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 <D OS 2 Q I- < CO I— 00 o o oo~ _l 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 . . CO CO • «-« OO CO >■ 'E 3 c CM CO OO CO in ** CO 3 co ■ cr> • lo • co 1 — lo rv CO "te LO • «=*■ ■ OO • OO OO CO CO O CO a> LO • .— 1 CO • CO <— 1 LO .—1 z CO a> a. CO c "0 .,_,. co o •a 3 * CO 00 lo ^t (\J in to rv "co o CO cd co rv • ^3- 00 co in —h CM -o -O CD^d-LO ■ Lf) IV CM N. ,— 1 CO c o iv, to CM ■ ^ CM O CO rv rv TO 00 • — •— I CO w > o o CO CO CO >- T3 -™ CO.— ICVJ ■ CM m m CM CM LO CM CO CO ^H CM • "3- "=1- •— • CM ^J- ^3- >- 'E 3 c OO CO CO CO OO O (D OO CO CO 5 ^f ■ cn iv -lo ■ cm in «=*■ co cn 2? CD 1 — ^3-CM • «* COCO CM in -—i CD ■ CvJ «=J- CD CO • Cvl "* CD co rv CO z CO ++ "0 CO ■0 # o o CO oooommcvjcMin^t cm "3" CO < m^-cDOincM^-aiincn co CO CO CDOOrvCOCOLOLnOOCOOO CO "=3- CO o ca rvCOCMOOCDrv^J-CNJ — ICO rv 1 — .—1 00 > CO 33 v. 00L0CZ3OL0LOLOCDL0CMC3L0 CO LO CO CO CO >- CO 'E 3 1— 1 co cm m cm m iocmcolo LO CO CM 03 ■_*- CO co • in in -co in in in co • co in co .a tec CO OOLOCO CO CM rv OO CO ■ 00 in £~ = "0 ■a CM ■ 1— t CO CM CM • ^i- CO »— 1 CM CM ■ CVJ .—1 CO E 00>>>0>0^>^> c3 5 5 5 3 -^-^ooo-£ic->.£iooocj -Jr. CJ . -a 1 "a 1 "U CD CD CD CD CD CD 1 si si a 2 2 2 -0 CJ T3 O ^> O CD ' — "•— ■V *» V " v Q. ven co O CD OO VX> >, -5 CO -J x—v co v, ">, «2 .E So -C 4<9Q 00 co ca % <n tv -£Z _cr tz -C= .c: co c: — CD OjO rn CD CO CD ca co v, _q v_^ >i> "CD 5 v. "CD i^ _C3 — ZZ CD ^ _ _ •> .Oa>" coco — -fCu ^*!:" — — co .0 — ca .$£ ca co •- ^ ^ ^ ^r- co ■— co .S. < <c cc 0. CJ CJ S: c cc c/: 00 ^ ^ cc Q_ B te >s o ^^ = 1o^ O ^J3 <->.±, CT3 L? ro «c .!2 c= § > TO ^ **■ CO 00 1--OT3 TO Q. Qj lJ- 3 CO *"* co"^ "c CO o =3 -5 w ~ o X >< o5« «= <0.3 CO O-o ■°.£ 3 Sam EE 1 . "co.n: co cou. 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.) The gains presented in table 7 are gains in the lot before shrink is deducted. It is also assumed that differences among rations in finishing grade are negligible — that 75 per cent of the cattle finish choice and 25 per cent good for each ration. These assumptions probably are unduly favorable to the higher roughage rations relative to higher concentrate rations. It is likely that cattle fed on the former will have a higher percentage shrink and place a smaller percentage of animals in the choice grade as compared with cattle fed on the latter. As data were not avail- able to specify with precision the differ- ences among rations for these factors, the same assumptions were used for all. How- ever, the effects on comparative incomes 11 oo oo CD CO ^r co co CNJ OO CO OO C3 r- 1 fO P>« CO «3- CO CD CO CvJ CD •*$■ oo o M O f>J C3 CD OO .—i f- o -2> 1- ■^1- CD CO CO CvJ oo "=a- r-> ■ co CD rt <J o LO ^ co CD CvJ CO CD o o CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD O CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD CZ2 CD » -=j- r-~ OO CO OO CO ■^r OO *3- ■ CO CD ,— 1 CO r-» OO CD CvJ ^ CD CVJ ^ CO • CD "^ CD CD CD CD CD CD CD CD CD CD ■— « r-l CD CD — 1 .—i CD «— • CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD CD • CD CD CNJ CNJ «=J- CD OO CO CD CO LO CO CD CD OO r»>» **■ Oi CD ■*d- .— i LO ^ CD "=}■ LO CvJ CO CO CO «=r r-. OO "<=}- LO f— 1 1 LO CSJ LO CSJ CO «^- LO CD OO CO CO !-» CvJ OO I— 1 r— 1 r-» CO .— i CD o o o " CD CD CD CD CD CD ~ rH O O " CvJ CD OO oo n m CD CvJ OO LO LO CvJ OO CO CO CD ^S- CD t CD CD .— i r-^ T— I ,— 1 LO CO LO CD "51- CD r-» oo CO CO CO CvJ CO ,_ CvJ CvJ CD CD CD CD CD CD CD r-» cd co CD CD OO CvJ CD CD CD CD CD OO CvJ CD CvJ CO CO _ LO CvJ ^J- CvJ OO CO *3" CvJ CD CvJ CM CvJ CO 05 E Q. Q. <5 >, a — .2?. -t- — CO C CD .2 — TO <D _ro ajjL to — .+-■ TO i_ CD — TO CD < CQ CO TO >, Q. — .52 ■»- TO aj^. co CD >-, TO ° c 7S ^ — o I- o >2 ~ j= 1- ._ TO TO ■SS < o 00 r~. cnj co to CD CD OO «* OO CD CNJ CNJ CD CO CD CO CNJ CNJ OO ^d" CNj CD CM OO CNJ c™> Oxl OO I CNJ OO CD CD CD CD CD CD (N CVJ [N CD CD CD CD CD CD LO .—i r~. r-. i — co r~.r~.oo lo o r~. r~. i — co ^ O O I CD CD I •—! co *s- oo OO CO *3- LO CD CNJ OO CO CNJ en CNi 00 CO CD LO cn >-h 00 CD CD CD CO «^1- CD CD CD O CD CO ^J- CD CD .— 1 .—1 OO CD CD CD CD CD CD JZ CD gj IS ».— J2 otg il! (UTS <-> O-Q E = to a> CO -*-' =*= CO CD .2 — ca ■ — ■C <C O S CD -^ OuO >^ CO CO ■s: <C O O ,2 - o ra C CO E -2 i S 5 ii = ™ t t .2 — o o •; < o o Table 8 PURCHASE COST, GROSS RETURN AND GROSS RETURN MINUS PURCHASE COST PER HEAD FOR CATTLE FED FOR EACH OF THE TEN RATIONS Purchase cost Gross return Gross return Ration number Average weight Average price per cwt* Average cost Average weightf Average price per cwtt Average gross return§ minus purchase cost pounds dollars pounds dollars 1 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 150.00 150.00 150.00 150.00 150.00 150.00 150.00 150.00 150.00 150.00 994.4 994.4 991.5 956.8 939.4 936.5 942.3 925.0 922.0 927.8 25.375 25.375 25.375 25.375 25.375 25.375 25.375 25.375 25.375 25.375 252.33 252.33 251.59 242.79 238.37 237.64 239.11 234.72 233.96 235.43 102 33 2 102 33 3 101 59 4 92 79 5 88 37 6 87 64 7 89 11 8 84 72 9 83 96 10 85 43 * Assume purchase 50 per cent choice and 50 per cent good with choice at $25.75 cwt and good at $24.25/cwt giving an average price/cwt of $25.00. f 150-day average feeding period. Gains per day are shown in table 7. Weight shown is after a 3'/ 2 per cent shrink has been deducted. t Assume finish 75 per cent choice and 25 per cent good with choice at $25.75/cwt and good at $24.25/cwt giving an average price/cwt of $25,375. § Death loss assumed to be negligible. of varying percentage shrinks and final grades are discussed on page 31. It also was assumed that death losses for cattle on all of the rations were negli- gible. However, differences in death losses among rations might be a factor in choice of ration. For example, with the feedlot at a capacity of 3,600 head per year, a 1 per cent death loss would reduce gross and net incomes by about $7,000 per year. For the major part of the analysis, a zero price margin is assumed — good- choice cattle are bought and sold at an average price of 25 cents per pound. (However, average sale price slightly ex- ceeds purchase price because of a larger percentage in the choice grade, table 8.) In essence, this implies that there is no within-year trend or cycle in cattle prices. The effect of different sets of price rela- tionships is analyzed later in more detail. METHOD OF ANALYSIS Given the large number of crop and livestock alternatives presented, linear programming (Heady and Candler, 1958) is used to evaluate the profitability of the large number of combinations possible. Linear programming is a mathematical technique which selects the most profit- able combination of activities from those available, consistent with resources avail- able, government programs, and other re- strictions. First, the cost and net return from each of the crop and livestock alter- natives is budgeted (see the text and appendix tables for crop and livestock budgets) . Then, the resource restrictions are specified. In this study, the major re- stricting resources are the acreage of total farmland, acreage of land in each soil class, rice allotment, maximum acreage of land doublecropped (no more than 50 per [14 cent of each soil type), feedlot capacity by months (1,500-head "practical" ca- pacity), and silo storage space. 