Wednesday July 05 Ag News

How High is Too High to Pay for Cow Replacements in 2023?
Elliott Dennis, Extension Livestock Economist, University of Nebraska - Lincoln

Cattle prices are up. There's no doubt about that. For example, Nebraska feeder cattle prices have risen significantly over the last four months. Nominally prices are at or higher than where we were in the 2013 to 2015 cycle. June 2023 average monthly prices for 500-600 lb. steers were approximately $300 per cwt. The November Feeder Cattle contract at the CME stubbled down through June as the corn market rallied but has since recovered and broken previous price resistance levels into $252/cwt. But as summer begins to come to an end, producers will soon begin to make decisions about early weaning and cow sell/retention. Producers looking to buy cows in 2023 need to know how high is too high or in other words, what must go right to pay back the full cost of that cow.

How much should I pay for a heifer this fall?
The answer…It depends. Typical, answer from an economist, right?

So, what does it depend on?
It requires producers to make expectations about current and future market conditions. These market conditions generally include animal productivity, calf prices, inflation, cow inventories, weather events, etc. all of which contribute to the value of a replacement cow. Ultimately, these factors combine to produce a single breakeven value but for simplicity, let’s take each factor separately to see how movement in either direction affects the value we are willing to pay for a cow today.
-         Productive life: Each cow has a useful or productive life – some are long, and some are short. The longer she lives, the more value she has. This productive life has a direct tie to the cull rates of the whole herd. While cull rates vary by year and age of cows, they may be used as a rough measure of average cow life. If a rancher has an average annual cull rate of 16%, on average a cow lasts 6.25 years in that herd (100/16=6.25).
-         Cow Productivity: This is separate from the productive life of a cow and is typically measured in terms of the weaning weight of calves. The size and number of calves weaned and sold per cow exposed to a bull will alter this value considerably. Heavier weaning weights imply more income generated per cow and thus one can pay for replacements.
-         Cow costs: If weaning weights were all that mattered, we would raise extremely large cows. But large cows tend to cost more and have larger maintenance costs. What it costs (what it truly costs) to run a cow impacts the value. The higher the cost, the less one can afford to pay for replacements.
-         Salvage value: If the expected salvage or cull value is expected to increase over time then, what one can afford to pay increases. In the past, these values have been fairly low but in the past few years have been much higher.
-         Calf prices: If cattle prices over the productivity life of the cow are expected to be high (or higher) on average, then what one can pay for replacements increases. Understanding the cattle cycle dynamics here is important.
-         Interest rates: Higher feeder cattle interest rates imply more expensive borrowing costs and thus less one can pay for replacements. Over the past 15 years, interest rates have been declining but in the last 6 months, they have jumped significantly – from about 5.5% to 8.2%. If you are not borrowing money then you can pay a lot more for replacements.

What tools can I use to calculate this value?
Gathering, compiling, formatting, and estimating all these factors into one estimate is cumbersome. Thankfully there are several free and accessible tools out there. The two I highlight are the 2023 Heifer Replacement Values (UNL) and 2023 Heifer Replacement Values (KSU). The primary difference between these tools is the assumptions/data used in the calculations and how flexible one wants to be in modifying the assumptions. The UNL estimates are based on the Food and Agricultural Policy Research Institute at the University of Missouri (FAPRI-MU) projections for cattle value, as well as the cost of production and related data from UNL’s Gudmundsen Sandhills Laboratory. They are calculated based on a simulation model. Alternative scenarios are provided but one cannot adjust the models underlying assumptions. KSU estimates are largely based on USDA-ERS ten-year projections, are static (i.e. produce one value rather than a distribution of values), and the user can modify most assumptions.

A word of caution. Most tools use a representative operation that does not reflect an individual producer but rather an average over many producers. There is no expectation that the cost and production assumptions reflect exactly a particular producer. Forecasts, such as the two tools mentioned, are intended to help individuals create a reference point for individual situations and expectations of future events. Producers can use these, other information, and their own ideas to arrive at what a reasonable value might be for a heifer/cow purchased or retained for replacement.

