Division of Agricultural Sciences UNIVERSITY OF CALIFORNIA * i% **S ECONOMICS of ! FARM FEEDLOTS Hf **" in the Rice Area of the Sacramento Valley -^ SQ V.-. : > ^"- JAMES A. PETIT, JR " r'w.i GERALD W. DEAN ' * * * f *• ' ' k ■*«.-<" e - * 1 ** *L w CALIFORNIA AGRICULTURAL EXPERIMENT STATIO N BULLETIN 800 &&^: ; ^&r^^ \^--^-l^M^.tfiKWMfM'&\-- I* fffeJt '.,■':-. ... ■ ....•■*...,.'.••■ '■■■..■;:. >;■-' :.}■ : ^•* f *4,<**0 Economics of Farm Feedlots in the Rice Area of the Sacramento Valley The background: The heavy-soil areas of the Sacramento Valley are well adapted to the production of rice. This crop is usually most profitable and for this reason is grown here extensively. However, govern- ment controls on rice acreage have forced rice farmers to expand acreages of other crop alternatives, such as hay and grain. The question arises whether livestock feeding — and particularly drylot feeding of beef cattle — is economically feasible in this area. 1 hlS OUllStlTl reports investigations of the economic feasi- bility of incorporating feedlots for beef cattle into the over-all organization of farms located in these heavy-soil areas of the Sacramento Valley. It specifically attempts to answer the following questions: * What is the most profitable type of cropping system, and what are the income levels attainable for rice farms without livestock? What are the income possibilities available by adding various types of beef feedlot programs to rice farms? • What type of ration is best suited for cattle feeding in this area? Are the most profitable rations high in forage (con- taining large proportions of silage and haylage), conven- tional alfalfa hay-grain rations, or all-concentrate rations? • Which type of storage and feeding facilities best fit these situations? Should feeders with relatively small feedlots invest in a feedmill and feed conventional rations or invest in silos and feed rations high in silage? • What are the risks and the critical variables which determine the success or failure of the cattle feeding systems studied? • When a feedlot program is superimposed on a rice farm, should the cropping system be changed? Should the farm continue to produce rice and other cash crops and buy feeds, or revise its program to furnish the feeds required in the feedlot? The main findings of the study are summarized on pages 1 and 2. MAY, 1964 III ''**- ; €} CONTENTS PAGE THE MAIN FINDINGS 1 GENERAL PROCEDURE 2 FIXED RESOURCES OF STUDY FARM . 3 Land 3 Irrigation Facilities 5 Machinery, Buildings, and Equipment 5 Cash Crop Farm 5 Crop-Livestock Farm Using Silage Rations 5 Crop-Livestock Farm Using Non-Silage Rations 6 Labor, Management and Capital 7 Cost Comparisons 8 CROP AND LIVESTOCK ALTERNATIVES CONSIDERED 9 Cropping Alternatives 9 Livestock Alternatives 9 METHOD OF ANALYSIS 14 OPTIMUM CROPPING SYSTEM AND INCOME WITHOUT LIVESTOCK 15 OPTIMUM PLANS AND INCOME LEVELS USING SILAGE RATIONS 16 OPTIMUM PLANS AND INCOME LEVELS USING NON-SILAGE RATIONS 18 OPTIMUM PLAN AND INCOME LEVEL USING A COMBINATION OF RATIONS 20 SENSITIVITY OF CATTLE FEEDING INCOME TO PRICE AND GAIN VARIABILITY 21 Income Variability Resulting from Fluctuations in Cattle Prices 22 Effect of Gains Per Day on Income and Relative Advantage of Various Rations 26 Effect of Percentage Shrink and Final Grade on Income from Various Rations 31 APPENDIX A: BASIC DATA 34 APPENDIX B: OPTIMUM PLAN USING SILAGE RATIONS TO CARRY CALVES TO FINISH WEIGHT . 42 ACKNOWLEDGMENTS 44 LITERATURE CITED 44 The Authors: James A. Petit, Jr. was Research Assistant in the Experiment Station and on the Giannini Foundation, Davis. Gerald W. Dean is Associate Professor of Agricultural Economics and Associate Economist in the Experiment Station and in the Giannini Foundation, Davis. it ECONOMICS OF FARM FEEDLOTS in the Rice Area of the Sacramento Valley 1 James A. Petit, Jr. and Gerald W. Dean Advantages and disadvantages The heavy-soil areas of the Sacramento Valley hold the following advantages for beef-cattle feeding: • Availability of surplus feed grains and alfalfa hay, now shipped out of this area; conversion of these feedstuffs to beef within the area would seem to be an alternative for farmers to consider. • Availability of feeder cattle — from nearby foothill ranges during part of the year; from other parts of the West in any season. • A large nearby market for the finished product because of the expanding population on the Pacific Coast. The main disadvantage of the area for cattle feeding is the weather: Daytime summer temperatures are extremely high, sometimes reaching 110°-115°F, while winters tend to be damp and chilly. Essentially the entire annual rainfall, averaging about 18 inches, generally falls during a four-month