4 Finally, given these alternatives and restrictions, the linear programming procedure se- lects the most profitable plan. (Problems solved on the IBM 704 computer.) By changing the alternatives, restrictions, prices and other data, solutions to a range of situations can be obtained. OPTIMUM CROPPING SYSTEM AND INCOME WITHOUT LIVESTOCK Table 9 presents the most profitable cropping system and the resulting level of income for the study ranch when operated as a cash crop farm with no livestock — the typical type of operation in the rice area. The results serve as a point of com- parison with later analyses which convert the operation to alternative types of farm- feedlot programs. Rice is the most profit- able cash crop on each soil group. How- ever, the 309-acre rice allotment is most profitably planted on the better soils; all of the A soils (209 acres) and 100 acres of the B soils are allocated to rice. 5 The remainder of the B soil (235 acres) is planted to alfalfa, the next most profitable cash crop on B soils. Aside from rice, barley x milo (doublecropped) is the most profitable cash crop on C soils. Since doublecropping is limited to 50 per cent of the acreage, 215 acres of C soil are planted to barley x milo (doublecropped) and the remaining C acreage is planted to milo, the next ranking crop in profit- ability. The bottom portion of table 9 sum- Table 9 OPTIMUM CROPPING SYSTEM AND INCOME LEVEL WITHOUT LIVESTOCK Category Crop Acres Crops Soil A Rice Rice Alfalfa hay Barley x milo (doublecropped) Milo 209 Soil B 100 SoilC 235 215 215 dollars Costs and returns Gross income Cash variable costs. . . Cash fixed costs Depreciation Interest on investment 132,940 76,086 12,186 11,669 23,468 dollars Net income Net cash income* Net farm income Management income.. 44,668 32,999 9,531 * See definitions on page 16. 4 Silo storage space is most limiting at the end of the summer when alfalfa haylage harvest is completed. Two silos are set aside for grain and the remaining eleven (total capacity = 1.870 tons haylage) are available for silage. The cattle on feed during the summer eat the silage component of the ration after it has been allowed to process in the tanks — a period of approximately two weeks after harvest. The excess supply harvested accumulates through the summer, reaching a peak with the last cutting of alfalfa. If enough silage cannot be stored to carry the 1,500 head of cattle through the winter, either hay must be purchased and reconstituted, cattle numbers reduced, or a different ration fed. 5 Putting all of the A soils into rice assumes that continuous rice is possible. While continuous rice is not typical, some fields in the study area have maintained or increased rice yields when continuously cropped with rice over a 15-year period. More typically land is planted to rice for 3-5 years, then fallowed or planted to a nonirrigated crop for a year, followed by safflower, milo, bean, oats-vetch or some other alternative for a year, and then returned to rice. If continuous rice is not considered practical, the cropping system in table 9 could be revised to combine A and B soils into one rotation, with a maximum of 4 years of rice followed by 3 years in alfalfa. Such a revision would reduce management income by only about $1,000 from that shown in table 9. [15] Net cash income = gross income minus cash variable costs minus cash fixed costs. This figure gives the cash remaining from the business after paying all cash expenses for the year. Unless this figure is positive, the operator will be forced to draw on savings or outside sources of funds to continue in operation, even in the short run. Net farm income = net cash income minus depreciation. If this figure is posi- tive, the operator can stay in business indefinitely. He can replace his equipment, pay all cash costs, and have cash remaining. However, this figure may be so low as to provide returns to the operator's labor, management, and capital which are far below market rates. Net farm income as defined here is approximately equal to taxable income as defined by the Internal Revenue Service. Management income = net farm income minus interest on investment. This figure is a more accurate measure of the true "profit" of the operation. It repre- sents what is left for the owner-manager's labor and management after paying all other factors of production at the market rates. It is assumed that the man- ager has full equity in his land and equipment. Hence, the "interest on invest- ment" is not a cash cost, but represents an opportunity cost (what the capital could earn if invested elsewhere at market rates). If the operator owned less than 100 per cent of his business and therefore paid cash interest costs, both net cash income and the net farm income would be correspondingly lowered but management income would remain unchanged. marizes the costs and returns and the net income figures from this cropping system. (See also appendix table A-ll.) Since comparable net income figures are used for other plans throughout the report, they are briefly defined in the box above. The results presented in table 9 show that the optimum cropping system alone provides sizable net cash and net farm in- comes, and leaves a management income roughly comparable with salaries paid to professional farm managers on operations of this size and complexity. Although rice harvesting is assumed to be contracted in this study, the income figures likely could be raised somewhat by owning rice har- vesting machinery, particularly in view of timeliness of harvest. Succeeding sec- tions evaluate the income possibilities of reorganizing the resources of this cash crop farm into various types of farm feed- lot programs. OPTIMUM PLANS AND INCOME LEVELS USING SILAGE RATIONS Table 10 summarizes the optimum farm organizations and income levels pos- sible when a 1,500-head capacity feedlot, 13 air-tight silos and associated equip- ment are added to the cash crop farm. The results are presented for each of the six silage rations outlined earlier in table 7. Ration 5, using alfalfa haylage, oats- vetch haylage and barley, provides the highest income of the several plans, re- gardless of the income measure employed. Some milo is produced in each of the plans in table 10. In practice, a feeder would likely use the milo produced as [16 Table 10 COMPARISON OF OPTIMUM PLANS FOR THE SILAGE RATIONS* Crop feed and livestock systems, and costs and returns for alternative plans Category Ration 5 Ration 6 Ration 7 Ration 8 Ration 9 Ration 10 acres Cropsf Soil A (209 acres) R-209 R-166 AH-43 R-209 R-166 CS-43 R-166 CW-43 R-166 CW-43 Soil B (335 acres) AH-29 OVXM-44 AH-291 OVXM-44 AH-29 OVXM-44 R-26 AH-309 R-26 AH-309 R-26 AH-309 Soil C (430 acres) R-100 AH-93 OVXM-214 M-23 R-143 OVXM-215 M-72 R-100 AH-93 OVXM-214 M-23 R-117 BXM-215 M-98 R-117 BXM-215 M-98 R-117 BXM-215 M-98 pounds per head per day Components of ration Alfalfa haylage 16.0 4.0 100 16.0 4.0 io'o 16.0 4.0 io!6 16.0 '4:0 10.0 16.0 '4.0 100 16.0 Oat-vetch haylage Corn silage 4 Barley Milo Corn 10.0 cwt Feed buying Barley 54,000 42,'il6 54,000 50,775 43,055 Milo Corn 54,000 tons, haylage basis Alfalfa reconstituted.... 470 470 470 920 920 920 cwt Feed selling Barley 10,'i53 io,'i53 i6,945 3,225 3,225 Milo 10,945 number purchased per month Cattle feeding Jan. - Dec... . 300 300 300 300 300 300 dollars Costs and returns Gross returns 940,076 751,256 45,843 28,466 33,675 912,558 729,052 45,845 28,466 33,675 942,722 775,556 45,843 28,466 33,675 924,975 752,184 45,807 28,466 33,675 906,405 738,510 45,807 28,466 33,675 933.584 Cash variable costs Cash fixed costs Depreciation Interest on investment. . 783.095 45.807 28,466 33.675 dollars Net income Net cash income Net farm income Management income 142,977 114,511 80,836 137,661 109,195 75,520 121,323 92,857 59,182 126,984 98,518 64,843 122,088 93,622 59,947 104,682 76.216 42.541 * Rations defined in table 7. t R = rice, AH = alfalfa haylage, OVXM = oat-vetch, milo doublecropped, M = milo, CS = corn silage, BXM = barley, milo doublecropped. [17] part of the grain component in the ration fed. However, at the prices used in this study (buying and selling prices of $2.05 and $1.85 per cwt, respectively, for barley and $2.10 and $2.00 per cwt for milo) it is most profitable to use barley as the pur- chased grain. Of course, a shift in the milo-barley price relationship favoring milo could make it profitable to purchase milo rather than barley. Since compara- ble gains are obtained from silage rations using either barley or milo as the grain component, the choice of purchased grain depends on which provides the lower cost per unit of TDN. The entire allotment of rice is included in each of the optimum programs in table 10. Rice is clearly the most profitable cash crop in the area, and in every plan it pays to raise rice as a cash crop and buy the major portion of the feed grains, rather than substituting feed grains for rice in the cropping system. Aside from rice, the rest of the acreage is devoted first to the forages required for the rations, the