Range / Livestock Economics
George Frisvold
Department of Agricultural & Resource Economics
University of Arizona
Cattle Cycle …
… shocks
have longlived
impacts
USDA Baseline
Beef Export Picture
Trade restrictions
Rebound depends on
opening Asian markets
Exports to Japan?
NAFTA Markets More
Integrated …
CATTLE IMPORTS FROM
CANADA AND MEXICO
Annual
Thou. Head
2000
1500
Mexico
1000
Canada
500
0
1979
1982
1985
1988
Livestock Marketing Information Center
1991
1994
1997
2000
2003
I-N-13
12/16/05
. . . But what
about safety,
inspection,
and trade
institutions?
www.RightRisk.org
Strategic Risk Management Process
RightRisk: Public Lands Scenario
Public Lands
The John Q. Public Ranch is a cow /calf/hay operation near the Arizona/Utah border. It is December 1st and they have 650 head of cow s that have been
preg checked and are assumed to be pregnant. The cow s run predominantly on public grazing land. Calves a
General Information
Crop Enterprise:
Hay
Crop acres:
Production costs per acre:
Initial inventory:
Livestock:
50 acres
$60
125 tons
Background Feeder Steers
Initial inventory:
150 head
Initial w eight:
650 lbs.
Percent death loss:
1.5%
Production costs per head:
$140
Cow s
Quantity:
Nonfeed production costs per unit:
Annual Hay Consumption per unit:
Replacement percentage:
Sale w eight per cull unit:
Public Grazing base:
650
$230
0.18
20%
1100
4770
Expected Revenues:
Units
Sales
Weaned Calf
468 head
Cow s
130 head
Yearlings
148 head
Government payment:
Annual total:
Revenue
$244,530
$64,350
$106,184
$0
$415,064
Normal annual yield per acre:
Initial market price:
Annual government payment:
2.5 tons
$80.00 per ton
$0
Output unit:
Output date:
Output w eight:
Initial output market price:
Yearlings
April 1
850 lbs.
$84.55 per cw t.
Output unit:
Weaning percentage:
Output w eight per unit:
Initial output market price:
Cull market price:
Private Grazing base:
Weaned Calf
92%
550 lbs.
$95.00 per cw t.
$45.00 per cw t.
2725 AUMs
Livestock Enterprise:
head
tons
lbs.
AUMs
Expected Expenses:
Hay
Cow s
Background Feeder Steers
Grazing expenses
Units
50 acres
650 head
150 head
7495 AUMs
Annual total:
Expense
$3,000
$149,500
$21,000
$119,929
$293,429
Exit
Start
EXPECTED ANNUAL RANCH CASH INCOME:
$121,635
EXPECTED 2-YEAR TOTAL NET INCOME:
$158,086
Decision-making & uncertainty
“ When we want something,
we always have to reckon
with probabilities.”
- Jean – Paul Sartre,
Existentialism, 1947
Probabilities enter into decisions
Period 1
Year 1: Dec. 1 - Apr. 1
Scenario: Public Lands
De c is io ns
Decision 1:
Buy(+) or Sell(-) Hay
Decision 2:
Forw ard Price (800-900 lb.) Yearlings
Decide
Decide
Commodity
Weaned Calf
Hay
Yearlings
Public Grazing
Private Grazing
Cash
Price
$95.00
$80.00
$84.55
Contract
Price
$88.11
Th e Bo o ks
Bank balance:
-$293,429
2,600
Price
+$20.00
+$10.00
-$5.00
-$20.00
Weaned Calf Impacts
Yield
-50
-25
+50
Hay Impacts
Probability
20%
65%
15%
Average
Contract
148
Hay Impacts
Probability
5%
15%
65%
15%
Expected Contracted
Feed Use
Quantity
117
4,770
2,725
Risk 2
Corn planting intentions
> 80 million acres
70-80 million acres
< 70 million acres
Expected
Harvest
468
125
Risk 1
Winter precip conditions
Extremely Dry Winter
Dry w inter
Normal w inter
Wet w inter
Current
Inventory
Price
-$5.00
+$5.00
+$10.00
Price Weaning %
-$15.00
-$5.00
+$5.00
-1.0%
Feed Impacts
Weight
View
+25
Weaned Calf Impacts
Yield
Price Weaning %
+$15.00
+$5.00
-$10.00
Hay Use P ublic A UM s P rivate A UM s
+182
+65
-477
-239
-125
-125
-117
+477
+273
Feed Impacts
Weight
Hay Use P ublic A UM s P rivate A UM s
Period 1
Dec. 1 - Apr. 1
Risk 1
Scenario: Public Lands
Hay Im pacts
Winter precip conditions
Extremely Dry Winter
Dry w inter
Normal w inter
Wet w inter
Risk 2
Corn planting intentions
> 80 m illion acres
70-80 million acres
< 70 million acres
Commodity
Weaned Calf
Hay
Yearlings
Public Grazing
Private Grazing
Results
Probability
5%
15%
65%
15%
Probability
20%
65%
15%
Cash
Price
$85.00
$105.00
$75.65
Contract
Price
Weaned Calf Information
Expected Weaning Pct.