period from De- cember to March, accompanied by tem- peratures dropping occasionally to 15°- 20°F. Because of mud and poor climatic conditions for feeding during the winter months, many feedlots in the Sacramento Valley are left vacant at this time. Scope of study An actual farming operation of about 1,000 acres was used to define the basic physical resources and the production possibilities considered. Linear program- ming was used to determine the most profitable crop and livestock programs and the income levels possible for this farm. Plans were developed (1) for a cash crop operation, (2) for operations including a farm feedlot of 1,500-head capacity, silos and silage handling equip- ment, and a choice of six rations using silage, and (3) for operations including the same 1,500-head feedlot, a feed mill and associated equipment, and a choice of four rations, including an all-concen- trate ration (barley + supplement) and three other conventional grain-hay rations. THE MAIN FINDINGS The main findings of the study are: The cash crop farm alone (emphasiz- ing rice production) provided an annual management income of about $10,000. 1 Submitted September 1962. Addition of the various types of cattle feeding programs increased potential management income to $40,000 to ),000 per year. The most profitable nonsilage ration was all-concentrate (barley + supple- [i] ment) ; the most profitable silage ration included alfalfa haylage, oats- vetch haylage, and barley. If percent- age shrinks and final grades are as- sumed to be the same for these two rations, the cattle feeding programs based on them ranked almost equal in management income at approximately $80,000 a year. However, if the silage ration gives a higher percentage shrink and a lower percentage of finished cattle grading choice, the advantage of the higher concentrate ration can be substantial. In none of the situations analyzed was it profitable to attempt to grow all of the grain required to feed cattle; it was always more profitable to raise the maximum acreage of rice per- mitted by government allotments, sell the rice as a cash crop, and buy part of the grain fed. Incomes from the optimum plans in- cluding cattle feeding were very sensi- tive both to the level and the margin of cattle prices. If the optimum programs presented actually had been followed over the past 11 years, potential incomes would have been variable (ranging from about $50,000 to $200,000 annually) but in no case as low as from cash crop farming alone. The level of profits and the choice of the optimum rations also were quite sensitive to the daily gains specified. For example, the all-concentrate ration was most profitable only if gains ob- tained from it exceeded by at least 0.37 pounds per day those obtained from the optimum silage ration. More detailed discussion of these and other findings are presented in the text. It must be recognized that these con- clusions are based on near-peak efficiency as to crop yields, production costs, cattle feeding efficiency, death losses, and gen- eral operation of the farm business. In particular, not every farm operator is qualified to assume the managerial re- sponsibilities which accompany an effi- cient feedlot operation. Special skills, aptitude, and judgment are especially im- portant for buying and selling cattle at the most advantageous terms as to price, < quality and uniformity, and maintaining cattle on feed and gaining at optimum rates throughout the feeding period. Therefore, the income levels shown from the livestock plans presented in this report are levels attainable under superior rather than typical management. However, for operators with sufficient capital and the ^ managerial capacity to make the major shift from cash crops to a crop-livestock program, cattle feeding appears to be an alternative worthy of careful considera- tion in many parts of the rice area. GENERAL PROCEDURE The study farm of approximately 1,000 acres had been operated as a typical rice farm, with no livestock. This report ac- cepts the land, irrigation facilities, and the basic crop machinery of the farm as given or fixed in the analyses to follow. However, two general alternative types of livestock feeding and storage systems arc hypothetically superimposed on these basic ranch resources: (1) A 1,500-head capacity feedlot, 13 air-tight silos, spe- cialized forage handling equipment and feeding equipment adapted to silage rations (rations with a high percentage of silage) ; and (2) a 1,500-head capacity feedlot, a feed mill and feeding equip- ment adapted to conventional types of 4 hay-grain rations. The report uses the following pro- cedure: First, the basic resources of the study farm and the over-all