re- mainder to milo — the best remaining cash crop on C soils. However, the capacity of the 11 silos (two additional silos set aside for grain) is not sufficient to store enough forage at the end of the harvest seasons to carry all lots of cattle through the win- ter and early spring on the high forage rations. Hence, under plans 5, 6, or 7, 470 tons of alfalfa (haylage basis — the equivalent of about three silos capacity) are purchased and reconstituted during the winter months to carry the cattle until forage harvesting begins in the spring. Rations 8, 9, and 10 each require pur- chase and reconstitution of 920 tons of alfalfa (haylage basis — about 5% silos capacity) because of the higher storage requirement for the corn silage included in these rations. Other alternatives to re- constituting alfalfa hay would be building additional storage capacity (the most eco- nomic would be building cheaper grain storage and using all 13 silos for silage), reducing the number of cattle fed, or switching to higher concentrate rations during the winter months. The latter al- ternative is evaluated on page 20. As shown in table 10, it is most profit- able to keep the feedlot filled to its prac- tical capacity of 1,500 head year-around. To help reduce price risk, 300 head are bought and sold each month in order to be in the market year-around. The feed- ing period averages 150 days, with some cattle sorted out and sold earlier, some being held over until later in order to reach the desired finish. Under this sys- tem, 2.4 lots (3,600 head) are fed out and sold each year. All of the rations considered increase the earning potential of the study farm considerably beyond that possible for a cash crop operation alone (compare tables 9 and 10) . Note, however, that the earn- ings from the feedlot program are based on superior management as reflected in relatively high crop yields and livestock gains. Also, the livestock feeding program involves greater risk. Again, essentially a zero price margin (equal buying and sell- ing prices averaging 25 cents per pound for 50 per cent good-50 per cent choice animals) is used throughout. However, since the finished animals are assumed to grade 25 per cent good-75 per cent choice, a slight positive margin of $0,375 per cwt actually exists for cattle fed on each of the ten rations studied. A more detailed appraisal of the critical price risk element in cattle feeding is made in the section starting on page 22. OPTIMUM PLANS AND INCOME LEVELS USING NON-SILAGE RATIONS Table 11 summarizes the optimum pro- grams and income levels possible when a 1,500-head feedlot and feed mill for con- ventional ration feeding are superimposed on the study farm. The results are pre- sented for the entire farm when cattle are [18 Table 11 COMPARISON OF OPTIMUM PLANS FOR THE NONSILAGE RATIONS* Crop, feed and livestock systems, and costs and returns for alternative plans Category Ration 1 Ration 2 Ration 3 Ration 4 acres Cropsf Soil A (209) R-209 R-209 R-209 R-190 A-19 Soil B (335) R-100 A-67 BXM-168 R-100 A-90 BXM-145 R-80 A-255 A-335 Soil C (430) BXM-215 M-215 BXM-215 M-215 R-20 BXM-215 M-195 R-119 BXM-215 M-96 pounds per head per day Components of ration Barley ( U.C. supplement 13.0 2.0 6.0 12.0 5.7 4.9 9.8 Alfalfa 8.0 Beet pulp 4.2 cwt Feed buying Barley 90,279 63,785 61,575 49,695 cwt Feed selling Seel milo 22,106 21,140 14,350 10,885 tons Sell alfalfa hay 402 number purchased per month Cattle feeding Jan. -Dec 300 300 300 300 dollars Costs and returns Gross returns 1,027,317 849,196 48,491 19,040 28,553 1,016,541 844,443 52,735 20,238 29,392 999,471 826,520 52,783 20,238 29,392 955,387 Cash variable costs 793.591 Cash fixed costs 52.817 Depreciation Interest on investment 20.238 29,392 dollars Net income Net cash income 129,631 110,591 82,038 119,363 99,125 69.733 120,168 99,930 70.538 108 980 Net farm income 88 742 Management income 59,350 * Rations defined in table 7. t R = rice, A = alfalfa hay, BXM barley, milo doublecropped, M = milo. [19] fed on each of the four grain-hay rations specified. The all-concentrate ration 1 is the most profitable nonsilage ration under the conditions specified. Rations 2 and 3, containing typical grain-hay ratios, rank about equal in income, but net approxi- mately $12,000 less than the all-concen- trate ration. Ration 4, with a high propor- tion of hay relative to concentrate, ranks somewhat lower in income potential — about $20,000 less than all-concentrate ration 1. The programming results also indicate that the all-concentrate ration alone produces greater income than any combination of the four rations shown in table 11. Despite the results presented here, some feeders still might prefer ra- tions 2 or 3 over 1 because of the rela- tively short experience with all-concen- trate rations, the possibility of cattle going off-feed, higher death losses and other factors. Considering these factors, the $12,000 separating these three rations may not solely determine a feeder's choice. Again, each of the cattle feeding plans (table 11) permit higher attainable incomes than a cash crop operation. All of the plans in table 11 show milo sold and barley purchased. With the ex- ception of ration 1, where barley is needed to provide enough fiber in the ration, the milo produced could be sub- stituted for barley in the rations with neg- ligible changes in income. However, after the home-produced supply of milo is fed, any additional grain purchased would be barley. Table 11 shows that the optimum crop- ping system changes to include more alfalfa hay and less barley and milo as the type of ration shifts to a higher per- centage of roughage. However, for none of the plans does it pay to attempt to pro- duce all of the feed for the cattle finishing program. In every case it is more profit- able to plant the entire rice allotment and purchase barley. Except for the plan using ration 1, where 67 acres of alfalfa hay are raised as a cash crop, the remaining plans produce just the alfalfa needed to supply the cattle feeding operation. In these cases, raising the alfalfa is a more profit- able alternative than producing another cash crop and buying alfalfa. OPTIMUM PLAN AND INCOME LEVEL USING A COMBINATION OF RATIONS Tables 10 and 11 above indicate that rations 1 (all-concentrate) and 5 (alfalfa haylage, oats- vetch haylage and barley) are almost identical in earning power under the assumptions used. The effect of other shrink and grade assumptions are discussed later. The question arises as to whether some combination of forage and concentrate rations might provide higher income than either alone. Table 12, there- fore, presents the plan representing the optimum choice from among all of the rations. The optimum plan uses a com- bination of the silage rations 5 and 6 (using both barley and milo) during the major portion of the year, with the all- concentrate ration being used for about one lot of cattle fed during the winter months October-February. The all-con- centrate ration essentially replaces the reconstituted hay activity required to per- mit year-around feeding of the silage rations presented in table 10. The com- bination of rations in table 12 would be feasible in that the barley could be pur- chased as needed during the fall and win- ter, put in one of the silos, then crimped and fed as an all-concentrate ration, using the regular feeding setup available for the silage rations. However, the income in- centive for introducing this new ration is slight, netting only about $2,000 more than ration 5 alone and only about $500 more than ration 1 alone. It is doubtful if feeders would be interested in introduc- ing the complexity of feeding two com- pletely different rations for these small bonuses. 20 Table 12 OPTIMUM PROGRAM AND INCOME LEVEL WITH COMBINATION OF HIGH FORAGE AND CONVENTIONAL RATIONS Category Crop Acres Crops Soil A SoilB Rice Alfalfa haylage Oats-vetch x milo (doublecropped) Rice Alfalfa haylage Oats-vetch x milo (doublecropped) Milo 209 310 SoilC 25 100 76 215 39 cwt Feed buying Barley. . 