Example Calculations
Total net return from calves is simply the total revenue from calf sales, minus the total cost of producing those calves. Net revenue per calf is the total net revenue from calves, divided by the number of calves over the productive life of that cow. For example, $100,000 of total costs, divided by 100 calves, equals a cost of $1,000/hd. For every cow that weaned a calf, it cost $1,000/hd. If the average calf weighs 550 lb. and brings $2.50/lb., the expected revenue from calves is $1,375/hd. (2.50 x 550). The difference is $375/hd. net return (1,375-1,000). Assume we have an average herd culling rate of 16%. Thus, on average a cow lasts 6.25 years in that herd (100/16=6.25). Thus, if these conditions are what is expected for the next 6.25 years, then the net return per cow that weaned a calf is $375/hd. Over the life of a newly bought or raised cow replacement for this herd, it is estimated that the average cow replacement will have a net return of ~ $2,344/hd. (i.e. 375* 6.25 yr.). These calculations assume no borrowed money (i.e. interest rate = 0%). This represents the most we should be willing to pay for that replacement.

Drought Conditions on the Mind
Pasture conditions have been on many producers' minds this summer in the Midwest, particularly in Nebraska and Kansas. Lack of rain has hampered pasture conditions but more recent rains have provided some relief allowing both corn and hay fields to improve considerably. The concern is that decreasing pasture and higher feed costs would continue to cause cow liquidation. Putting that into our example of “what can I pay for a replacement cow?” indicates that if cow harvest continues due to drought, it could continue to pull up calf prices and thus we could pay more for a replacement cow. However, it could also increase costs to raise cows in drought-affected areas. Beef cow slaughter has regulated over highs in 2022 towards the 5-year average even though drought has continued in some areas. So, the likelihood of drought impacting future cull rates and cow replacement cows appears low.



GRAZING WITH THE WEATHER
– Ben Beckman, NE Extension Educator

Precipitation and temperature play major roles in pasture productivity, and knowing how to adjust grazing to match current conditions is key.  Are you shifting your management to meet pasture conditions?

Stocking and grazing management are not static things.  When production is limited, especially during a drought period, stretching forage resources is a high priority.  By this point in the year, our pastures have produced the vast majority of forage that we will get.  Using temporary electric fence to cross fence can increase utilization, slowing down a grazing rotation and stretching forage considerably.

This is especially true when plants become dormant due to lack of precipitation or heat.  Typically, utilization seeks to balance animal demand and plant health, but taking more of a dormant plant without damaging the crown has little impact on overall plant health.

On the flip side, grass that is getting tall and lanky, ahead of a grazing rotation, could benefit from flash grazing.  Moving animals on and off quick can help keep plants from getting over mature. Keep up this fast pace while growth is rapid.  Once growth slows, then the rotation can slow down as well.

Speeding up grazing when things are wet and slowing down during dry times is a good rule of thumb to use as we adjust to the weather Mother Nature throws our way.  Doing so can help you find the perfect balance for your pasture and animal health.

 

GRASSHOPPER MANAGEMENT
– Samantha Daniel, NE Extension Educator

Last year’s drought conditions and results from adult grasshopper surveys indicated the potential for grasshopper outbreaks this year, however, precipitation and temperature can impact the severity of outbreaks. Keeping an eye on fields this summer can help mitigate economic loss from grasshopper feeding.

Because grasshoppers tend to thrive in dry, hot conditions while outbreaks can be severely limited by cool, wet spring weather, producers in eastern Nebraska might see an increase in outbreaks this summer, while western Nebraska grasshopper populations may be reduced. It is still recommended that producers throughout the state scout their fields and select proper treatment protocols when needed.

One of the best ways to scout for grasshoppers is to use the square foot method. Randomly select an area several feet away and visualize a one square-foot area around that spot. Walk toward this spot and count the number of grasshoppers you see in or jumping out of this area. Repeat this procedure 18 times and divide the total number of grasshoppers by two. This will give you the number of grasshoppers per square yard. Economic thresholds for grasshoppers range from 8 to 40 grasshoppers per square yard, depending on a variety of factors. Keep in mind that control is easiest before grasshoppers reach the adult stage.

Grasshoppers may be controlled by applying insecticides as sprays or baits. The insecticides currently registered for use on rangeland are dimilin, malathion, and carbaryl. Rates for these products are listed on the labels. If larger grasshoppers are targeted, the higher-labeled rates should be used. Other insecticides are labeled for control of grasshoppers in forages, grasses, alfalfa, and other crops.