assumptions of the report are discussed. Next, efficient [2 crop and livestock programs are de- termined for the basic resource situa- tions, and income comparisons made among alternative plans. Finally, the plans including livestock are examined in detail to show the dependence of cattle feeding profits on price and gain relation- ships. FIXED RESOURCES OF STUDY FARM Land The farm contains a net cropland acreage of 974 acres, composed of three grades of soils, designated as A, B and C. The A soil is medium-to-fine textured with good drainage and no alkali, well- adapted to a wide range of field crops. The predominant soil type is Marvin silty clay loam, with lesser amounts of Codora silty clay loam. The B soil also is Marvin silty clay loam, but contains some slight alkali deposits. The C soils are heavy textured, with a high water table, poor structure and alkali spots. These soils are composed of Marvin silty clay (slight alkali), Marvin silty clay loam (slight alkali), Sidds silty clay loam (slight alkali), and Quint silty clay (slight alkali) . The A, B, and C soils total 209, 335, and 430 acres, respectively (a ratio of soil classes of 0.22 : 0.34 : 0.44) . The land on the study farm is valued at an average of about $300 per acre. Table 1 shows the annual fixed costs associated with the land investment. In evaluating the results of this study it is important to understand how the study farm compares in basic soil re- sources and cropping possibilities with other farms in the rice area (Sitton, 1958) . In general, the study farm has a greater proportion of the higher-grade soils and therefore a wider range of crop- ping possibilities than is found in a large part of the rice area. Sitton (1958, pages 2—3) divides rice soils into three major natural divisions. 1. Alluvial fan and flood plain soils adjacent to rivers and streams. They are generally deep, permeable, well-drained, coarse-textured soils adapted to a wide range of crops. The A soils on the study farm are of this general type. 2. Basin soils in the bottom of the troughs. They are fine-textured, poorly-drained soils and more limited in cropping possibilities. The poorest of these soils are used only for rice or pasture. Others are adapted for wider use, including grain and forage. The B and C soils on the study farm are of this general type, but tending toward those with a wider range of crop possibilities. 3. Terrace soils lying between the rolling foothills and the flat basins. These soils are more variable than the above types, with crop uses ranging from nonirrigated pasture and grain to rice and irrigated for- age crops. The study farm contains none of these soils. Depending primarily on the combina- tions of these soils, the crops grown on specific rice farms may range from rice alone, to rotations of rice and other crops on the same fields, to combinations of rice and other crops not grown in the same fields. In a 1950 survey of 49 rice farms in Colusa County, Sitton (1958. pages 30- 34) reports that 20 per cent of the farms produced rice only, 43 per cent produced rice and one or more small grains (mainly barley) , 29 per cent produced rice, other grains and some other crop (usually alfalfa or ladino clover) . and 6 per cent produced rice and alfalfa or ladino clover but no other grains. Other crops included oats and vetch, barley and vetch, milo. and sudan grass for seed. While cropping [3] Table 1 CAPITAL INVESTMENT AND ASSOCIATED ANNUAL FIXED COSTS FOR CASH CROP FARM Item Land (1,018 acres at $300). Buildings 2 Implement sheds Foreman's house. Machine shed. Total buildings. . Irrigation equipment Well and pump.... 2 pumps Total irrigation equipment. Ranch vehicles Pickup (used) Pickup Jeep Bankout wagon 2 ton truck V/i ton truck Total ranch vehicles Cultural equipment 115 HP tracklayer 75 HP tracklayer 2 50-HP tracklayer 45 HP diesel-wheel 40 HP diesel-wheel 2 25-HP gas-wheel Landplane 14' x 60' 5 sections of harrow and heavy duty drawbar 2 tillers 2 bottom plow 2-way plow (4 bottom) 20' springtooth harrow 30' spiketooth harrow 2 12' disc harrows 15' disc harrow 8' seeder 6-row planter 4-row planter 6-row cultivator Ditcher Ridger Side-delivery rake Rear-mounted mower Baler Bale loader 150-gal. sprayer Total cultural equipment Miscellaneous Office equipment Desk and file Total miscellaneous. Grand total Initial cost dollars 305,500 10,000 15,300 3,000 28,300 1,625 6,100 7,725 1,000 2,200 1,600 1,000 3,400 3,200 12,400 25,000 14,700 17,200 6,000 5,300 4,000 3,600 350 1,000 450 4,000 630 320 2,800 2,000 900 900 600 1,000 800 500 700 185 1,120 225 2,500 96,780~ 1,400 200 1,600 452,305 Estimated useful life years 15 15 15 10 10 10 20 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 Average