47,846 Number purchased per month Ration fed Cattle feeding January February March-June 300 300 300 |237 \ 63 300 300 300 (16 300 5 6 5 July August September October 5 6 6 5 1 November December 1 5 5 dollars Costs and returns Gross return Cash variable costs. .. Cash fixed costs Depreciation Interest on investment 923,694 733,103 45,866 28,466 33,675 dollars Net income Net cash income Net farm income Management income. . 144,725 116,258 82,583 The main body of this report has con- centrated on the question of optimum cattle finishing programs in farm feedlots. starting with feeder cattle in the 600- pound range. However, some operators, particularly those equipped to feed silage rations, may be interested in the possibili- ties of buying lighter animals and carry- ing them through to finished weights. Appendix B summarizes the results of such a program. SENSITIVITY OF CATTLE FEEDING INCOME TO PRICE AND GAIN VARIABILITY Assuming average price conditions, each of the farm plans that included cat- tle feeding increased income substantially over the cash crop operation. However, cattle feeding generally is considered quite risky. The following analysis indi- cates the variability in income from the cattle feeding operations resulting from variations in probably the two most criti- cal factors influencing feeding profits — cattle prices and gains per day. Profits from cattle feeding can be sum- marized as in equation (2) where: (2) tt^PsWs-PbWb-F-K tt = profit ; P B = buying price ; P s = selling price; W B = initial weight; W s = final weight after shrink; F = variable costs as- sociated with feeding (feed, labor, etc.) ; and K = fixed or overhead costs (depre- ciation, taxes, etc.). Final weight after shrink equals initial weight plus total shrunk gain (G) in the feed lot (W s = W B + G) . Substituting this expression in equation (2) and simplifying gives equa- tion (3). (3) 7t = W b (Ps-Pb) + (P s G-F) -K In the short run, fixed costs (K) can be ignored since they will remain con- stant whether cattle are fed or not; of course, in the long run they must be cov- ered if the feeder is to remain in business. Hence, in the short run, cattle profits de- [21] pend on two factors: the increase (or decrease) in the value of the initial weight, W B (P s -Pb) ; and the value of the gain (loss) over (under) feeding costs, P S G - F. For any given lot of cattle on a specified ration, W B , G and F can be assumed constant and the effect on profits of variation in the remaining price variables P B and P s assessed. Both the price margin (P s -Pb) and the level of prices (P s ) exert a strong impact on profits. Also, at given prices, variation in gains (G) sharply change the profit level. Income variability resulting from fluctuations in cattle prices Table 13 illustrates several aspects of the influence of cattle prices on the level and stability of income from the two most profitable farm plans derived earlier — those with cattle fed on rations 1 and 5, respectively. Variation in cattle prices would affect variability in income from the other livestock plans similarly. The top portion of table 13 illustrates the effect of price margin (P s — P B ) on management income for rations 1 and 5, Table 13 INFLUENCE OF PRICE MARGIN AND PRICE LEVEL ON FARM PROFITS FOR OPTIMUM FARM PLANS USING RATIONS 1 AND 5 Price relationships* Optimum plan jsing ration 1 Optimum plan using ration 5 Feeder cattle Slaughter cattle Price margin Management Deviation from Management Deviation from prices (Pb) prices (Ps) (Ps - Pb) income averagef income averagef dollars per cwt dollars per cent dollars per cent 25.00 20.00 -5.00 -110,457 -235 -110,976 -237 25.00 22.00 -3.00 - 38,853 -147 - 33,332 -141 25.00 24.00 -1.00 32,751 - 60 34,312 - 58 25.00 26.00 1.00 104,319 27 101,920 26 25.00 28.00 3.00 175,923 115 169,564 110 25.00 30.00 5.00 247,527 202 237,208 193 20.00 20.00 10,971 - 87 20,193 - 75 22.50 22.50 46,467 - 43 50,260 - 38 25.00 25.00 82,038 80,836 27.50 27.50 117,459 43 111,362 38 30.00 30.00 152,955 87 141,890 75 20.00 20.33 0.33 9,531$ 22.50 21.84 -0.66 9,531 25.00 23.32 -1.65 9,531 27.50 24.86 -2.64 9,531 30.00 26.37 -3.63 9,531 20.00 20.07 0.07 9, 531 J 22.50 21.67 —0 83 9,531 25.00 23.27 -1.73 9,531 27.50 24.86 -2.64 9,531 30.00 26.46 —3.54 9,531 < • u !l ee( lf, r and slau i h 4 ter Prices based on 50-50 good-choice grade. Actual selling prices are $0,375 higher in each case because finished cattle assumed to grade 25-75 good-choice. eA A Per J*"* dev '2l' 0l L f ™ m i^rage management income resulting from feeder and slaughter cattle prices of $25.00 per cwt for 50-50 good-choice ($81,982 and $80,833 for rations 1 and 5, respectively). ^ t Management income level possible from cash-crop operation of ranch. [22] at feeder cattle prices of $25.00 per cwt. A negative price margin of only $1.00 per cwt reduces management income for ra- tion 1 from $82,038 (with $25.00 buying and selling prices) to $32,751 — a drop of 60 per cent. A negative price margin of $3.00 per cwt results in a negative man- agement income of $38,853 — a drop of 147 per cent. The level of management income is equally sensitive to positive price margins. The variation in income from different cattle price margins is about the same for rations 1 and 5. While the percentage variation in income might be overemphasized by using management income as the standard for comparison, the absolute variation would be the same regardless of whether net cash or net farm income were used. The second section of table 13 shows the effect on income of the level of cattle prices with a constant zero price margin. For example, ration 1 varies ± 87 per cent in management income as the level of buying and selling prices are varied simultaneously from $20.00-$30.00 per cwt. In all of these cases, the entire cattle feeding profit comes from the value of the gain over feed costs — the second source of profit in equation (3) ; the higher the price level, the higher the value of the gain. Since the price margin equals zero, the first source of profit contributes noth- ing to cattle feeding returns; i.e., W B (P s -Pb) =0. Results for ration 5 are similar. Hence, cattle feeding profits are highly sensitive to both price margin and the level of beef prices. The analysis provides evidence for the widely held conviction that cattle feeding is a high-risk business. Time devoted by a cattle feeder to study- ing market conditions and price trends usually is well spent; buying and selling cattle at the most favorable possible prices is probably the most important single aspect of his business. 8 The last portion of table 13 answers this question: At various feeder cattle prices, what price margin is needed to "break even"? By break even is meant to provide a short-run management income as high as is possible by shutting down the feedlot and producing cash crops. 7 Table 13 shows that, at feeder cattle prices of $20.00, a slightly positive price margin is needed to break even. However, as feeder cattle prices rise, successively larger negative price margins can be sus- tained and still provide break-even profits. Referring again to equation (3), the higher level of prices permits the value of gain over feed costs (second source) to outweigh the negative price margin (first source) . The proceeding analysis shows that income associated with cattle feeding can be extremely variable depending on cattle price relationships. But do actual prices and profits show this degree of variability from year to year? Tables 14 and 15 show the management income which would have been derived annually from 1951-61 if the optimum plans with live- stock using rations 1 and 5, respectively, had been employed in these years. Actual variations in both crop and livestock prices are reflected in the income figures shown. However, crop yields, production costs, and other variables are held constant at the levels assumed in the rest of the study. The top portion of each table shows the level and variability of management income if the cattle were purchased and sold on a monthly basis throughout the year. The lower portion of 6 This analysis assumes that the feeder buys and sells his own cattle. A common alternative is custom feeding all or a part of the cattle for someone else who owns the cattle and takes the price risk. In this case, the returns to the feedlot operator will be related to the second source of profits — value of gain in relation to feed costs. For further information on custom feeding see King (1962) andHopkin (1957). 