,628 
		(38,752)
		26,062 
		

		84,891 
		71,820 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		2014 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		Revenues from Calves
		

		

		

		

		

		

		

		54,000 
		54,000 
		54,000 
		

		54,000 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Operating Expenses
		

		

		

		

		

		

		

		(50,000)
		(50,000)
		(50,000)
		

		(50,000)
		(5,000)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Interest Income/Expenses
		

		

		

		

		

		

		

		170 
		(8,044)
		(3,831)
		

		(982)
		898 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Profits
		

		

		

		

		

		

		

		4,170 
		(4,044)
		169 
		

		3,018 
		(4,102)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Taxes (SE, US Income, CO Income)
		

		

		

		

		

		

		

		1,309 
		0 
		53 
		

		948 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		After Tax Income
		

		

		

		

		

		

		

		2,861 
		(4,044)
		116 
		

		2,070 
		(4,102)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Purchase Replacement Females
		

		

		

		

		

		

		

		0 
		0 
		0 
		

		0 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Ending Net Worth
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		Cows
		

		

		

		

		

		

		

		85,000 
		85,000 
		85,000 
		

		100,000 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Cash
		

		

		

		

		

		

		

		16,489 
		(127,796)
		(58,823)
		

		(13,039)
		67,718 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Total
		

		

		

		

		

		

		

		101,489 
		(42,796)
		26,177 
		

		86,961 
		67,718 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		2015 
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		Revenues from Calves
		

		

		

		

		

		

		

		54,000 
		54,000 
		54,000 
		

		54,000 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Operating Expenses
		

		

		

		

		

		

		

		(50,000)
		(50,000)
		(50,000)
		

		(50,000)
		(5,000)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Interest Income/Expenses
		

		

		

		

		

		

		

		206 
		(8,307)
		(3,823)
		

		(848)
		846 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Profits
		

		

		

		

		

		

		

		4,206 
		(4,307)
		177 
		

		3,152 
		(4,154)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Taxes (SE, US Income, CO Income)
		

		

		

		

		

		

		

		1,321 
		0 
		55 
		

		990 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		After Tax Income
		

		

		

		

		

		

		

		2,885 
		(4,307)
		121 
		

		2,163 
		(4,154)
		

		

		

		

		

		

		

		

	
	
		

		

		

		Purchase Replacement Females
		

		

		

		

		

		

		

		0 
		0 
		0 
		

		0 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Ending Net Worth
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		Cows
		

		

		

		

		

		

		

		85,000 
		85,000 
		85,000 
		

		100,000 
		0 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Cash
		

		

		

		

		

		

		

		19,374 
		(132,102)
		(58,701)
		

		(10,876)
		63,564 
		

		

		

		

		

		

		

		

	
	
		

		

		

		Total
		

		

		

		

		

		

		

		104,374 
		(47,102)
		26,299 
		

		89,124 
		63,564 
		

		

		

		

		

		

		

		

	
	
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		CHANGE IN NET WORTH OVER 5 YEARS
		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

	
	
		

		

		

		TOTAL
		

		

		

		

		

		

		

		53,220 
		(84,160)
		(19,346)
		

		39,483 
		26,412 
		

		

		

		

		

		

		

		

	
	
		

		

		

		PER COW
		

		

		

		

		

		

		

		532.20 
		(841.60)
		(193.46)
		

		394.83 
		264.12

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...Sheet strategies for beef cattle herds during times of drought v by jeffrey e tranel rod sharp amp john deering agriculture and business management economists this decision aid is designed to help cowcalf producers compare the financial consequences alternative limited grazing forage eg it a guide only should consult with their lenders tax practioners andor other professional before making any final decisions cows calves herd size head average weaning percentage normal number be sold cow weight lbs percent current value per currently culled in year at annual quot costs prices lb adjustment factor following information expected interest rate borrowed money months days invested years basis total income us state ends month action assumed that are replaced december option purchase additional feed price you must make sure ration balanced your lbsday ton add l hay cost cowday truck pairs rented pasture distance tofrom miles actual trucking loaded mile selling rent aum calf sales on home deat...