in- vestment* 5.000 7,650 1,500 14,150 812 3,050 3,862 500 1,100 800 500 1,700 1,600 6,200 12,500 7,350 8,600 3,000 2,650 2,000 1,800 175 500 225 2,000 315 160 1,400 1,000 450 450 300 500 400 250 350 92 560 112 1,250 48,390 700 100 800 73,402 Annual de- preciationf Taxes and Interest on insurance} investments dollars 500 765 150 1,415 162 610 772 200 440 320 100 340 320 1,720 1.667 980 1,147 600 530 400 180 35 100 45 400 63 32 280 200 90 90 60 100 80 50 70 18 112 22 250 7,601 140 20 160 11,669 3,055 100 153 30 283 16 61 77 10 22 16 10 34 32 124 250 147 172 60 53 40 36 4 10 4 40 6 3 28 20 9 9 6 10 8 5 7 2 11 2 25 968 16 4,523 18,330 350 536 105 990 57 214 270 35 77 56 35 119 112 434 875 514 602 210 186 140 126 12 35 16 140 22 11 98 70 32 32 21 35 28 18 24 6 39 3,387 49 7 56 23,468 Hole. Occasional discrepancy in final digit from rounding original computations to nearest dollar. [4] systems in the area undoubtedly have changed in the past ten years, such as the introduction of safflower as a major crop, this survey indicates that the crop- ping possibilities on a large proportion of rice farms undoubtedly are more re- stricted than on the study farm. The cropping systems, livestock programs and income levels reported in this study reflect this fact and should be so in- terpreted. Irrigation facilities Approximately 544 acres on the study farm are irrigated by surface water from the irrigation district, the remainder be- ing serviced from wells located on the farm. As in other parts of the rice area, water from the district is relatively in- expensive, costing a flat $11.00 per acre for rice and $1.50 per acre-foot for other crops. The variable cost of pumping water for the remainder of the farm is low be- cause of the high water table, and also is assumed to equal $1.50 per acre-foot. The investment and annual fixed costs associated with the irrigation system on the study farm are detailed in table 1, along with the other investment items for a cash crop operation. Machinery, buildings, equipment Cash crop farm. Table 1 gives the description, investment, and annual fixed costs of the land, buildings, irrigation equipment, and machinery used pri- marily for cash crop production on the study farm. This list corresponds closely to the expected inventory on a rice farm which contracts rice harvesting, raises no livestock, and sells all crops. Crop-livestock farm using silage rations. Expanding a cash crop opera- tion to include a farm feedlot operation utilizing silage rations requires certain changes in machinery and facilities (see table 2). The specialized equipment for baling hay is deleted from the machinery inventory and replaced by additional forage handling equipment for bringing the forage from the fields and blowing it into the silos. A 1,500-head capacity 2 feedlot and 13 air-tight silos constitute the major investment items in converting from the cash crop to the farm feedlot- silage operation. The feedlot costs are high because the entire lot is concreted to permit year-around feeding; heavy winter rains and poor natural drainage necessitate this step. The silos, with a capacity of about 170 tons of forage each, are located near the feedlot. They can be used for moist as well as dry grain and for silage or haylage — a green chop which is field-wilted to 40-50 per cent moisture and then ensiled. The feedlot is designed for feeding by automatic unloading trucks, which are loaded by an auger conveyor from the silos. Ingredients of the rations are de- livered automatically from the respective silos into a central auger, where the ration is mixed and delivered to the truck. Proportions of ingredients for the various rations are controlled by varying the unloading time for the particular components; the truck itself rests on a scale permitting control of the total quantity of a ration fed to each pen. The feeding operation is highly mechanized, requiring only one man to feed the 1,500- head lot. Despite the large investment in silos, some of the rations studied require more silage during the winter months than can be stored. To permit year-around feeding, it is possible to buy baled alfalfa hay and "reconstitute" it to haylage by chopping it, adding water to bring the moisture level up to haylage content, and blowing it into the silo. This process permits year- around feeding on haylage without re- stricting livestock numbers because of limited storage capacity or quantity of home-grown haylage. However, because 2 The 1,500-head figure is a "practical" ca- pacity taking into account the unavoidable de- lays and time lapses between lots of cattle. At any given time the physical capacity of the lot is slightly over 1,700 head. [5 Table 2 ADDITIONS AND DELETIONS OF