J.J. Jones, OSU Extension Area Ag Economist, offered the following article in the latest edition of the OSU S.E. Area News & Notes newsletter. 

It has been an age-old debate. Is it better to raise your replacement heifers or purchase them? The question brings a lot of opinions and arguments. There are both advantages and disadvantages for each. Producers must consider each of them before making their decision.

The first table below outlines some of the main advantages and disadvantages of raising versus buying replacement heifers. Some of these points will be more important than others for different producers. For example, the only advantage listed for raising replacements is that the producer knows the genetics of their heifers. This could be important for producers that have spent considerable effort in selecting for specific traits and attributes. But for a producer that has not been managing for specific genetic traits and has a common set of commercial cows this might not be as important.

Producers need to determine what is the most important for them and their operation and make the decision based on that criteria. For most producers, one of the more important criteria is cost. What is the cost of raising replacements versus buying them? The remainder of this article will focus on that very question.

The second table compares the costs associated with buying a 4-5 month bred cow and raising a heifer until her first calf is sold. It is assumed that the purchased cow will have two calves in the same time that it takes a weaned heifer to be bred, calve and wean that calf.

When comparing the returns and costs for the first two years of buying versus raising it shows that there is a slight cost advantage to raising replacements over buying them. Although, the results are close enough that one might consider it to be a wash. Keep in mind that no consideration was given to the possibility of calving difficulties, quality of first-born calf, poor breeding percentage, or poor growth rate. Everything is kept equal so just to consider the costs.

So, with the costs being about equal producers must consider the other ramifications of buying versus selling. Producers must consider their operations resources. Not only land availability, but also time availability and management. Producers need to consider the long-term effects on the operation’s cash flow from holding onto heifers instead of selling them. Can an operation withstand the decrease in revenue and be able to wait two years for the payoff? Producers will need to determine if they could improve the quality and production of their herd faster by purchasing replacements versus raising them from existing stock.

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Oklahoma State University, in compliance with Title VI and VII of the Civil Rights Act of 1964, Executive Order 11246 as amended, and Title IX of the Education Amendments of 1972 (Higher Education Act), the Americans with Disabilities Act of 1990, and other federal and state laws and regulations, does not discriminate on the basis of race, color, national origin, genetic information, sex, age, sexual orientation, gender identity, religion, disability, or status as a veteran, in any of its policies, practices or procedures. This provision includes, but is not limited to admissions, employment, financial aid, and educational services. The Director of Equal Opportunity, 408 Whitehurst, OSU, Stillwater, OK 74078-1035; Phone 405-744-5371; email: eeo@okstate.edu has been designated to handle inquiries regarding non-discrimination policies.  Any person who believes that discriminatory practices have been engaged in based on gender may discuss his or her concerns and file informal or formal complaints of possible violations of Title IX with OSU’s Title IX Coordinator 405-744-9154.

Livestock Risk Protection Insurance

Listening to Derrell Peel, OSU Extension Livestock Marketing Specialist, speak this past week, one might conclude that profit margins may be a little tighter in the coming year or two. According to Derrell, we may have reached a plateau on the national cow herd expansion and, subsequently, the potential for higher prices. If so, and IF is a big word, it would seem that management and marketing skills will become much more prominent in determining the profitability of the cattle enterprise; or, in a worst-case scenario, minimizing the down-side risks of market prices.

 With those thoughts in mind, I found the following comments, courtesy of OSU Extension Area Ag Economist Trent Milack, of particular interest.

Livestock Risk Protection is an insurance product that protects against declines in cattle prices. In the past, the main focus when raising cattle has been on the production side. Arguably, this is still true. However, price is at the forefront of many producer’s minds due to recent cattle market volatility.

Livestock Risk Protection can be purchased through a livestock insurance agent. This product insures between 1 and 1,000 head at a time with a total of 2,000 insurable head per year. The length of the insurance coverage varies from 13, 17, 21, 26, 30, 34, 39, 43, 47, or 52 weeks. Insurance can be purchased on calves, steers or heifers, which fall in the weight classes of Weight 1 (under 600 pounds) or Weight 2 (600-900 pounds).

Coverage levels vary between 70 percent and 100 percent of the expected ending value of the animals. The coverage options available vary each day so it is important for producers to check the RMA website https://public.rma.usda.gov/livestockreports/main.aspx daily to determine which coverage options are available. The ending values of the policy are based upon the weighted average prices reported in the CME Group Feeder Cattle Index. This index is used to settle the Feeder cattle contracts.

An indemnity payment is triggered if the actual ending value is lower than the coverage price. This has nothing to do with what the producer receives for the animals in the cash market when he sells the cattle. Indemnity payments will only occur if the price declines below the coverage level during the coverage period. Also, the producer must own the cattle and have taken delivery of them in order to qualify for the insurance coverage.

An example of the insurance coverage includes a producer who wants to use LRP to put a floor on his 2019 steer crop. He normally sells in the middle of March and his steers currently weigh 500 pounds. His herd consists of 100 predominately Angus cross steers.