7 The fixed or overhead costs associated with cattle feeding still remain even if the lot is tem- porarily closed. The break-even margins of table 13 therefore reflect continuation of these costs. [23] Table VARIATION IN COSTS, REVENUES AND MANAGEMENT OVER PERIOD 1951-61, WITH MONTHLY Costs and returns 1951 1952 1953 1954 1955 1956 Monthly buying- , dollars Revenue Rice 15 495 cwt 63,530 66,318 11,418 1,181,347 1,322,613 718,794 267,386 35,396 188,690 1,210,266 -15,540 96,807 (110) 112,347 (112) 79,024 80,687 12,881 1,131,025 1,303,617 604,098 286,116 38,299 188,690 1,117,203 -93,330 93,084 (106) 186,414 (185) 85,222 67,423 9,058 807,970 969,673 383,670 247,963 33,876 188,690 854,199 -55,560 59,914 (68) 115,474 (115) 72,826 57,476 7,920 800,900 939,122 395,442 208,862 33,925 188,690 826,919 2,340 114,543 (130) 112,203 (HI) 71,277 50,844 10,658 765,638 898,417 385,344 198,519 33,922 188,690 806,475 -44,070 47,872 (54) 91,942 (91) 61,980 Milo 22 106 cwt 56,370 Alfalfa 402 ton 9,422 Livestock 704,602 Total revenue 832,374 i Cost Feeder cattle 358,884 Buy barley 90,279 cwt 198,920 Buy supplement, 540 ton 32,619 Other costs 188,690 Total costs 779,113 Closing-opening inventory 8,430 Management income (accrual basis), (per cent of average) 61,691 (70) Management income (cash basis) (per cent of average) 53,261 (53) Seasonal buying- dollars Milo rice and alfalfaj 141,266 1,235,045 1,376,311 730,647 302,782 188,690 172,592 1,178,260 1,350,852 626,940 324,415 188,690 161,703 872,676 1,034,379 366,444 281,839 188,690 836,973 -55,560 141,846 (143) 197,406 (177) 138,222 802,555 940,777 399,060 242,787 188,690 830,537 2,340 112,580 (114) 110,240 (99) 132,779 787,788 920,567 343,197 232,441 188,690 764,328 -44,070 112,169 (113) 156,239 (140) 127,772 Livestock 711,494 Total revenue 839,266 364,068 231,539 188,690 Cost Feeder cattle Barley and supplement! Other costs Total cost 1,222,119 -15,540 138,652 (140) 154,192 (138) 1,140,045 -93,330 117,477 (118) 210,807 (189) 784 297 Closing-opening inventory 8,430 63,399 (64) 54,969 (49) Management income (accrual basis). . . . Management income (cash basis) (per cent of average) * Buy and sell 300 head monthly at actual prices. t Fill lot twice a year; once in April, once in September; sell in January and August at actual prices. t Not itemized since same as in upper section of table. 14 INCOME FROM OPTIMUM PLAN USING RATION 1 VERSUS SEASONAL BUYING AND SELLING 1957 1958 1959 1960 1961 1951-61 average Optimum program Coeff. of variation s C = -(100) filing program* selling program! 65,079 45,980 9,105 776,378 67,403 46,423 9,591 926,910 1,050,327 57,332 45,096 10,176 963,245 1,075,849 63,530 42,664 10,120 885,742 64,304 46,202 8,410 839,114 68,319 55,044 9,887 889,352 1,022,602 65,854 44,212 8,844 908,407 1,027,317 t 896,542 1,002,056 958,030 409,968 190,508 31,311 188,690 533,412 191,822 29,249 188,690 943,173 562,140 196,269 34,579 188,690 501,660 185,057 32,559 188,690 479,736 193,958 31,208 188,690 484,832 215,035 33,358 188,690 540,000 185,072 31,573 188,690 945,335 820,477 981,678 907,966 893,592 921,915 58,530 29,280 -18,240 -12,630 -2,070 -12,610 134,595 (153) 136,434 (155) 75,931 (86) 81,460 (92) 62,368 (71) 88,077 (100) 81,982 (93) 34 7 76,065 (76) 107,154 (106) 94,171 (94) 94,090 (93) 64,438 (64) 100,687 (100) 81,982 (81) 34 6 T 120,164 754,585 123,417 886,502 112,604 953,088 1,065,692 116,314 886,771 1,003,085 118,916 851,197 133,250 901,815 874,749 1,009,919 970,113 1,035,065 , 410,940 221,819 188,690 539,514 221,070 188,690 949,274 577,368 230,848 188,690 502,524 217,616 188,690 908,830 487,404 225,166 188,690 486,191 248,394 188,690 n cable 821,449 996,906 901,260 923,275 58,530 29,280 -18,240 -12,630 -2,070 -12,610 appli 111,830 . (H3) 89,925 (91) 50,546 (51) 81,625 (82) 66,783 (67) 99,180 (100) 30.8 53,300 (48) 60,645 (54) 68,786 (62) 94,255 (84) 68,853 (62) 111,790 (100) 52 4 the table shows the same data assuming that the cattle were purchased seasonally, one lot in the spring, another in the fall — probably a more usual practice for farm feedlots. The data in tables 14 and 15 provide some interesting insights into price risks associated with cattle feeding. First, per- haps the most obvious observation is that cattle feeding may not be as risky due to price variation as the preceding analyses might indicate. In no year from 1951-61 would management income have been as low from cattle feedings as from cash crop farming alone (approximately $10,000). Second, there would have been little dif- ference in either level or variability of management income between feeding ration 1 or ration 5. In part, this results from the fact that prices of purchased feeds did not fluctuate greatly from year to year (although there was a decline in the feed price level from 1951-61). Third, price variations from the cash crops were less important than cattle prices in influencing year-to-year income variability although again there was a general decline in cash crop prices over the 11-year period. Fourth, management income would have averaged roughly $10,000 per year higher from 1951-61 if cattle were bought and sold seasonally (spring and fall) rather than monthly. Fifth, variability in income would have been no higher from seasonal versus monthly buying and selling, providing income was reported on an accrual basis (i.e., taking into account changes in in- ventory values because of changes in the price level) . For example, the coefficients of variation in annual management income from the monthly versus the sea- sonal programs were 34.7 versus 30.8, respectively, for ration 1 (table 14), and 30.8 versus 30.6, respectively, for ration 5 (table 15). 8 Sixth, if income were re- ported on a cash basis, the variability in income would have been appreciably higher from the seasonal program. The coefficients of variability in management income for monthly versus seasonal buy- ing on a cash basis were 34.6 versus 52.4, respectively, for ration 1 (table 14), and 34.0 versus 51.3, respectively, for ration 5 (table 15) . Thus, at least if income is to be reported on a cash basis, the argument for buying and selling cattle monthly to reduce income variability would appear sound. Seventh, because of changes in the level of farm prices, the income from the optimum programs derived in this report are slightly lower than the average in- come which could have been obtained from these same programs if employed over the past 11-year period. However, the levels of income from the optimum programs are somewhat higher than those possible in the past three years shown (1958-61). Effect of gains per day on income and relative advantage of various rations One of the most difficult variables to estimate in cattle feeding is the gain per day from a particular ration. The method used for estimating gains in this report was explained earlier; the same method was used for all rations in an attempt to maintain reasonable relationships among the gains from different rations. Despite this attempt, many feeders will not be able to achieve the feeding efficiencies and gains used in this report. Con- sequently, this section shows how the comparative advantage and the income levels associated with different rations change as gains per day vary. As indicated earlier, rations 1 (all- concentrate) and 5 (alfalfa haylage, oats-vetch haylage, and barley) provide approximately equal management in- comes at the assumed gain-per-day figures of 2.87 and 2.49, respectively. 8 Coefficient of variation = (standard deviation -5- mean) 100. The coefficient of variation is thus a comparative measure of the year-to-year variability in income from the various programs; it is computed from the indexes of management income from 1951-61 in tables 14 and 15. [26] Figure 1. Combinations of Gains from Rations 1 and 5 which Yield Equivalent Management Incomes. 3.00^ 2.00 2. 50 3.00 3. 