Economics of Different Feeding Strategies

Ben Hamm / Greg Fedak Farm Management Specialist, Manitoba AgricultureOctober 2019

Calculations for 9 different rations

Cost comparisons for alternative feeding strategies

Calculating Feed Requirements

• What animals are you feeding?• What are the weights?• How many days?• What is the Dry Matter content of your feed?• How much feed do you have on hand? • Are you culling the non productive animals?

– Preg Check most important in high feed price years

Financing Cost for a Feed Purchase• Comparing the cost of ration 1 and 4 from our options.• Ration 1 Alfalfa Grass Hay $50700 for 92 days

Interest cost @5.5% = $2788.50 Principal cost for 5 year loan is $10140 = $12928.50 for year 1.

• 200 cows with 95% calf crop is $12928.50/ 190 calves works out to $68/calf first year payment

• With a 90% calf crop becomes $71.83/ calf

• Ration 4 Barley Straw/Barley Grain/32% supplement $35076 for 92 days• Interest cost @5.5% = $1929.00, principal cost 5 year loan $7015.20 = $8944.20 for year 1

costs• 200 cows 95% calf crop is 8944.20/190 works out to $47.07/calf first year payment• With 90% calf crop becomes $49.69/calf

Is it Cheaper to Bring Cows to Feed?• $2.75 Custom Fed • 200 mile haul there and back home at $5.50/loaded mile = $2200 for a load of 40

cows • Freight over 160 days = $0.34/hd/day• $3.09/hd/day – equivalent of you feeding 7.5 cent hay not including minerals, fuel,

and time to feed them• All Costs - $3.73 to feed cows at home with 5.5 cent hay • All Costs - $4.06 to feed cows at home with 6.5 cent hay • All Costs - $4.39 to feed cows at home with 7.5 cent hay• All Costs - $4.72 to feed cows at home with 8.5 cent hay • Can you feed cheaper at home?? • Make money selling feed this year?

What’s a Better Deal??

Pricing based on Moisture

What now?

• Do you buy feed to replace shortfall?• Do you have cash to pay for feed?• What is ur debt per cow now?• Have you considered tax consequences of selling

cows?

Defer Income? • To defer income, the breeding herd must have been reduced by at least

15%. • Where the breeding herd has been reduced by at least 15%, but less than

30%, 30% of income from net sales can be deferred.• Where the breeding herd has been reduced by 30% or more, 90% of

income from net sales can be deferred.• In a year in which a region has been prescribed, income from livestock

sales are deferred to the next tax year when the income may be at least partially offset by the cost of reacquiring breeding animals, thus reducing the potential tax burden. In the case of consecutive years of drought or excess moisture and flood conditions, producers may defer sales income to the first year in which the region is no longer prescribed.

What does debt per cow tell you

• If regular operating/cash costs are $800/cow • And regular income is $1200 per cow • That leaves $400 for fixed costs, debt servicing and

money left over to live – Do you have room for increased debt?

Take Home Message • Take out the risk with BRM Programs

– Western Livestock Price Insurance– Agristability and Agriinsurance

• Doing your cost of production for your own farm is the starting point for profitability-These tools will Calculate

• Total cost, Breakeven purchase price, Breakeven selling price, and cost per lb of gain sold

• Get a nutritionist to balance a ration to get the desired gains• Each year is different! Profitability and risk is dependent on the relationship between

yield/price/costs with your financial situation.

Agri-Insurance

Questions?

Contact me:Ben Hamm

Farm Enterprise Management Specialist204-392-9350 benjamin.hamm@gov.mb.ca

http://www.gov.mb.ca/agriculture/business-and-economics/farm-business-management-contacts.html