Expected Weaning Wt.
Yearling Weight
Current
Inventory
Harvest
468
Price Weaning %
-$15.00
-$5.00
Feed Im pacts
Weight
-50
+$5.00
-1.00%
+25
Weaned Calf Impacts
Price Weaning %
Weight
+$15.00
+$5.00
-$10.00
Feed Use
Contracted
Quantity
Average
Contract
H a y Us e Pub li c A U M s Pr ivat e A U M s
+182
+65
-117
-477
-239
-125
-125
+477
Feed Impacts
+273
Hay Use P ublic A UM s P rivate A UM s
Th e Bo o ks
Bank balance:
-$311,699
299
148
4,293
148
2,600
Bank
Balance
Feed Usage
Harvest
Contract Delivery
Required purchase
Weaned Calf Im pacts
Price
Yield
+$20.00
-50
+$10.00
-25
-$5.00
-$20.00
+50
Hay Impacts
Price
Yield
-$5.00
+$5.00
+$10.00
+$37,446.75
-$595.00
92%
500
850
Hay
Inventory
-182
Yearlings
Inventory
Private Grazing
Inventory
-2,600
+148
-50
+7
Hay Information
Expected Hay Harvest
75
Next
Period 2
Year 1: Apr. 1 - Jul. 1
Scenario: Public Lands
De c is io ns
Decision 1:
Buy(+) or Sell(-) Cow /Calf pairs
Decision 2:
Leasing additional private range
Decision 3:
Forw ard Price (900-1000 lb.) Yearlings
Decide
Decide
Decide
Commodity
Weaned Calf
Hay
Yearlings
Public Grazing
Private Grazing
Cash
Price
$85.00
$105.00
$73.95
Contract
Price
4,293
Expected Contracted
Feed Use
Quantity
Average
Contract
Th e Bo o ks
Bank balance:
-$216,531
1,950
Weaned Calf Impacts
Hay Impacts
Probability
20%
65%
15%
Price
-$10.00
-$2.00
+$5.00
Yield
Probability
20%
50%
23%
7%
Price
-$7.00
-$2.00
+$5.00
+$10.00
Price
+$5.00
Weight
Yearling
Wt. Gain
Feed Impacts
Hay Use P ublic A UM s P rivate A UM S
-$10.00
Weaned Calf Impacts
Hay Impacts
Risk 2
Spring precipitation conditions
Excellent
Normal
Poor
Very poor
Expected
Harvest
468
$73.21
Risk 1
Corn crop condition report
Excellent crop conditions
Normal crop conditions
Poor crop conditions
Current
Inventory
Yield
+25
-10
-25
Price
+$5.00
+$1.00
-$5.00
-$10.00
Weight
+5
-5
-10
Yearling
Wt. Gain
+140
+130
+125
+120
Feed Impacts
Hay Use P ublic A UM s P rivate A UM S
+477
-239
-477
Climate change as draws from a
different distribution
Distribution Analysis
Percentage
Profit Distribution from 100 Repeated Plays
16
14
12
10
8
6
4
2
0
Profit Category ($)
Maximum
Mean
Minimum
313567.76
145174.12
-33655.10
Median
Standard deviation
10th percentile
143912.55
76947.31
35072.09
Compare
Second
Option
New Game