Raw Milk Webinar Scheduled For July 12 Canceled

The webinar program to supply information concerning producing raw milk for human consumption scheduled for July 12 has been canceled due to low registration.

Please discontinue the use of the previous news release titled, “It Will Be Legal to Sell Raw Milk in Iowa on July 1; What Do Producers Need to consider?”

The Dairy Team encourages potential producers to call them directly for assistance or contact other professional organizations to get assistance in developing safe protocols and best management practices for their dairies.

For more information, contact the ISU Extension and Outreach Dairy Field Specialist in your area: in Northwest Iowa, Fred M. Hall, 712-737-4230 or fredhall@iastate.edu; in Northeast Iowa, Jennifer Bentley, 563-382-2949 or jbentley@iastate.edu; in East Central Iowa, Larry Tranel, 563-583-6496 or tranel@iastate.edu.



EPA Region 7 Extends Call for Abstracts Deadline for Anaerobic Digestion on the Farm Conference  

The U.S. Environmental Protection Agency (EPA) Region 7, Iowa State University, and the University of Iowa have extended the deadline to submit abstracts for their upcoming Anaerobic Digestion on the Farm Conference to July 21, 2023.

EPA and the universities invite experts interested in speaking at the conference to submit presentation proposals via a Call for Abstracts. Abstracts discussing a broad spectrum of anaerobic digestion topics are welcome; presenters may submit abstracts for presentations, demonstrations, panels, and posters. Sessions may be designated for beginner, intermediate, or advanced audiences. Information on submitting an abstract is available at the link above and on EPA’s conference webpage.

EPA and the universities will host the conference, titled “Anaerobic Digestion on the Farm: Optimizing environmental and economic outcomes for rural communities and beyond,” on Nov. 6-8, 2023, at the Scheman Building at the Iowa State Center in Ames, Iowa.

In addition to presentations, exhibits, panel sessions, and virtual tours of anaerobic digestion facilities, the conference will feature several keynote speakers, including Rudi Roeslein and Marcelo Mena-Carrasco. Additional information regarding the upcoming conference is available on EPA’s conference webpage https://www.epa.gov/ia/forms/anaerobic-digestion-farm-conference.



Register now for 2023 CHS owners forums

Registration is open for a series of forums for CHS owners at 10 cities across the U.S. A virtual forum will also be available for real-time participation by owners.

At the forums, owners will hear business updates and a financial report from CHS leaders, then engage in discussion about equity management with members of the CHS Board of Directors. There will be ample time for owners to ask questions and provide feedback.

Each forum will run from 9:00 a.m. to noon local time, concluding with lunch. The following forums are planned:
    July 20: Bemidji, Minn.
    July 24: Bismarck, N.D.
    July 27: Indianapolis, Ind.
    July 31: Madison, Wis.
    Aug. 3: Laurel, Mont.
    Aug. 4: Richland, Wash.
    Aug. 8: McPherson, Kan.
    Aug. 10: Ames, Iowa
    Aug. 11: New Ulm, Minn.
    Aug. 11: Virtual forum
    Aug. 24: Mitchell, S.D.

Register today to reserve your place at https://www.chsinc.com/owner-events. Virtual attendees will receive a link to the Aug. 11 virtual forum in early August.



Biofuel, Farm, Fuel Marketer Groups Urge Fairness in Tailpipe Emissions Standards

America’s farmers, fuel marketers and retailers, and renewable fuel producers today called on the U.S. Environmental Protection Agency to adopt a market-oriented, technology-neutral approach to transportation decarbonization in its upcoming final tailpipe emissions standards for 2027-2032 light- and medium-duty vehicles.    

In a letter to EPA Administrator Michael Regan, seven national associations representing the full spectrum of the renewable fuel supply chain, said the proposed rule favors electric vehicles while failing to consider the decarbonization potential of existing biofuels that can improve the emissions profile of the vast majority of cars on the road today. The organizations recommend that EPA account for all emissions relating to different fuel and engine technologies and equitably incentivize emissions reductions from all of those technologies.

“EPA should use the best available science to accurately account for the full lifecycle carbon intensity associated with particular fuels and technologies, but its proposed approach ignores the significant upstream emissions from electricity generation associated with electric vehicles,” the groups said. “Incentives for alternative fuel technologies should be tied to those technologies’ full lifecycle environmental attributes rather than a single cherry-picked step in the lifecycle (i.e., tailpipe emissions).”