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*Strategies for Beef Cattle Herds During Times of Drought, v2011*
by: Jeffrey E. Tranel, Rod Sharp, & John Deering
Agriculture and Business Management Economists

This 'decision aid' is designed to help cow-calf producers compare the financial consequences of alternative management strategies during times of limited grazing forage, e.g. drought. It is a guide only. Producers should consult with their lenders, tax practioners, and/or other professional before making any final decisions.
COWS						CALVES
Herd Size (head)			100			Average Weaning Percentage					94%	Normal Number of Calves to Be Sold			75	head
Average Cow Weight (lbs)			1,200			Average Percent of Calves Sold					75%
Current Value of Cows (per cow)			$850			Average Weight Currently (lbs)					375
Number of Cows Culled in a Normal Year			15			Average Weight at Weaning (lbs)					600
Annual "Cow" Costs			$500			Prices (per lb)
Adjustment Factor Following Drought			0%			Current					$1.45
OTHER INFORMATION						Expected at Weaning, This Year					$1.32
Interest Rate for Borrowed Money			6.50%			Expected at Weaning, Year 2					$1.25		Months	Days
Interest Rate for Invested Money			1.25%			Expected at Weaning, Years 3-5					$1.20	2011	4	120
Average Tax Basis of Cows (per cow)			$0									2012	12	360
Total Income Tax Rate (U.S. & State)			19%			DROUGHT ENDS:		MONTH			1	2013	1	30
								YEAR			2013	0	0	0
CURRENT MONTH (month of action)			8			(it assumed that cows are replaced in December of year that drought ends)						1	0	0
CURRENT YEAR			2011										17	510

OPTION 1: PURCHASE ADDITIONAL FEED
			Price			Days of				Additional Costs
You must make sure the ration is balanced for your cows. Ration 1		lbs/day	Per Ton			Add'l Feed				Per Cow	Per Herd
Hay		22.00	$240			120				316.80	31,680
Other		0.00	$0			315				831.60	83,160
Additional Cost ($/cow/day)			2.64			510				1,346.40	134,640

OPTION 2: TRUCK PAIRS TO RENTED PASTURE
Distance to/from Pasture (miles)			300							Additional Costs		Actual Calves Sold (Option 2)			73	head
Trucking Cost (per loaded mile)			$4.00							Per Cow	Per Herd	Actual Selling Weight (Option 2)			540	lbs
Pasture Rent (per AUM)			$25.00			Trucking Pairs to Pasture				48.00	4,800	Expected Calf Sales			$59,400
Days on Rented Pasture (per year)			120			Trucking Cows to Home				36.00	3,600	Actual Calf Sales			$52,034
Additional Calf Death Loss, Year 1 (hd)			2			Pasture Rent				100.00	10,000				$7,366
Adjustment for Calf Weaning Weights			-10%			Other Costs				3.00	300	Pairs Per Truck (40,000 lbs)			26
Total Other (not rent) Costs			$300			Lost Revenues (calf sales at weaning)				73.66	7,366	Cows Per Truck (40,000 lbs)			34
Total Days of Drought			510			Interest				4.05	405	Trucks Needed to Ship Pairs			4
Total Months of Drought			17			Total				264.71	26,471	Trucks Needed to Ship Cows			3

OPTION 3: SELL PAIRS & REPLACE COWS
Reduced Operating Costs, Year 1 (per cow)			$100							Additional Costs		Expected Calf Sales, Current Year			$59,400
Operating Costs, Year 2 (total)			$5,000							Per Cow	Per Herd	Actual Calf Sales			$51,113
Operating Costs, Years 3-5 (total)			$5,000			Reduced Calf Sales This Year				82.88	8,288				$8,288
Selling Costs (per cow)			$20			Reduced Operating Costs, This Year				100.00	10,000
Cost of Replacement Animals (per cow)			$1,000			Additional Costs for Selling Cows				20.00	2,000	Expected Calf Sales, Year 2			$56,250
It is assumed that cows are replaced on last day of the second year after they are sold. For example, cows sold in 2011 are replaced on 12/31/2013.						Interest on Cow Sales Revenues				(3.54)	(354)	Expected Calf Sales, Year 3			$54,000
						Total, Year 1				199.33	19,933	Cow Sales			$85,000
						Revenues from Cow Sales				(722.50)	(72,250)
						Interest Income, Years 2+3				(25.01)	(2,501)	Initial Money Invested			85,000
						Expected Calf Sales, Years 2+3				1,102.50	110,250	Interest Income, Year 1			354
						Reduced Operating Expenses, Yrs 2+3				(900.00)	(90,000)	Interest Income, Year 2			1,067
						Replacement Cows				1,000.00	100,000	Interest Income, Year 3			1,080
						Total, Years 2 & 3				454.99	45,499
						Total for 3 Years				654.32	65,432