MACHINERY AND FACILITIES FOR CONVERTING FROM CASH CROP OPERATION TO FARM FEEDLOT, SILAGE RATIONS Item Initial cost dollars Estimated useful life years Average in- vestment* Annual de- preciation! Taxes and insurance! Interest on investments dollars Delete Rear-mounted mower. Side-delivery rake... . Baler Bale loader Total deletions. Add Livestock equipment and facilities Feedlot, wiring, plumbing and 2 scales 13 air-tight silos 3 forage unloaders 2 grain unloaders Crimper Auger Squeeze 3 trucks 4 feeder kits Total. Cultural equipment Swather (14') Forage chopper Accessories for chopper . Blower Total Total additions. Net additions 185 700 1,120 225 2,230 90,000 157,274 5,250 3,850 1,200 3,000 500 10,200 6,531 277,805 4,705 8,154 2,294 885 16,038 293,843 291,613 92 350 560 112 1,115 45,000 78,637 2,625 1,925 600 1,500 250 5,100 3,266 138,902 2,352 4,077 1,147 442 8,019 146,922 145,806 18 2 70 7 112 11 22 2 223 22 4,500 900 7,864 1,573 525 52 385 38 120 12 300 30 50 5 1,020 102 653 65 15,417 2,778 470 47 815 82 229 23 88 9 1,604 160 17,021 2,938 16,798 2,916 * Computed assuming no salvage value. t Straight-line method. | Figured at 1 per cent of original cost. § Seven per cent of average investment. Note: Occasional discrepancy in final digit from rounding original computations to nearest dollar. 78 3,150 5,505 184 135 42 105 18 357 229 9,723 165 285 80 31 561 10,285 10,206 the quality of reconstituted haylage is lower than haylage harvested directly, the two forages should be blended for late-winter feeding. Crop-livestock farm using non- silage rations. In addition to the basic machinery in table 1, a feedlot operation using conventional grain-hay rations re- quires the machinery and facilities listed in table 3 (see also King, 1962). Of course, the required amount of hay stor- age and handling facilities varies depend- ing on the ration fed. The investment in table 3 provides sufficient hay storage for a daily ration including up to eight pounds of hay per head. An all-concen- [6] Table 3 ADDITIONS OF MACHINERY AND FACILITIES FOR CONVERTING FARM CASH CROP OPERATION TO FARM FEEDLOT, NONSILAGE RATIONS Item initial cost Estimated useful life Average in- vestment* Annual de- preciation! Taxes and insurance! Interest on investment§ dollars years dollars Add Livestock equipment and facilities Feedlot, wiring, plumbing, 2 scales Feed mill and storage facilities ... Components for all-concentrate rations Additional components for rations using alfalfa-hay|| 90,000 77,120 (53,150) (23,970) 500 1,633 169,253 20 20 (20) (20) 10 10 45,000 38,560 (26,575) (11,985) 250 816 84,626 4,500 3,856 (2,658) (1,198) 50 163 8,569 900 771 (532) (240) 5 16 1,693 3,150 2,699 (1,860) (839) Squeeze 18 Self-unloading feeder kit 57 Net additions 5,924 * Computed assuming no salvage value. t Straight-line method. t Figured at 1 per cent of initial cost. § Seven per cent of average investment. || Assumes sufficient hay storage facilities for daily rations including up to 8 pounds of alfalfa-hay per head for a 1500-head capacity feedlot. For additional details on feed mill costs see: King (1962). Note: Occasional discrepancy in final digit from rounding original computations to nearest dollar. trate ration could eliminate hay handling facilities and reduce the initial cost by approximately $24,000. The correspond- ing corrections in annual fixed costs are made in later comparisons of incomes among plans. The feed-mill operation represents a typical layout and feeding procedure for a feedlot with a small mill. It takes about three men to run the mill and feed the cattle on the conventional hay-grain rations, but only two men for the all-concentrate ration since there is no hay to handle. Before mixing, the hay component of the rations is unbaled and ground in a hay mill, and the grain is rolled. The mixed feed can be stored in feed bins or loaded directly on the feed- ing truck. The truck is self-unloading so that feeding is accomplished by driving along the bunkers. Labor, management, and capital The full-time labor and management force on the ranch consists of a manager- owner and a crop foreman. The crop foreman supervises field crews and keeps time cards on the labor and machinery inputs to different crops and fields. Costs are summarized and other records and accounts are kept by a bookkeeper work- ing about one-half time. When the feed- lot is added, additional men are needed year-around for feeding. As mentioned above, the silage programs require one man for feeding while the feed mill pro- grams require three for this purpose. The manager-owner devotes the major portion of his time to the cattle operation, par- ticularly in buying and selling cattle, buy- ing feeds and specifying the rations