The associations support the agency’s goal of reducing over-the-road transportation emissions but are concerned that the agency’s proposed standards “artificially tilts the scale towards electric vehicles” while ignoring other available fuel and vehicle options that can help decarbonize the transportation sector more rapidly and at a lower cost. The groups also noted that “the proposed rule exceeds the scope of the Agency’s statutory authority, which does not include authority to set greenhouse gas emission standards that effectively mandate EVs.”

If finalized as proposed, EPA expects its tailpipe emissions standards could result in EVs accounting for 67% of new light-duty vehicle sales and 46% of new medium-duty vehicle sales by 2032. “The speed at which the Agency appears to anticipate the market and consumers will transition to electric vehicles is divorced from our members’ assessment of reality,” according to the letter. “The Proposed Rule does not appreciate the market obstacles associated with such a massive transition in consumer behavior. It also abandons proven decarbonization technologies, such as higher-octane liquid fuels, that can deliver material emissions reductions using existing infrastructure, existing vehicles, and working with consumers’ existing behavioral proclivities.”

The organizations submitting the letter include the Renewable Fuels Association; National Association of Convenience Stores; NATSO, Representing America’s Travel Plazas and Truckstops; National Corn Growers Association; National Farmers Union; SIGMA: America’s Leading Fuel Marketers; and Growth Energy.



CF Industries and CHS Inc. working on production and distribution of low-carbon nitrogen fertilizer

CF Industries, one of the world’s largest producers of nitrogen fertilizer, is working with CHS Inc., the nation’s leading agribusiness cooperative, to accelerate quantifiable and certifiable agriculture and food system greenhouse gas (GHG) emission reductions through the production and distribution of low-carbon nitrogen fertilizer. This initiative was developed as part of the U.S.-UAE’s Agriculture Innovation Mission for Climate (AIM for Climate) program that seeks to catalyze global innovation in climate-smart agriculture.

The manufacture of fertilizers, which are essential to crop yields, is a significant contributor to the lifecycle GHG footprint of global food production. For example, one study estimated that nitrogen fertilizer manufacturing accounts for about 30% of the lifecycle GHG emissions associated with the production of a loaf of bread.

To address the GHG footprint of food production, both companies will leverage CF Industries’ investments to produce ammonia, which is the building block of nitrogen-based fertilizer products, with lower Scope 1 carbon dioxide (CO2) emissions.

They will also leverage the extensive distribution network of CHS to place low- and zero-carbon fertilizers with growers. The companies expect to work together to promote the use of low-GHG nitrogen fertilizer to help farmers and crop end users, such as consumer product goods companies and ethanol producers, reduce the overall carbon footprint of agriculture.

“Decarbonized fertilizer is the future of how we sustainably supply and produce the goods that humanity needs,” says Bert Frost, senior vice president, sales, supply chain and market development, CF Industries. “The advantage of using decarbonized fertilizer is that we can measure the reduction in greenhouse gas emissions associated with its production and transfer that attribute to the farmer, who can then provide crops to their customers that have a quantifiably lower GHG footprint. This will enable us to develop a certifiable decarbonized agricultural value chain.”

“We recognize the importance of helping growers optimize resources as they produce food the world needs,” says Brian Schouvieller, senior vice president, commercial trade and risk management at CHS. “Nitrogen fertilizer is critical to plant growth; zero- or low-carbon fertilizer can be an important tool as we pursue solutions that help growers simultaneously achieve their crop production and sustainability goals.”

Since 2020, CF Industries has advanced industry-leading projects to decarbonize its ammonia production network and position the company to supply a substantial volume of clean ammonia within the next few years.

This includes leveraging carbon capture and sequestration (CCS) technologies at its Donaldsonville Complex, where CF Industries is constructing a CO2 dehydration and compression facility to enable the capture and permanent sequestration of up to 2 million tons of CO2 per year, which is expected to begin in 2025. Additionally, CF Industries is constructing North America’s first commercial-scale green ammonia capacity at its Donaldsonville Complex, enabling up to 20,000 tons of green ammonia production beginning in 2024.



