To hold or sell the breeding herd

Page last updated: Wednesday, 13 September 2017 - 2:47pm

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In a dry season where feed and finances are limited, producers may look to cull the less productive animals as soon as possible. This will free up feed for more productive animals, as well as reduce stress on paddocks and pasture. If conditions persist the question then becomes, whether to hold or sell the livestock in excess of the property’s immediate carrying capacity. If implemented it is for the purpose of this exercise a short term strategy and is not intended to change the farm enterprise mix over the longer term.

Considerations

Although each situation has its own unique circumstances, any decision to hold or sell should be based on good information.

Managers need to consider:

  • the quantity and quality of feed on offer (including water)
  • the quality, cost and availability of supplementary feed
  • duration of likely supplementary feeding
  • implications any decision will have on cashflow
  • ability to borrow, that is, equity
  • labour requirements and effect on other business tasks
  • marketability of product – both potential weaner/feeder and cow-calf unit
  • the value of herd genetics
  • availability and cost of restocking
  • the level of acceptable risk  and stress - mental health.

Selling cow-calf units can alleviate feeding expenses and give the business an immediate injection of income. Sale proceeds can be used on other parts of the business that provide more attractive returns. However, offsetting this is the need to restore the status quo by purchasing replacement cow-calf units, assumedly within the next 12 months.

If the herd is retained, the key to buying supplementary feed is to purchase feed with sufficient metabolisable energy (ME) to ensure herd health, performance and survival with just enough protein content required for the various stock classes[i]. It could be more cost effective and efficient to ‘top up’ the ration being provided with a specifically formulated pellet ration.

Costing feed on metabolisable energy

Base your ME calculation on dry matter (DM). Some common feed’s DM, ME and Crude Protein approximate compositions are in Table 1.

Table1 Common feed composition [ii]
Feed type DM (%) ME (MJ/kg DM) Crude protein (% ME/kg DM)
Grain - wheat 91 12.9 11.5
Grain - barley 91 11.9 11.0
Grain - oats 92 10.7 9.0
Lupins 92 13.8 36
Oaten hay - flowering 90 9.1 8.5
Oaten hay - ripe seed 90 8.5 6.0

Warning: Nutritional values can vary considerably. The only way to be sure of nutritional composition of a particular batch of feed is to have it tested for energy (ME), crude protein (CP) and dry matter (DM).

Table 2 Comparison information (assumptions) of oats and barley to calculate best value feed
Feed type Cost/tonne ($) Dry matter (%) MJ ME/kg DM
Grain - oats 195 92 10.7
Grain - barley 240 91 11.9

A worked example calculation to find the best value for money feed based on ME is outlined below.

1. Calculate the cost of feed on a dry matter basis

Method: [$/tonne as feed multiplied by 10] divided by [percent DM] = cents/kg DM

Therefore:

Oats = [$195 x 10] ÷ 92 = 21 cents/kg DM
Barley = [$240 x 10] ÷ 91 = 26 cents/kg DM

2. Calculate the cost per MJ of Energy (ME)

Method:
[Cents/kg DM (from step 1) divided by MJ ME/kg DM] = cents/MJ ME
Oats at 21c/kg DM = [21 ÷ 10.7] = 1.96 cents/MJ ME
Barley at 26c/kg DM = [26 ÷ 11.9] = 2.18 cents/MJ ME

In the above example, barley ME is marginally more expensive than oats, that is, 2.18 versus 1.96 cents per MJ of ME.

Typically, a 450kg lactating cow requires 100-127 MJ ME/day. With a maximum dry matter intake of around 2.2% of LWT (9.9kg) leading to a minimum ME concentration of diet of 10MJ/kg of DM[iii].

Based on the above and adopting 120 MJ ME/day as the ration requirement then:

Cost per day = [cents/MJ multiplied by the daily ration requirement]
Oats = [1.96 x 120] = $2.35 per day
Barley = [2.18 x 120] = $2.60 per day

Warning: Grain rations should be introduced slowly to avoid health complications; the above is only an example of ME costing not a recommended ration.

The hold or sell decision process

Destocking may be the preferred strategy when the benefits of selling cow-calf units are similar or outweigh the benefits of retaining them and selling the progeny as weaners/feeders.

Identify the trigger point at which one option outweighs the benefits of the other option/s; by comparing the financial benefits of selling stock now as opposed to retaining them. 

Where:

  • USV = unit sell value (net of associated selling costs)
  • FV = feed value (including associated labour costs)
  • RUV = replacement unit value (including all associated acquisition costs)
  • PSV = progeny sale value (net of associated selling costs)

The financial benefit can be calculated as:

USV + FV – RUV- PSV = destock benefit

That is, the sale value of the cow-calf units, in addition to the value of feed saved less the cost of replacement cow-calf units and potential progeny sale proceeds.

PSV – FV = hold benefit

That is, the anticipated progeny sale value less the feed value to maintain the cow through to next season and the progeny through to sale point

In summary

Always purchase feed on a MJ ME/kg DM basis and if not provided seek a feed test for composition of ME and CP.

Calculate the financial benefit of the options available – once you are familiar with the equation you can add additional items if they are considered important and add weighting and/or discounting to certain values to allow for characteristics such as probability, stress etc.

For further information on calculating the costs for your individual circumstances contact Tony Della Bosca on +61 (0)8 9780 6113.

References

[i] Accioly Livestock Industries Services, Gelorup 0403 327 216

[ii]The good food guide for sheep: feeding sheep for meat production in the areas of Western Australia, Bulletin 4473

[iii]Drought Feeding and Management of Cattle 2015, Department of Primary Industries, Victoria

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