50 Pounds, Gain Per Day, Ration 1 Figure 1 shows all combinations of the gains per day from rations 1 and 5 which provide the same management income. All-concentrate ration 1 has a profit ad- vantage only if gains per day from it exceed by at least 0.37 pounds the daily gains from high-forage ration 5. For example, a 2.50-pound gain per day from ration 1 provides the same management income from the entire farm plan as a 2.13-pound gain per day from ration 5 (point B, figure 1.) Point A, figure 1, shows the gains per day required to pro- vide a management income of zero from each of the two rations (at $25.00 per cwt buying and selling prices for cattle) . In summary, for any combination of gains from rations 1 and 5 lying to the left of the dividing line in figure 1, it will be advantageous to feed ration 5; combina- tions of gains to the right of the dividing line favor ration 1. Feeders equipped to feed only conven- tional hay-grain rations may be interested in a similar gain comparison with all- concentrate ration 1. Figure 2 provides the relevant "break-even" gains. Rations 2 and 3 would need to produce gains per day of nearly 0.1 pounds higher than ration 1 in order to provide comparable management incomes. For example, when ration 1 is assumed to give gains of 2.50 pounds per day, rations 2 and 3 must provide gains of 2.59 and 2.57, respec- tively, to produce the same profit. Gains from ration 4 can be about 0.1 pound [27] Table VARIATION IN COSTS, REVENUES AND MANAGEMENT INCOME 1951-61, WITH MONTHLY VERSOS Costs and returns 1951 1952 1953 1954 1955 1956 Monthly buying- jl Revenue Rice, 14,495 cwt. Milo, 10,153 cwt. Livestock dollars l Total revenue Cost Feeder cattle Buy barley, 54,000 cwt.. Buy alfalfa hay, 320 ton^ Other costs Total cost Closing-opening inventory Management income (accrual basis) (per cent of average) Management income (cash basis) (percent of average) 59,430 30,459 1,116,007 1,205,896 718,794 160,510 9,991 199,601 1,088,896 -15,540 101,460 (110) 117,000 (112) 73,924 37,058 1,068,746 1,179,728 604,098 170,940 15,863 199,601 990,502 -93,330 95,896 (104) 189,226 (181) 79,722 30,967 763,281 873,970 383,670 148,181 12,529 199,601 743,981 -55,560 74,429 (81) 129,989 (124) 68,126 26,398 756,602 851,126 395,442 124,852 9,774 199,601 729,669 2,340 123,797 (134) 121,457 (116) 66,677 23,352 723,291 813,320 385,344 118,731 13,425 199,601 717,101 -44,070 52,149 (57) 96,219 (92) 57,980 25,8S0 665,631 749,501 358,884 119,661 * 12,365 199,601 690,511 i 8,430 67,420 (73) 58,990 (56) Seasonal buying- dollars Revenue Rice and milo|. Livestock 89,889 1,166,735 Total revenue Cost Feeder cattle Buy barley and alfalfa! Other costs 1,256,624 730,647 170,501 199,601 Total cost Closing-opening inventory Management income (accrual basis) (per cent of average) Management income (cash basis) (per cent of average) 1,100,749 -15,540 140,335 (137) 155,875 (136) 110,982 1,111,695 1,222,677 626,940 186,803 199,601 1,013,344 -93,330 116,003 (113) 209,333 (182) 110,689 824,408 935,097 366,444 160,710 199,601 726,755 -55,560 152,782 (149) 208,342 (181) 94,524 758,166 852,690 399,060 134,626 199,601 733,287 2,340 121,743 (119) 119,403 (104) 90,029 744,216 834,245 343,197 132,156 199,601 674,954 -44,070 115,221 (113) 159,291 (138) 83,870 672,140 756,010 364,068 i 132,026 199,601'' 695,695 8,430 68,745 (67) 60,315 (52) * Buy and sell 300 head monthly at actual prices. t Fill lot twice a year; once in April, once in September, sell in January and August at actual prices t Not itemized since same as in upper section of table. § Includes a cost of $2.00 per ton to unbale, chop, add water, and put in silo. ;0M OPTIMUM PLAN USING RATION 5 OVER PERIOD .ASONAL BUYING AND SELLING 1958 1959 1960 1961 1951-61 average Optimum program Coeff. of variation s C = -(100) 60,879 21,118 733,436 63,053 21,321 875,643 960,017 53,632 20,712 909,969 984,313 59,430 19,595 836,752 915,777 60,154 21,220 792,703 63,910 25,281 840,187 61,604 20,306 858,166 940,076 815,433 874,077 929,378 409,968 113,936 11,696 199,601 533,412 115,206 10,880 199,601 859,099 562,140 109,379 12,587 199,601 501,660 110,691 14,711 199,601 826,663 479,736 116,282 10,104 199,601 805,723 484,832 128,034 12,175 199,601 824,642 540,000 110,700 8,953 199,601 735,201 883,707 859,254 * 58,530 29,280 -18,240 -12,630 2,070 -12,610 138,762 (151) 130,198 (141) 82,365 (89) 76,484 (83) 70,424 (76) 92,126 (100) 80,822 (88) 30 8 80,232 (77) 100,918 (96) 100,606 (96) 89,114 (85) 68,354 (65) 104,736 (100) 80,822 (77) 34"0 81,997 712,850 84,374 837,470 921,844 74,344 900,373 974,717 79,025 837,724 81,374 804,117 885,491 89,191 851,808 940,999 794,847 916,749 410,940 , 125,632 199,601 539,514 126,086 199,601 577,368 121,966 199,601 502,524 125,402 199,601 827,527 487,404 126,386 199,601 813,391 486,191 140,209 199,601 826,001 n appli ot cable 736,173 865,201 898,935 58,530 29,280 -18,240 -12,630 2,070 -12,610 117,204 (114) 85,923 (84) 57,542 (56) 76,592 (75) 74,170 (72) 102,388 (100) 306 58,674 (51) 56,643 (49) 75,782 (66) 89,222 (78) 72,100 (63) 114,998 (100) 5L3 Figure 2. Comparison Gains from Rations 2, 3, and 4 which Yield the Same Management Income as Ration 1. 3. 50 3.00 2. 50 2. 00 2. 00 Ration 2 J 2.50 3.00 Pounds, Gain Per Day, Ration 1 3. 50 lower than from ration 1 and still provide comparable profits. Again, the relative advantage of the different rations will depend directly on the gains an individual feeder can actually obtain. For example, if a particular feeder has difficulty keep- ing cattle on feed using the all-concentrate ration, gains may drop to the point where he might more profitably feed ration 2 or 3. Feeders organized to feed high silage rations would be interested in how in- di\ idual silage rations 6-10 compare with the most profitable silage ration 5 under varying gain conditions. Figure 3 shows that each of the 5 rations 6-10 would have to provide greater gains per day than ration 5 in order to give comparable management income; the gain increases required vary from only 0.02 pounds per day for rations 6 and 8 to 0.21 pounds per day for ration 10. Figure 4 shows more clearly the direct dependence of income level on gains per day from the ten rations studied. For ex- ample, if cattle on ration 3 gain 2.85 pounds per day, as assumed in this report, management income is approximately $70,000. However, if the feeder can obtain only a 2.5-pound average daily gain, management income drops to $25,- 000. If gains should fall to 2.0 pounds per [30] Figure 3, Comparison Gains from Rations 6 to 10 which Yield the Same Management Income as Ration 5. rV 3.00 2.50 2.00 - 1.70 day, a loss in management income of $40,000 would result. Similar compari- sons can be made for the other rations shown in figure 4. It should be clear that only those individuals with the man- agerial capacity to maintain cattle on feed and gaining at better-than-average rates throughout the feeding period are apt to profit from cattle feeding. In summary, level of income and choice of optimum ration both are quite sensitive to gains per day from the various rations. Gains even from a single ration can vary widely, as is evident from a comparison of feeding trials under dif- ferent conditions of weight, quality, length of feeding period, feed additives, climate, and other factors. Based on his own evaluation of the gains obtainable from the various rations, a feeder can use figures 1, 2, 3, and 4 as aids in selecting the most profitable ration and likely level of income. Effect of percentage shrink and final grade on income from various rations It was stated earlier that this report may tend to overevaluate the high rough- age rations because of the assumption of equal percentage shrink (3% per cent) and final grade (75 per cent choice : 25 per cent good) for all rations considered. The effects of alternative assumptions are now considered. The effect of added shrink is easily computed : for each additional 1 per cent shrink beyond the 3Vo per cent assump- tion, management income drops by $8,000-$9,000. Hence, significant dif- [31 Figure 4. Levels of Management Income Corresponding to Rates of Daily Gain for Each of Ten Rations. 2.0 2.5 Gain Per Day, Pounds 3. 