to be fed. The manager, together with the men doing the feeding, also watches for sick- ness, for cattle off feed, and helps to sort and treat animals. However, many feed- lots of this size hire an additional man strictly for handling cattle (exclusive of feeding) ; in this case, the income figures reported later would be lowered by about $5,000 per year. All full-time employees are salaried except the owner-manager who receives his compensation from profits. The remaining labor for crop and [7] livestock production on the farm is hired seasonally at prevailing rates in the area. It is assumed that the operation has the management and financial backing to warrant obtaining ample operating capital or investment capital for any of the plans envisioned in this report. It is further assumed that that the owner- manager has 100 per cent equity in the land, machinery, and feeding facilities, but borrows operating capital to finance the crop production and cattle inventory. Of course, financial conditions vary widely from situation to situation and may require corresponding adjustments in the costs and returns shown later. For example, if investment capital for the feedlot construction and silos must be borrowed, the interest paid would be a cash fixed cost rather than noncash "interest on investment." (Such adjust- ments could be made directly from the data in appendix table A-ll.) Cost comparisons Table 4 itemizes the major categories of fixed costs associated with the various farming programs analyzed in this re- port. The bottom portion of table 4 gives the total fixed costs for each of the three major situations studied. The fixed costs for the plans including livestock are obviously considerably higher than for the cash crop operation. Fixed costs for the silage operation are $5,734 higher than those for the conventional ration operation; although labor costs for the silage operation are $8,000 lower than Table 4 SUMMARY OF FIXED COSTS FOR ENTIRE FARM, OPERATED AS CASH CROP FARM, FARM FEEDLOT WITH SILOS, AND FARM FEEDLOT WITH FEEDMILL Item Depreci ation Taxes and insurance Interest on investment Miscellane- ous cash fixed costs Total annual fixed costs dollars Land (table 1) Buildings (table 1) Irrigation equipment (table 1) Cash-crop machinery and facilities (table 1). . . . Additional machinery and equipment for silage rations (table 2) 6. Additional machinery and equipment for non- silage rations (table 3) 7. Bookkeeping and overhead (Accountant plus misc. off. exp.) 8. Crop foreman (Annual salary) 9. Feeding labor, silo operation (One man, annual salary) 10. Feeding labor, feedmill operation (3 men, annual salaries) 1,415 772 9,481 16,798 8,569 11. Total fixed costs for cash-crop farm (sum of items 1, 2, 3, 4, 7, 8) 12. Total fixed costs for farm plus feedlot with silo operation (sum of items 1, 2, 3, 4, 5, 7, 8, 9). . . 13. Total fixed costs for farm plus feedlot with feed- mill operation (sum of items 1, 2, 3, 4, 6, 7, 8, 10) 11,669 28,466 20,238 3,055 283 77 1,108 2,916 1,693 4,523 7,439 6,216 18,330 990 270 3,877 10,206 5,924 23,468 33,675 29,392 Note: Occasional discrepancy in final digit from rounding original computations to nearest dollar I 8] 5,200 5,000 5,000 13,000 10,200 15,200 23,200 21,385 2,688 1,120 14,466 29,920 16,186 5,200 5,000 5,000 13,000 49,860 84,780 79,046 for the conventional ration operation, the annual fixed costs associated with the in- vestment in the silage operation are $13,- 692 higher ($13,734-$8,000=$5,734) . Thus, the annual fixed costs of the con- ventional and the silage programs are quite comparable. The comparative ad- vantage of the two systems therefore is likely to hinge on factors other than annual overhead costs. CROP AND LIVESTOCK ALTERNATIVES CONSIDERED Cropping alternatives Each of the three soil groups on the study farm is physically adapted to a range of crops. Table 5 summarizes yields, costs and returns, by soil group, for each crop alternative considered. While certain high-income cash crops, such as tomatoes and sugar beets, might be grown on parts of the A soil on the ranch, the range of crops considered is limited to those more typically grown in the rice area. Yields were estimated in consultation with Farm Advisor person- nel familiar with the area, and checked against county yield records and crop his- tory on the study farm. 3 Production costs for each crop were estimated by updating and revising past cost studies of Farm Advisors, and comparing these with pro- duction costs on the study ranch (appen- dix tables A-l to A- 10). Since haylage and silage are used directly on the farm and have no established sale value, prices and returns are not computed for these alternatives in table 5. In the plans