To hold or sell breeding cattle in the rangelands

What do you need to know?

To make good decisions for their business, managers need to know:

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

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

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

Cost of metabolisable energy in feed

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

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

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

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

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

Therefore:

• Oats = [$450 x 10] ÷ 92 = 48 cents/kg DM
• Barley = [$356 x 10] ÷ 91 = 39 cents/kg DM
• Oaten hay = [$220 x 10] ÷ 90 = 24 cents/kg DM

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

Method:
[Cents/kg DM (from step 1) divided by MJ ME/kg DM] = cents/MJ ME

• Oats at 48c/kg DM = [48 ÷ 10.7] = 4.48 cents/MJ ME
• Barley at 39c/kg DM = [39 ÷ 11.9] = 3.27 cents/MJ ME
• Oaten hay at 24c/kg DM = [24 ÷ 8.5] = 2.82 cents/MJ ME

In the above example, Oaten hay – ripe seed ME is less expensive than oats and barley; that is, 2.82 versus 4.48 versus 3.27 cents per MJ of ME respectively. 

3.    Calculate the ration cost per breeder per day

Typically, a 450kg lactating cow requires 100–127 MJ ME/day. With a maximum dry matter intake of around 2.2% of liveweight (9.9kg) means there must be a minimum ME concentration in the diet of 10MJ/kg of DM to achieve the assumed minimum daily breeder requirements.

• Oats = [4.48 x 120] ÷ 100 = $5.37 per head per day 
• Barley = [3.27 x 120] ÷ 100 = $3.92 per head per day
• Oaten hay = [2.82 x 120] ÷ 100 = $3.38 per head per day

Don’t forget to include your estimate of the duration of drought (in days) and add freight as these may ultimately be the deciding factors.

Warning: Grain rations should be introduced slowly to avoid health complications; the above is only an example of ME costing not a recommended ration and does not allow for any nutritional value from the rangelands but could provide bulk. 

Note: The oaten hay and assumed nutritional value would fall marginally short of meeting the daily requirements of the assumed breeder requirements i.e., 94 MJ ME / day limited by the assumed maximum intake of 9.9 kg.

To hold or sell – a rational decision process

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

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

From the above calculations you can now establish an estimated total supplementary feed cost for the estimated duration of the drought, where:

• USV = unit (cow calf unit) sell value (net of associated selling costs)
• FV = feed value (including associated freight, labour over time and any other costs)
• RUV = replacement unit value (including all associated acquisition costs)
• PSV = progeny sale value (net of associated selling costs)

Adopting the following value assumptions:

• USV ~ to say $750, FV ~ $320 assumes feed ($242 + freight $50 +labour $18), RUV ~ $900 and PSV ~ $500
• Then the financial benefit/loss can be calculated as:
  • USV + FV – RUV- PSV = destock benefit
  • $750 + $320 – $900 – $500 = -$330 per unit
• That is, the sale value of the cow calf units, in addition to the value of feed and associated costs saved less the cost of replacement cow calf units and potential progeny sale proceeds.
  • PSV – FV = hold benefit
  • $900 – 320 = $580

Additional strategy consideration: rangeland condition

Are there areas of rangeland less grazed than the current areas and can sustain additional grazing pressure without causing losses in rangeland condition?  For example, the recommended grazable radius to a water point is in the range of 510 kms. If there are areas of rangeland that are outside of these radii then, - capital permitting – a consideration would be to establish temporary and/or permanent watering points in these areas. This will require the ability/investment to be able to cart water to these new points. 

This strategy reduces the demand for livestock to walk excessive distances to better grazing while also reducing the pressure on traditional water surrounds. Livestock can walk further than the 5-10 kms however any nutritional gain will generally not compensate for the additional energy requirement to walk the greater distances. 

An additional advantage of this strategy is that it allows the herd to be further dispersed across the rangelands to lower grazing pressure/density. Management of total grazing pressure (from all herbivores) is crucial to preserve (and improve) rangeland condition while providing feed for livestock.

In summary

• Always purchase feed on a MJ ME/kg DM basis and if not provided seek a feed test for composition of ME and CP.
• Calculate the financial benefit of the options available – once you are familiar with the equation you can add additional items if they are considered important and add weighting and/or discounting to certain values to allow for characteristics such as probability, stress, additional labour and/or equipment, etc.

For further information on calculating the costs and strategies for your individual circumstances contact Tony Della Bosca [1] on +61 (0)8 9780 6113.