									SELL COWS
					NORMAL		BUY	RENT		REPLACE	DO NOT
				CONDITIONS			FEED	PASTURE		12/31/2013	REPLACE

	Current (Applicable) Net Worth
	Cows					85,000	85,000	85,000		85,000	85,000
	Calves					408	408	408	408	408	408
	Cash					(40,000)	(40,000)	(40,000)		(40,000)	(40,000)
	Total					45,408	45,408	45,408		45,408	45,408

	2011
	Revenues from Calves					59,400	59,400	52,034		51,113	51,113
	Operating Costs (typical + adjustments)					(50,000)	(81,680)	(76,471)		(40,000)	(40,000)
	Profits					9,400	(22,280)	(24,436)		11,113	11,113
	Taxes (SE, US Income, CO Income)					2,952	0	0		3,489	3,489
	After Tax Income					6,448	(22,280)	(24,436)		7,623	7,623
	Capital Sales - Cow Sales					0	0	0		85,000	85,000
	Capital Gains (@ 15%)					0	0	0		0	12,750
	Ending Net Worth
	Cows					85,000	85,000	85,000		0	0
	Cash					6,448	(22,280)	(24,436)		92,623	79,873
	Total					91,448	62,720	60,564		92,623	79,873

	2012
	Revenues from Calves					56,250	56,250	49,275		0	0
	Operating Expenses					(50,000)	(145,040)	(80,000)		(5,000)	(5,000)	Days on rented pasture in Year 2 equals days in cell X18, rather than the value used for Year 1 (cell I35)
	Interest Income/Expenses					81	(1,448)	(1,588)		1,158	998
	Profits					6,331	(90,238)	(32,313)		(3,842)	(4,002)
	Taxes (SE, US Income, CO Income)					1,988	0	0		0	0
	After Tax Income					4,343	(90,238)	(32,313)		(3,842)	(4,002)
	Purchase Replacement Females					0	0	0		0	0
	Ending Net Worth
	Cows					85,000	85,000	85,000	0	0	0
	Cash					10,791	(112,518)	(56,750)		88,781	75,872
	Total					95,791	(27,518)	28,250		88,781	75,872

	2013
	Revenues from Calves					54,000	54,000	54,000		0	0
	Operating Expenses					(50,000)	(57,920)	(52,500)		(5,000)	(5,000)
	Interest Income/Expenses					135	(7,314)	(3,689)		1,110	948
	Profits					4,135	(11,234)	(2,189)		(3,890)	(4,052)
	Taxes (SE, US Income, CO Income)					1,298	0	0		0	0
	After Tax Income					2,837	(11,234)	(2,189)		(3,890)	(4,052)
	Purchase Replacement Females					0	0	0		100,000	0
	Ending Net Worth
	Cows					85,000	85,000	85,000		100,000	0
	Cash					13,628	(123,752)	(58,938)		(15,109)	71,820
	Total					98,628	(38,752)	26,062		84,891	71,820

	2014
	Revenues from Calves					54,000	54,000	54,000		54,000	0
	Operating Expenses					(50,000)	(50,000)	(50,000)		(50,000)	(5,000)
	Interest Income/Expenses					170	(8,044)	(3,831)		(982)	898
	Profits					4,170	(4,044)	169		3,018	(4,102)
	Taxes (SE, US Income, CO Income)					1,309	0	53		948	0
	After Tax Income					2,861	(4,044)	116		2,070	(4,102)
	Purchase Replacement Females					0	0	0		0	0
	Ending Net Worth
	Cows					85,000	85,000	85,000		100,000	0
	Cash					16,489	(127,796)	(58,823)		(13,039)	67,718
	Total					101,489	(42,796)	26,177		86,961	67,718

	2015
	Revenues from Calves					54,000	54,000	54,000		54,000	0
	Operating Expenses					(50,000)	(50,000)	(50,000)		(50,000)	(5,000)
	Interest Income/Expenses					206	(8,307)	(3,823)		(848)	846
	Profits					4,206	(4,307)	177		3,152	(4,154)
	Taxes (SE, US Income, CO Income)					1,321	0	55		990	0
	After Tax Income					2,885	(4,307)	121		2,163	(4,154)
	Purchase Replacement Females					0	0	0		0	0
	Ending Net Worth
	Cows					85,000	85,000	85,000		100,000	0
	Cash					19,374	(132,102)	(58,701)		(10,876)	63,564
	Total					104,374	(47,102)	26,299		89,124	63,564

	CHANGE IN NET WORTH OVER 5 YEARS
	TOTAL					53,220	(84,160)	(19,346)		39,483	26,412
	PER COW					532.20	(841.60)	(193.46)		394.83	264.12

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