pre- sented later, these activities contribute toward total profits through the livestock feeding opportunities they permit. Livestock alternatives To find the most profitable feeding pro- gram for a number of situations, ten dif- ferent rations were considered, ranging from an all-concentrate ration to rations high in silage and haylage. A major prob- lem was encountered in establishing daily 3 F. L. Bell, and Robert Sailsbery, Glenn County farm advisors, were particularly helpful in suggesting appropriate crop yield levels for the various soils. gains for each of these rations. While re- sults from a large number of individual feeding trials were available, the experi- mental conditions from trial to trial varied greatly as to type and breed of animal, weighing conditions, climatic conditions, control rations, and other factors. There- fore, to estimate gains more directly com- parable among rations, the relationship in equation (1), derived experimentally by Garrett et al. (1959) was used: (1) TDN = 0.0331 W 075 (1.48) G where TDN = pounds of total digesti- ble nutrients fed per day. (Concen- trates are entered in the equation at 100 per cent of their TDN value; good quality roughage at 75 per cent of reported TDN, and poor quality roughage at 50 per cent of reported TDN.) W = weight of the animal in pounds G = gain in pounds per day The daily requirements for feeder cat- tle were taken from Morrison (1949). Tables 6 and 7 give these requirements, the composition of feeds, and the com- ponents of the ten rations considered, along with estimated gains per day based on equation (1). The resultant gains, varying from 2.37 to 2.87 pounds per day probably should be considered close to the maximum attainable under actual feeding conditions on a year-around basis. Many feeders will not be able to obtain the gain levels specified in table 7 under normal day-to-day conditions. For example, in a study based on a survey of 85 feedlot operators. Hopkin ( 1957. page 24) reports average gains in California [9] en o < LU Q_ 00 cc ■=> LO UJ - Q < oo LU o c ^j- LO 00 co co CO =3 co • rv • • in • cn co CO "S oo oo • "«»■ • op CM - _ 1 J_J • CM • CO CVJ 1 CO z CO "0 T3 o CO Lf) O CM ID O CM 00 * u _co CO LO O • *=1" CD CO -^T «e}-' a «*' • LO CO CO CD co CM "o rv co evi • «3- cvj cn co 1 — 00 > CO O a v «* rv m • m ^r co mm •tj- LO CO co ^ r-5 . . 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Table 6 FATTENING REQUIREMENTS AND COMPOSITION OF FEEDS Dry matter Digestible protein TDN Calcium Phos- phorus Carotene Estimated net energy pounds/day mg/day therms/day Requirements for fattening yearling cattle (800 pounds) 17.8- 20.4 1.5- 1.7 14.1- 15.9 .044 .042 45 13.0- 14.6 Composition of feeds per cent mg/pound therms/cwt Concentrates Barley 89.9 88.0 85.0 92.2 79.5 90.5 60.0 60.0 26.3 6.9 8.2 6.6 5.9 23.4 11.2 7.1 3.4 1.1 78.8 78.5 80.1 72.4 58.3 51.4 35.7 35.0 17.2 0.06 0.02 0.02 0.57 3.20 1.47 0.84 0.09 0.33 0.32 0.27 0.07 0.66 0.24 0.17 0.06 0.2 2.2 0.1 8.7 8 2 18.9 40.2 5.8 71 4 Milo #2 Dent corn Beet pulp 76.4 80.1 74.3 U.C. supplement* Roughage Alfalfa hay . 57.2 41.5 Alfalfa haylage Oat-vetch haylage Corn silage 29.1 29.8 16.3 * U.C. supplement = 57 per cent cottonseed meal 20 per cent alfalfa meal 10 per cent molasses 7 per cent ground limestone 6 per cent trace mineralized salt Source: Morrison (1949). feedlots ranging from only 1.86 to 2.13 pounds per day for 600-pound steers, and 2.08 to 2.33 pounds per day for 900- pound steers. Thus, the income figures derived from cattle feeding as shown in this report should be interpreted as near- ing the upper limit attainable by the most efficient managers. The importance of gains per day on the level of income at- tainable is discussed in more detail on page 26. Table 8 summarizes the gross return minus purchase cost per head for cattle fed on each of the ten rations. The higher concentrate rations naturally show greater returns when so computed because of greater weight gains. However, one pur- pose of this study is to find which rations are more profitable when livestock feed- ing is considered as one component in an over-all farming program. The feeder cattle are bought as 600- pound good-to-choice feeders, fed 150 days and sold at 922 to 995 pounds, de- pending on the ration fed. These market- ing weights represent actual weight sold after deducting a 3% per cent shrink on the gross weight. (Data based on Wyckoff, 1961.) 