bookkkeeping

[cswilson]

We run a fairly large ranching operation-with several different cattle profit centers-bred heifers,finished steers etc. We purchase all our feed and rent a substantial amount of pasture every year. All our calculations are based on the fair market value of feeds and pasture. We used to run a custom haying business so are very familiar with the costs of owning machinery. I find the argument that purchasing feed in a drought will ruin you to be quite humerous-after 10 straight years of below normal precipitation- I can safely say what will you is buying feed and making machinery payments at the same time. Face the facts people if feed is high priced its because there was none to make.

[rsomer]

cswilson: I am glad you got a chuckle out of the discussion on bookkeeping. You said "I find the argument that purchasing feed in a drought will ruin you to be quite humerous". I am pretty sure that last years drought was ruinous for some whose pockets were not as deep as yours appear to be. Since you purchase all your feed and a substantial amount of pasture it would seem that basing your calculations on the fair market value is quite appropriate for you. Obviously if you had no feed to put up last year you were going to have to out and buy it at high prices. Those beef producers who were able to put at least some of their own forage last year would have benefited however. I am curious how you see yourself coming through this fall and the upcoming year.

[rsomer]

cswilson: I was thinking about your remarks as I was fixing the swather. To comment further, I think you are confusing production cost and risk with market cost and market risk. To keep in context, in my original post I was replying to a comment made by jmillang that a producer in west central Alberta could consider purchasing his hay which would be expected to be in plentiful supply rather than own machinery to produce his own. This producer would be substituting his production cost for market cost if he had to go purchase his hay off farm. In the example it would be safe to assume that production risk was small, production cost would be stable from year to year. Market risk would be quite a bit higher than the production risk therefore more cash flow risk, for example hay prices in 2002. I stay with my comments that the producer in the example may be increasing his cash flow risk by purchasing hay rather than producing his own even if the cost per bale were slightly less. The amount of risk a producer can take will vary by how deep they can reach into their pockets. If you have had ten years of drought your production risk would be quite high, wouldn’t it. That risk can be reduced by purchasing forage insurance but that costs too. On our farm we manage our production risk partly by keeping large reserves of feed from year to year. I suppose someone will tell me I need to figure the opportunity cost of keeping that hay on hand but frankly my dear I don’t give a damn. By this spring the reserve was all gone but this years crop will start to build it up again. Production risk is not as wide spread of a problem this year, it is all market risk with the BSE crisis. I would still like to hear how you are making out and see the next year or so.

[countryguy]

Does anyone put a value on the nutrient value left behind from purchased hay?I have heard people say that in most years this value equals the cost of the hay.I feed on pasture year round and in a short time can really see my pastures improving.If I can fertilize my pastures and feed my cows with the same dollar I think it is a win win situation.

[cswilson]

country guy it is really hard to put a value on the manure left behind but it is considerable-we have the feed delivered to the paddock where it will be fed. There was probably twice as much grass in those paddocks-even seemed to be less hoppers there. As well it allows you to partially rest those pastures as cattle will not graze as close to the ground where it is well manured. We use those paddocks to turn out on the the following spring. RS I don't have deep pockets but I do makje my living totally from the cattle business-we can argue figures till the borfder opens but we came to the buying decision quite easily-our fuel,repairs,depreciation totalled more than the feed would of cost to buy. We doubled or cow numbers and grazed all our hay land-calve in may. I hear that there are people spending $700 plus to carry a cow - I find that well unbelievable.

[rsomer]

countryguy: See: http://www.aginfonet.com/aglibrary/content/grazing_pasture_technology/nov99_fertilizer.html
Fertilizer value of a 1200 pound Alfalfa Brome hay bale was $9.27 before being fed, $4.55 after being fed allowing for nutrient uptake by the animal and nutrient losses from the manure. It was felt a bale of hay might be worth $9.00 when value of organic matter was figured in. I calculated the fertilizer value of barley some years ago and if memory serves I think it was around $0.35 per bushel before being fed.

cswilson: Cows were unusually profitable for a number of years due to the loss of the Crow Rate and the readjustments caused by cheaper local feed grains. During this time the more cows you had the more money you made so doubling your cows by purchasing your feed needs was a great move. The pendulum may have swung the other way now. Its a different world since May 20. I find it real interesting to see how what works in one area doesn’t work in another or even between producers in the same area. Or how what worked for you last year doesn’t anymore.