Dykhuis and Thomas Join SHIC Board of Directors; Nugent, Schwartz and Bang elected officers

During the Swine Health Information Center board meeting on June 30, 2023, two new board members began their service. Joseph Dykhuis, a Michigan pork producer representing the National Pork Producers Council on the SHIC Board, and Pete Thomas, DVM, with Iowa Select Farms, in an at-large position, joined Kent Bang, Daryl Olsen, DVM, Russ Nugent, PhD, Gene Noem, Jeremy Pittman, DVM, Paul Ruen, DVM, and Mark Schwartz. Founding board members Howard Hill, DVM, retired industry veterinarian, pork producer, and NPPC representative, and Matthew Turner, DVM, head of live pork division, JBS, concluded their service.

An election of officers at the same meeting saw Nugent elected to serve as chair of the Board, replacing Olsen who filled the role since the Center’s inception in 2015. Schwartz will be vice chair and Bang will continue to serve as secretary/treasurer.

Dykhuis and Thomas
Dykhuis of Holland, Michigan, is president of Dykhuis Farms, Inc., a farrow-to-finish hog and row crop farm operating in Michigan and Indiana. He owns the enterprise along with his four sisters and his parents, Robert and Lorrie Dykhuis. Dykhuis earned a degree in agricultural economics from Purdue University and has served on serval committees and task forces for Pork Board, NPPC, and SHIC. He and his wife, Heather, have four children at home.

Thomas of Boone, Iowa, has served as director of health services for Iowa Select Farms for more than seven years. Prior to joining Iowa Select, he was in private practice for five years and with Smithfield for four years. Thomas earned a master of science in preventive medicine from Iowa State University and a doctor of veterinary medicine degree from there as well. He was raised on a 200-sow farrow-to-finish farm in eastern Iowa.

Hill and Turner
“I saw this as a great opportunity for our industry to be a little more nimble with our funding and communications,” explained Hill when asked why he agreed to serve on the SHIC Board of Directors. “When you look at our original mission statement, and changes we’ve made, we have done a good job of fulfilling it.”

Looking back over the last eight years, Hill sees a lot to be proud of. “We have had some great projects that helped answer a lot of questions. And it was not done it in a vacuum. While SHIC is a separate organization with its own budget, we work hand-in-hand with other industry organizations like AASV, Pork Board, and NPPC. We also partnered with USDA’s Foreign Ag Service for research being conducted in Vietnam as well as the Foundation for Food & Agriculture Research for our biosecurity program,” he commented.

SHIC’s focus has been on preparedness and prevention, in Hill’s view, along with anticipating what might be next. “I hope producers recognize the value SHIC has brought them. We always try to get information out in a timely manner and try to make sure people recognize the fact that though SHIC is separate, we are funded with Checkoff dollars,” he stated. “In fact, I hope producers recognize those Checkoff dollars come back to them in spades.”

Hill says serving on the SHIC Board of Directors has been a great experience. “I’ve learned a lot and worked with really talented people. It’s time for younger folks to take over,” he remarked. “I’m excited about Pete Thomas and Joe Dykhuis joining the board and know they will have a successful tenure with SHIC.”

“For me, joining the SHIC board was an opportunity to help craft the future of the swine industry, as we’ve been challenged with disease for decades, to improve the health status of the national swine herd as much as possible, and to make it more profitable for our producers,” Turner explained.

Working together, Turner says the SHIC board spends quite a bit of time focusing on nimbleness, creating the ability to quickly respond when needed. Because the needs of the future are not known today, it is essential to structure all elements of the Board’s work, including financial management, to enable response when needed. “We don’t feel compelled to spend money when there isn’t a need. That’s one of the best fiduciary things we do as an organization,” Turner stated.

Turner was a practitioner in 2013-2014 when porcine epidemic diarrhea virus struck the US pork industry. SHIC was borne out of that epidemic. “We didn’t know what was going on, weren’t aware, or connected. We were at risk and didn’t really know we were at risk,” he remembered. “With SHIC, awareness of disease issues around the world is communicated to producers and practitioners. We’re much more prepared today as a global participant because we know what’s going on around us.”

The SHIC Board of Directors includes veterinarians, producers, people with financial acumen, and researchers. “We are a blend of all those constituencies, which makes the Board incredibly strong,” Turner observed. “It has been an absolute pleasure to work with people who are incredibly bright. The perspectives of individuals from diverse backgrounds are valuable.”