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Using equation (1) in the text, gains during this period are estimated at 1.42 pounds per day. At the end of this six-month period the cattle, averaging 600 pounds, are placed on finishing ration 5 (see text) for the regular finishing program of five months. Over the total 11-month feeding period, the cattle gain an average of 1.91 pounds per day and are sold (after shrink) at 940 pounds per head. The calves are purchased at four-month inter- vals, with the lot being filled immediately with calves as each lot of finished cattle is sold. Under this program an average of 1,636 head are bought and sold each year. The optimum cropping system for this program is the same as for the plan in which cattle are finished year-around on ration 5 (compare tables 10 and B-l). However, less grain is purchased in the calf finishing program because of the lower grain requirement for the lighter cattle. Management income for this plan is only about $4,000 less than for ration 5. Furthermore, because of the lower pur- chase weight and efficient gain on light cattle, calf feeding is usually considered less risky than feeding somewhat heavier cattle. For example, cash variable costs (including cost of feeder cattle) are only $293,340 in table B-l, compared with $751,256 for ration 5, table 10; of course, gross income also is much lower in the calf feeding program. Although risk on calves is generally considered lower than on heavier cattle, it should be recognized that the calves are carried for 11 months rather than 5 months, and that price risk increases with the length of feeding period. Yet, with cattle purchased three times during the year, this added price risk element may not be serious. An important qualification of this plan (table B-l) is the assumption that 350- pound good-choice feeder calves can be purchased for the same price ($25.00 per cwt) as 600-pound good-choice feeders. A comparison of annual average prices over a ten-year period at Stockton for good-choice steers indicates that 350- pound calves are usually priced higher than 600-pound feeders. At feeder prices of $25.00 per cwt, calf prices would appear to average about $27.00 per cwt. If so, management income on the calf feeding plan would be reduced by $11,- 452 to $65,684. Still, this program would be more profitable than finishing pro- grams for silage rations 7 to 10 (table 10). In summary, feeders interested in a somewhat lower risk, less capital intensive silage operation may find a calf feeding program attractive. Once again, gains per day actually obtained, particularly during the growing period from 350-600 pounds, would have an important in- fluence on the optimum choice of feeding system. With the data presented in tables B-l and A- 11, the interested reader can budget out costs and returns based on different gain assumptions. [42 Table B-l OPTIMUM PLAN USING SILAGE RATIONS TO CARRY CALVES TO FINISH WEIGHT Category Crop Acres Crop Soil A Rice 209 Soil B Alfalfa haylage Oats-vetch x milo (doublecropped) 291 44 SoilC Rice Alfalfa haylage Oats-vetch x milo (doublecropped) Milo 100 93 214 23 Feed buying Barley cwt 27,000 tons, haylage basis Alfalfa reconstituted .... 470 Feed selling Milo cwt 10,153 Cattle feeding Purchase 500 350-lb calves at four-month intervals. Feed calves for 6 months on daily ration of 16.0 lbs alfalfa haylage, 4.0 lbs oats-vetch haylage and 1.0 lbs barley. Switch to ration 5 for 5 months finishing period. Total feeding period = 11 months. Fill lot immediately as finished cattle sold. Average of 1,636 head bought and sold each year. Costs and returns Gross returns dollars 471,883 293,340 39,252 28,466 33,675 Cash variable costs Cash fixed costs Depreciation Interest on investment Net income Net cash income Net farm income Management income. . . . dollars 139,291 110,824 77.149 [43 ACKNOWLEDGMENTS The authors express their appreciation to several persons associated with the Uni- versity of California who gave generously of their time when consulted on various phases of this study. Among these were Eugene Begg, Monte Bell, Gordon King, Trimble Hedges, Glen Lofgreen, James Meyer, Milton Miller, and Robert Sailsbery. LITERATURE CITED Garrett, W. H., J. H. Meyer and G. P. Lofgreen 1959. The comparative energy requirements of sheep and cattle for maintenance and gain. J. Animal Sci. 18(2). Heady, E. 0. and W. E. Candler 1958. Linear programming methods. Iowa State Coll. Press. Hopkins, John A. 1957. Cattle feeding in California — a study of feedlot finishing. Bank of America, Econ. Dept., San Francisco. King, Gordon A. 1962. Economics of scale in large commercial feedlots. U.C. Giannini Fdn. Res. Rept. 251. Morrison, Frank B. 1949. Feeds and feeding. The Morrison Publ. Co., Ithaca, N.Y. Sitton, Gordon R. 1958. Sacramento Valley rice farms, 1. Organization, costs, and returns. U.C. Gian- nini Fdn. Mimeo Rept. 207. Wyckoff, J. B. 1961. Marketing beef cattle and calves in Washington. Wash. Agr. Exp. Sta. Cir. 384. 7£m-5,'64( E3982 |JF