5 Figure 5. Effect of Selling Grade on Management Income from Rations 1 to 10. Percent choice Percent good 100 30 40 50 60 70 80 90 100 70 60 50 Final Grade 40 30 20 JO [32 ferences in shrink could substantially change comparative profits. The effect of final grade on relative income from the various rations is more complex and is shown in figure 5. For example, suppose ration 1 (high concen- trate) produces 80 per cent choice and 20 per cent good (point A, figure 5) while ration 5 (high forage ration) pro- duces only 60 per cent choice and 40 per cent good (point B, figure 5) . Using the assumed price differential of $1.50 per hundred between good and choice grade, ration 1 would then be about $10,000 more profitable than ration 5, rather than being equivalent. Under these same assumptions, if conventional ration 3 produced an 80:20 ratio of choice :good cattle (point C, figure 5) it would be as profitable as ration 5. Greater differences in grade would have more drastic consequences on relative net in- come. For example, if cattle on ration 1 grade 80:20 per cent choice :good and on ration 5 grade 20:80 per cent choice: good, the difference in management in- come increases to about $30,000. These are only illustrative examples. As more information becomes available the cattle feeder can formulate his own judgments of relative grades. Of course, this com- parison will depend on grading standards used in the future and price differentials associated with grade. | 33 APPENDIX A: BASIC DATA Table A-l ALFALFA HAY: ESTIMATED ANNUAL VARIABLE PRODUCTION COSTS* Operation Hours per acre Laborf Fuel and repairs Materials Total dollars Stand establishment Plow Disc2x Disc and harrow 2 x Landplane Ridge and shape Harrow Pre-irrigateJ Harrow Plant Total stand establishment. Annual costs Irrigate 8 xf. Weed control. Fertilize Insect control 2x Mow6x Rake 6x Bale 6x Roadside 6 x (3 men). .67 .60 .67 .25 .67 .20 1.00 .20 .40 5.00 .10 .20 .20 1.80 2.40 1.14 1.50 1.00 .90 1.00 .38 1.00 .30 2.20 .30 .60 11.00 .15 .30 .30 2.70 3.60 1.71 6.75 Total annual costs Stand establishment prorated over 3-year life Total variable costs 3.32 1.38 1.57 1.10 1.47 .40 .40 .96 .11 .23 .22 2.43 3.34 2.58 2.51 water, 4 acre-inches = $.50 seed, 20 lbs = $7.00 water, 4 acre-ft = $6.00 weed control spray = $9.00 nitrogen, 10 lbs; phosphorus, 80 lbs = $10.00 Systox, 2 oz = $2.00 wire @ $.75/ton = $6.00 dollars 4.32 2.28 2.57 1 48 2.47 .70 2 70 .70 8.56 25.78 17.00 9.26 10.53 2.52 5.13 6.94 10.29 9.26 70.93 8.59 79.52 * Six cuttings, 8 ton per acre yield. Annual fixed costs not allocated to individual crops, but charged against entire farming operation. & t Labor @ $1.50 per hour. Irrigators @ $1.10 per hour. X Two irrigators. Source: Synthesized by authors from Farm Advisor cost studies and from costs on the study ranch. [34 Table A-2 ALFALFA HAYLAGE: ESTIMATED ANNUAL VARIABLE PRODUCTION COSTS* Operation Stand establishment Plow Disc2x Disc and harrow 2 x Landplane Ridge and shape Harrow Pre-irrigateJ Harrow Plant Total stand establishment. Annual cost Irrigate 8xJ. Weed control. Fertilize Insect control 2x Swath 7x Chop 7x Haul to silo and blow into silo Hours per acre .67 .60 .67 .25 .67 .20 1.00 .20 .40 5.00 .10 .20 .20 2.03 1.00 1.00 Laborf Fuel and repairs dollars 1.00 .90 1.00 .38 1.00 .30 2.20 .30 .60 11.00 .15 .30 .30 3.05 1.50 4.50 Total annual costs Stand establishment prorated over 3-year life Total variable costs. 3 32 1.38 1.57 1.10 1.47 .40 .40 .96 .11 .23 .22 2.75 6.35 2.35 Materials water, 4 acre-inches = $.50 seed, 20 lbs = $7.00 water, 4 acre-ft = $6.00 weed control spray = $9.00 nitrogen, 10 lbs; phosphorus, 80 lbs $10.00 Systox, 2 oz = $2.00 Total dollars 4.32 2.28 2.57 1.48 2.47 .70 2.70 .70 8.56 25.78 17.00 9 26 10.53 2.52 5.80 7.85 6.85 59.81 8.59 68.40 * 7 cuttings, 15 ton per acre yield. Annual fixed costs not allocated to individual crops, but charged against entire farming operation. t Labor @ $1.50 per hour. Irrigators @ $1.10 per hour. t 2 irrigators. Source: Same as table A-l. [35 Table A-3 BARLEY: ESTIMATED ANNUAL VARIABLE PRODUCTION COSTS* Operation Hours per acre Laborf Fuel and repairs Materials Total .67 .9 .2 .4 .2 .1 .2 dollars 100 lbs seed @ $3.00/cwt = $3.00 weed control spray = $0.55 contract @ $5.00/acre plus $.25/cwt = $12.50 dollars Plow 1.00 1.35 .30 .60 .30 .15 .30 3.32 2.07 .40 .96 .40 .11 .29 4.32 Disc 3x 3.42 Harrow .70 Plant 4.56 Harrow .70 Weed spray .81 Combine Haul \ 12.50 .59 Blow into silo/ 27.60 * 30 cwt per acre yield. Annual fixed costs not allocated to individual crops, but charged against entire farming operation, t Labor @ $1.50 per hour. Irrigators @ $1.10 per hour. Source: Same as table A-l. Table A-4 PINK BEANS: ESTIMATED ANNUAL VARIABLE PRODUCTION COSTS* Operation Hours per acre Laborf Fuel and repairs Materials Total dollars dollars Plow Disc2x Harrow List Pre-irrigate Disc W/harrow 2x Plant Cultivate 3x Irrigate 6x Hoe Pest control Cut Rake Thresh Haul Clean-store-sack Total variable costs .67 .6 .2 .3 1.0 1.33 .3 .9 3.0 1.00 .90 .30 .45 2.20 2.00 .45 1.35 6.60 4.32 2.28 .70 .81 water, 4 acre-inches @ $1.50/acre ft = $.50 2.70 5.14 seed, 50 lbs @ 100/lb = $5.00 5.80 2.65 water, 2 acre-ft = $3.00 9.60 contract @ $7.50/acre 7.50 5.00 contract @ $2.00/acre 2.00 contract @ $2.00/acre 2 00 contract @ $1.00/cwt = $20.00/acre 20.00 2.00 $.65/cwt 13.50 86.00 * 20 cwt per acre yield. Annual fixed costs not allocated to individual crops, but charged against entire farming operation t Labor @ $1.50 per hour. Irrigators @ $1.10 per hour. Source: Same as table A-l. [36] Table A-5 CORN FOR GRAIN: ESTIMATED ANNUAL VARIABLE PRODUCTION COSTS" Operation Hours per acre Laborf Fuel and repairs Materials Total .67 2.00 .25 .20 .30 4.00 .90 .30 dollars nitrogen, 150 lbs plus application $15.00 plus $1.25 seed, 14 lbs = $3.50 water, 3 acre-ft = $4.50 contract = $15.00 dollars Plow 1.00 3.00 .38 .30 .45 8.80 1.35 .45 3.32 4.71 1.10 .40 .38 1.30 .36 4 32 Disc with harrow 3 x Landplane 7 71 1 48 Fertilize Harrow 16.25 70 Plant Irrigate 8x 4.33 13.30 Cultivate 3x Combine Haul and blow into silo 2.65 15.00 .81 Total variable costs 66.55 * 55 cwt per acre yield. Annual fixed costs not allocated to individual crops, but charged against entire farming operation, t Labor @ $1.50 per hour. Irrigators at $1.10 per hour. Source: Same as table A-l. Table A-6 CORN FOR SILAGE: ESTIMATED ANNUAL VARIABLE PRODUCTION COSTS* Operation Hours per acre .67 2.00 .25 .20 .30 4.00 .90 1.65 1.65 Laborf Fuel and repairs Materials Total dollars Plow Disc with harrow 3 x . . Landplane Fertilize Harrow Plant Irrigate 8x Cultivate 3x Chop Haul and blow into silo. Total variable costs 1.00 3.00 .38 .30 .45 8.80 1.35 2.48 7.44 3.32 4.71 1.10 .40 .38 1.30 10.40 4.19 nitrogen, 150 lbs plus application $15.00 plus $1.25 seed, 14 lbs = $3.50 water, 3 acre-ft = $4.50 dollars 4 32 7.71 1.48 16.25 .70 4.33 13.30 2.65 12.88 11.63 75 25 * 25 tons per acre yield. Annual fixed costs not allocated to individual crops, but charged against entire farming opreation. t Labor @ $1.50 per hour. Irrigators Qi, $1.10 per hour. Source: Same as table A-l. [37 Table A-7 MILO: ESTIMATED ANNUAL VARIABLE PRODUCTION COSTS' Operation Hours per acre Labort Fuel and repairs Materials Total .67 .90 .25 .20 .20 .30 .90 2.50 .20 dollars 100 lbs of nitrogen at $.10 = $10.00 12 lbs of seed at $.20 = $2.40 water, 2 acre-ft = $3.00 dollars Plow 1.00 1.35 .38 .30 .30 .45 1.35 5.50 .30 3 32 2 07 1 10 .23 .40 .38 1 30 .29 4.32 Disc 3 X 3.42 Landplane 1.48 Fertilize 10.53 Harrow .70 Plant 3.23 Cultivate 3 x 2.65 Irrigate 5x 8.50 Combine 10.00 Haul and blow into silo .59 Total variable costs 45.42 * 55 cwt per acre yield. Annual fixed costs not allocated to individual crops, but charged against entire farming operation, t Labor @ $1.50 per hour. Irrigators ® $1.10 per hour. Source: Same as table A-l Table A-8 OATS-VETCH HAYLAGE: ESTIMATED ANNUAL VARIABLE PRODUCTION COSTS* Operation Plow Disc2x Disc with harrow. Plant Fertilize Swath Chop Haul and blow into silo. Total variable costs. Hours per acre 67 60 33 40 20 66 40 .25 Laborf Fuel and repairs dollars 1.00 .90 .50 .60 .30 1.00 .60 1.12 3.32 1.38 .79 .96 .23 1.10 2.52 .60 Materials seed, 80 lbs = $4.00 nitrogen, 50 lbs; phosphorus at $.10 $8.00 Total dollars 4.32 2.28 1.29 5.56 8.53 2.10 3.12 1.72 28.92 ! iSHSSMmSSt Ann . Ua -' fi ? ed ^ s l s i 1# all0 