“The most rewarding thing I’ve seen, serving on the Board the last eight years, is to see the impact of collaboration at an industry-wide level,” Turner commented. “When SHIC starts giving information out, sharing results from research conducted with SHIC funding, it changes behavior and the future of our pork industry. I’m proud to have been part of that.”

The Swine Health Information Center, launched in 2015 with Pork Checkoff funding, protects and enhances the health of the US swine herd by minimizing the impact of disease threats through preparedness, coordinated communications, global disease monitoring, analysis of swine health data, and targeted research investments. As a conduit of information and research, SHIC encourages sharing of its publications and research. Forward, reprint, and quote SHIC material freely.

For more information, visit http://www.swinehealth.org.  



UNITED SORGHUM CHECKOFF PROGRAM CELEBRATES 15 YEARS OF INNOVATION

Sorghum industry leaders are marking a milestone in the industry as July 1, 2023 marked the 15th anniversary of the United Sorghum Checkoff Program, the leading producer-funded organization championing the sorghum industry in the United States. Since its founding, the Sorghum Checkoff has dedicated its efforts to advancing sorghum profitability through innovative research, promotion and education.

"We've made significant strides in the past 15 years, and we're deeply committed to continuing to advance the crop for U.S. sorghum producers and end-users across the world," Sorghum Checkoff CEO Tim Lust said. “Our 13-member board of sorghum producers located across the U.S. has invested over $46 million into research aimed at optimizing sorghum as a robust, profitable crop for several value-added end-use markets. These strategic projects and collaborations in research, education and market development have been pivotal to the sorghum industry's success and are anticipated to stimulate further growth.”

Over the past decade-and-a-half, the Sorghum Checkoff has made significant strides, including funneling resources into cutting-edge research to advance production techniques. Key agronomic milestones include the introduction of the first-ever over-the-top weed and grass control in sorghum, the development of sugarcane aphid-tolerant hybrids and the potential to fast-track breeding methods due to the discovery of doubled haploid in sorghum.

The Sorghum Checkoff has also played a key role in expanding international markets, specifically in countries like China, and it has significantly boosted public awareness about the nutritional and environmental benefits, establishing sorghum as a versatile crop.

A recent return on investment study revealed the significant positive impact of expenditures towards promoting sorghum exports on the total export of sorghum. Between 2008 and 2021, an approximate investment of $44.5 million yielded an impressive return of $376.7 million, reflecting a robust return on investment ratio of 7 to 1. This study also highlighted the Sorghum Checkoff's investments in crop improvement activities, resulting in a noteworthy increase in sorghum production from 133.3 million to 166.8 million bushels during the same period.

"Sorghum is a crucial crop for the U.S., and it holds immense potential for growth and expansion," Sorghum Checkoff Executive Director Norma Ritz Johnson said. "Our work in the last 15 years has laid a strong foundation and promising future for the sorghum industry, and we are eager to continue that success as we amplify our mission to support and promote The Resource Conserving Crop™.”

With a clear focus on the future, the Sorghum Checkoff continues to place strong emphasis on expanding the demand for sorghum within premium markets. This objective will be pursued through the establishment of robust strategic partnerships, the implementation of compelling marketing campaigns and the provision of targeted technical assistance programs. These efforts aim to not only increase demand but to also have a tangible impact on acreage yields and allow for significant growth and progress in the sorghum industry.

Grounded in breakthrough nutritional research, the Sorghum Checkoff plans to promote the potential of sorghum as a healthy, versatile food source for consumers. Simultaneously, the growing pet food market presents a prime opportunity for introducing more sorghum-based products.

On the production side, the Sorghum Checkoff is dedicated to fostering innovative practices and technologies aimed at increasing sorghum yields. This commitment to enhancing productivity will play a crucial role in meeting the rising demand for sorghum. Moreover, the Sorghum Checkoff is actively promoting the utilization of sorghum in various industries, including aquaculture and dairy. By exploring and embracing new applications, the Sorghum Checkoff aims to unlock additional market opportunities and drive further growth within the sorghum industry.

For further insights into the accomplishments of the Sorghum Checkoff over the past 15 years, as well as its efforts to enhance the sorghum industry, please visit the following link: SorghumCheckoff.com/celebrating-15-years-of-innovation/.