E ated t0 indiv 'dual crops, but charged against entire farming operation, t Labor @ $1.50 per hour. Irrigators @ $1.10 per hour. Source: Same as table A-l. [38] Table A-9 RICE: ESTIMATED ANNUAL VARIABLE PRODUCTION COSTS* Operation Hours per acre Laborf Fuel and repairs Materials Tota dollars dollars Plow Disc2x Landplane2x Survey Check Plow Disc Fertilize Flood Plant Spray 2x Irrigate Drain and open checks. Combine Bankout Haul Dry Total variable costs 50 10 $.60 90 lbs of nitrogen = $9.00, application = $3.00 150 lbs of seed = $12.00, application = $1.50 spray = $3.50, application water at $11.00 $15.00 $2.00 per ton $2.00 per ton $.35 per cwt $2.50 4.32 2.28 2.96 .60 1 46 4 32 1 14 12.00 1.10 13.50 6 00 15.40 .22 15.00 5.50 5.50 19.25 110.55 * 55 cwt per acre yield. Annual fixed costs not allocated to individual crops, but charged against entire farming operation t Labor @ $1.50 per hour. Irrigators % $1.10 per hour. Source: Same as table A-i. Table A-10 SAFFLOWER: ESTIMATED ANNUAL VARIABLE PRODUCTION COSTS* Operation Hours | per acre bort Fuel and repairs Materials Total dollars 50 lbs of nitrogen = $5.00 45 lbs of seed at $.10 = $4.50 $4.00 per ton dollars Plow 67 1 00 90 50 30 60 3.32 1 38 .79 .29 .96 4.32 Disc 2 X 60 33 20 40 2 28 Disc and harrow 1 29 Fertilize 5 59 Plant 6 06 Combine 15 00 Haul to mill 4.40 Total variable costs 38 94 * 22 cwt per acre yield. Annual fixed costs not allocated to individual crops, but charged against entire farming operation, t Labor @ $1.50 per hour. Irrigators @ $1.10 per hour. Source: Same as table A-l. [39 ^ £ E ^s- co CD OO oo LO r-~ CO • LO LO 00 ,y, QOE co CD oo CO LO • cm oo to OO cn cn oo r-» oo r^ • cm CO ini ve: ila itic , J cf .— r crT »-<* CNj' ■*3- ,_i • CO* LO U_— en ™ ej CO CNJ oo oo r*. OO CNJ ^-l r-~ oo "<*• 1 |o <2 ^f ^d- CD 1 «=*■ LO ■ CD CNJ ■ oo CD CO cd en cm CO • LO r~- • cn oo = . E E-o o CO CO CD 1 ^ I — ■ LO CO ■ ^i- ^3" *= E'-K i— r oj oo CNj' • «s»-~ Cxi ! co" co' Q-o 2 CO CO CO CNJ oo • CNJ .— 1 O <-> oo 1 cm ' co CO CD 1 co cr> LO CO • ^J- CD CO • co 1 5^! E *d- CO OT cn oo OO CD OO CO ^ ■ oo o •2o en OO en LO LO OO OO ^^ CNJ • CNJ OO | co rt oo LO LO r-» oo CNJ cm LO ^a- • OO •^r CC LO CNl 1 oo *a- oo OO r~~ 1 oo cm 4j) CNJ co CO co cn LO CO ■ ^ O CD CO "*3- CO cz> cn CD CD OO CO t-i oo CD o en .— H CNJ «=J- OO OO <— 1 CNJ • CNJ OO ■^z<n CO oo LO -3" CNJ CO CNJ cm co ^3- oo ^T OS LO co ^i- CO OO r~. oo cm co CD CO LO LO CO • «* O CO CO CNJ ■*3- co oo "*r i — CD oo co i—< • oo CO o OO co cm cm OO OO <— 1 CNJ ■ CNJ OO 4=00 CO oo CO 'Tf ■«3- CNJ cm" lo~ ^ • oo" 'O- OS LO CNJ oo ^j- CNJ oo r-- E O oo cm 1 ■*r co CD CN CNJ LO • r-~ oo • LO LO '* CO E CD CD CNJ co LO • em OO o CO oo cm oc i-- oo r-~ • cm OO *3r~- E CO CD .— i CD CNJ CNJ ^3- CO LO 0) OS CO CNl OO CO ^1- oo CNl r-- <5 OO cm ffc LO LO OO oo LO • 1 — • "«d- • CNJ OO E oo OO CNJ LO CO CO co • CNJ oo o <o CD LO LO CO CD • CD oo en ■SU) en CO _eo r^. 1 LO CN. CNJ LO • r~ LO en OS LO LO LO oo CNJ r-- 4 B "5 oo cm CO a. T3 E ** co CD r-~ CO LO r-~ oo • LT LO E co CD .— 1 CO r-~- co LO • cr OO « eo O CO OO cm — i co 1 — oo r~~ cm oo u_ '^ m co CD i—i oo co CNJ «=1- cc LO OS CO CNJ OO LO ** oo CNJ r-- OO cm LO CD LO CNJ r-~ CD OO • CD CO 1 "*" E oo LO oo oo CD OO CO CNJ ' — O LO r-~ oo co oo LO r-~ LO •J«* co CT> .—i ^r LO CNJ LO LO ^r f~~~ as LO cn OO 1 — LO oo CNJ 1 r-~ OO cm ' -si- O ^t- r-» , r-~ CD • CD CNJ cm E CD o CD CO r«~ cm oo CO CNJ CD O CD r~». 1 — 1 — . «* CO ,— ! CO CO IE CO co LO oo OO LO cm oo cm LO oo CO or CO CNl cm co cm oo r-~ cm cm *< «=t- CD «3- oo l_H LO OO • CNJ CO CNJ LO CO OO CD ■*d- CD CNJ cm r— 1 ^3- E oo CN .— i ^f LO oo cm oo .— < CsJ i O •• '^3 CM LO CNj OO OO CO oo CO OO CO LO co CO ^r CD CD oo CNJ OS .— i cm c ■- , ■*3- "3- CNj CD OO LO OO • «3- .— 1 oo LO ""=3- ^H O CD LO OO CO CD E oo oc CN, cm •* or oo ■*3- »-H — • 4 o LO oc "Ctf oo oo r-~ oo LO cm i — LO~ CO CO ^ .— t co CNJ oo CNJ r — OS —i cn CD -i •*r c: cc C CD CD LO CD ■ CD .— 1 CO |&! LO cv cc C «=s- *=t CD cm CO oo oo oo cr cr cm en oo <=> .— 1 LO CO o £.2 LO LT cd CNJ CNl oo oo lo cm CO CO (TV- OO oo OO oo r-~ T ~ ' 1 ^H en E '. 0- < 3 D • .5 1 ■a c co S' •% "cc S3 o > • > • cc . JC ' «t> r- > <T J "o O co co • 2? t o c -C *■" # x: .c TO •£ o o 3 © 2 £.1 o ce o < 3 > . a J "Z . cc CC c i 2 CD a '_ c ■s "Z. CO > CO a J o oc o ro to >, "co "to "T o S= 2= co •= < < CO ^ Corn . . Corn sil i j & > (9 o O r-i r-H CD LO CO CD CD r-H CD LO «=J- po cm csj m CO o ^3" CO co CO CD CD o cd CD cd CsJ to CD CD lO rs CD CO CSI LO CsJ CD CD CSJ CO to CSJ oo LO rs to CxJ en CSJ LO LO '- ' r*» CO is cd cn CO oo CSI CD CO co CD tO CD 1 — CD rs cn LO CD CD •*3- oo CD IS ■ rs co co CSJ CD CO .—i CD CD CD CD CD CD CD is CD is cd to CD LO is cn CO to to oo LO CSI to to OO LO CSJ LO rs to •<3- oo LO CD rs "3- LO CSJ LO oo cn CSJ to CO LO CO to rs LO LO — • CO CSJ CO rs LO ■=3- ■*3" oo CSJ to CO co CSJ OO cn cd lo ^r CSJ LO lo lo .— < co co rs LO r-l is ^ to LO CD tO CD 1 — CD rs en LO CD CD to to CSJ LO OO CD CD r— i 1 LO CD CD CD CD CD OO O O rH CD CD tO CD LO cn CO rs CD OO oo oo CD to to "<3- CSI CO LO rs to "<3- cn CD rs LO CSJ LO CD cn is CO oo to CO to rs LO LO i— I CO CSJ CO is LO Csl CSI oo CSJ co cn CO co cn CD tO CD I — CD Is CD CD CD CD CD CD CD CD CD OO CO CD LO rs en CO CD OO ^3- oo cn to to ^3- is LO LO rs to CO oo LO LO '—' CO CSJ CO ^ LO co CSJ oo CSJ OO cn co co ««3- to CD CD CD CO r— 1 is cn is lo CD CD ^3" • CD ■**■ ■ CD LO • CD cn CD CO Csl LO is lo CD CD CD CD CD CD CD CD CD LO to CD LO 1 — cn CO co oo co Csj CO to to -=3- to LO oo LO is to CSJ oo CD "=3- LO rs csj LO - LO oo • CO cn lo cn is to r — LO LO —* CO CSJ CO rs LO CSJ oo CSJ CSJ cn co co CD LO CD CO r-H CD rs cn CD 1 — LO CO CD ■*3" -=3- LO cn "=J- Csl to LO r— i CO CO CO CD CD CD CD CD CD CD CO LO CO CD LO rs cn CO *3" LO OO to to to to •si- CD LO 1 — to cn LO O is. CM "^3" LO LO OO oo oo CO CD LO CSJ to r — LO LO r ~ i CO Csl CO l *" LO "■=3- 1 — CO OO CSJ CD CO CO co LO r — co to co rs CO ls cn LO CD CD ■*3" CD CD ■ ** • LO • cn co to CNJ LO ^J" CSJ CD CD CD CD CD CD CD CD CD <? O Ol LO LO CO (D is ^t co oo rs rs cr> to to "=3- LO LO IS to to co oo co rs ■<3- LO CSJ LO CD • oo LO r— 1 is lo to rs LO LO "~* co co i — CSJ LO CSJ -=3- oo CSJ *3- co co CD OO co to to O N CD O is. CM CO CD LO IS OO CO CD • rs .—i cn CD LO CD CD CD CD CD CD CO CO LO rs CD tO LO 1— 1 rs csj oo CO oo CD oo CO CSJ CSJ "=3- rs CSJ cn CO CD LO co O IS <* ■*3- LO LO CO to LO to CO r—i cn rs rs LO CO 1—1 CO CSJ co to CSJ LO OO CO CO CSJ oo oo cn CSJ cn LO CD CO CD 1 — CD is CO CD tO CD csj ^r cn CSI CSJ • CO • *3- • CSJ r-H CD r— 1 CSJ cn lo CO CO CO CO CD CD CO CO r— 1 CD CO OO LO r— 1 to rs csj CO oo oo to oo CO CSJ CO co CD CSJ cn CO oo CO LO CD is *=3" LO «3- LO to CSJ • to to cn to «=3- CSJ rs oo LO CO ■— ' co co to CSJ CSJ LO CO CSJ CD CSJ en cn cn CSJ CO 1 — CD co CO CD cn CD ,__, co CO CD CO CO o to LO CO oo LO CSI CO CD IS CO CD LO CO CO «ef CO C ~> CO CO LO co to CO Csl CD CO CD (S CSJ *3" rs CO CSJ ^r CO CD ►—< CO rs CSJ rs co CSJ CO rs CD rs •*3- LO CD ,_, en "=3- LO CO ,_, CO CO to CSJ cn CD CD CD CD ^r co oo to «3- Csl LO CSJ cn CSJ to rs oo CD CO to CO CSJ ■<3- oo to CO CD to m o to ,__, ,_^ CO ,__, CO oo CD IS CO CO rs rs oo CD CO CD CO CSI LO rs CD CO «=a- CD LO co CD rs CSI •«3- CO LO CO CO CD CO rs en ■*3- to CD LO LO CO CD r^. «* LO LO _ «* CD LO en _, CO LO oo CD CD CO oo ** oo co rs ■^3- CSI •*3- CSJ CSJ oo rs oo CO CD CO CO to • to co Csj LO to oo oo to to CD to to CD CD CD oo to co LO LO ■ CSI -3- CSJ *3- m CSJ co co CSJ CD - s I = « " CO C3. s, -c, ocjct — o> o co • — o CO & SB a. i— u_ 03 co o !_ cd a> c= ,- o > Q. o ™ "S - ° x E — = = B O o ^ " l CO '—1 Q£ _ Q_ co «S O 8 » z a z I i o E mm 0> E S o ™ > qj o Q- a $? = « -r, « Q..E o o a> ♦; 3 mo -C o *- *" ro 00— C CL = qj c <u o = S £ E 5 c Q.^ — °°.Eci& ^«^^ E u — P, >> o = co - c <S i_ X! o a> (j APPENDIX B: OPTIMUM PLAN USING SILAGE RATIONS TO CARRY CALVES TO FINISH WEIGHT In this program, summarized in table B-l, calves are purchased at 350 pounds and fed for six months (176 days) on a daily ration consisting of 16.0 pounds of alfalfa haylage, 4.0 pounds of oats-vetch haylage, and 1.0 pounds of barley. 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