The insurance is purchased in October so he needs 26 weeks of coverage. The option he selects includes feeder cattle steers for the 2019 crop year with an expected ending value of $136.794 per cwt. He chooses a 99% coverage level with a coverage price of $135.040 per cwt. The premium will be $6.889 per cwt. He expects the steers to gain 250 pounds over the course of this coverage. The premium is calculated by multiplying the final weight in cwt. by the premium cost per cwt. and the number of head covered. So 7.5 cwt. X $6.889 X 100 hd. = $5,166.75. RMA subsidizes 13 percent of the premium cost so the producer will be responsible to pay $5,166.75 X .87 = $4,495.07.

In the event that on March 31st the actual value is below the coverage price of $135.040 per cwt., an indemnity payment will be triggered. If prices fall to $120.00 cwt., the producer would be paid a premium in the following example. The price decline in this example is $135.040 – $120.00 = $15.04. The producer’s payment is 100 hd. X 7.5 cwt. X $15.04 = $11,280.00. This farmer received an indemnity payment of $11,280.00 on 100 steers for the cost of $44.95 per head. While there is no way to know what the actual ending price will be, this is an option to manage downside price risk.

Perils not covered include death, government seizure, and forced destruction. If one of these events do occur, the producer is required to notify their insurance agent within 72 hours of the occurrence of the loss. By giving notice of the loss, the producer will have the affected livestock included if an indemnity is payable on the endorsement. Not giving notice of the loss will result in the affected livestock being excluded from the indemnity calculation and the premium will not be refunded.

Some producers are aware of hedging and the ways that they can manage price risk in the futures markets. There are many reasons, however, why producers do not utilize this option. They may not have enough cattle to fill an entire contract, they may be reluctant to pay brokerage fees and margin calls, or they just do not understand the complicated world of futures markets and are uncomfortable with that risk management system. Livestock Risk Protection allows a producer to tailor the insurance coverage to the number of cattle he needs to insure at a price where he will remain profitable.

The application for Livestock Risk Protection can be filled out at any time, but insurance does not come attached until a specific endorsement is made. The insurance coverage will begin when a specific endorsement is made and approved by RMA.

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Oklahoma State University, in compliance with Title VI and VII of the Civil Rights Act of 1964, Executive Order 11246 as amended, and Title IX of the Education Amendments of 1972 (Higher Education Act), the Americans with Disabilities Act of 1990, and other federal and state laws and regulations, does not discriminate on the basis of race, color, national origin, genetic information, sex, age, sexual orientation, gender identity, religion, disability, or status as a veteran, in any of its policies, practices or procedures. This provision includes, but is not limited to admissions, employment, financial aid, and educational services. The Director of Equal Opportunity, 408 Whitehurst, OSU, Stillwater, OK 74078-1035; Phone 405-744-5371; email: eeo@okstate.edu has been designated to handle inquiries regarding non-discrimination policies.  Any person who believes that discriminatory practices have been engaged in based on gender may discuss his or her concerns and file informal or formal complaints of possible violations of Title IX with OSU’s Title IX Coordinator 405-744-9154.

The Oklahoma Department of Agriculture Food and Forestry will offer a local testing session, at the Carter County OSU Extension Office, on Tuesday, November 20. They will have tests available for all the pesticide applicator categories, so anyone needing to certify for the first time or recertify can be accommodated. Of particular interest are the categories that licenses expire this year (December 31), and thus must be recertified are:

1a – Agricultural Plant

A – Aerial

7b – Structural

10 – Demonstration & Research

Private Applicator

Applicator certification requires the successful completion of at least two examinations: The “Core” exam, consisting of knowledge required in all categories of certification; and the category exam itself. Those who are recertifying need only to take the category exam. A few of the categories require completion of a practical examination in conjunction with the Core and category exams for certification in that particular category.

Core exam – Focuses on equipment, safety, laws, and other knowledge pertaining to all categories. All persons wishing to become certified applicators must pass this exam in addition to the category exam(s).

Category exam – Written exam to be taken (along with the Core exam) by those wishing to become certified in that particular category.

Practical exam- The following categories require a practical examination in addition to the Core and the written exam.  These exams are performed at OSU in Stillwater:

(7A)- General Pest

(7B)- Structural Pest/Termite

(7C)- Fumigation

The practical exam must be taken within twelve (12) months of passing the written examination.  Failure to pass the practical within this period of time will require retaking the written exam.

Service Technician exam – To be taken by anyone wishing to qualify as a service technician.  The Core exam is not required to become a service technician. 

No appointment is necessary for any regularly scheduled test session. Applicants are required to provide some type of photo identification (e.g., a valid driver’s license) showing their name and identification number. Pencils and paper are provided for applicants at the testing sites. Applicants may use a hand-held calculator as long as the print-out tape is not used. An applicant must attain a satisfactory score (70% or above) to pass any written exam. 

After all the necessary examinations have been successfully completed, the certified applicator will be issued a certification card. This certification card is not a license to do pesticide applicator work; a pesticide applicator license must be obtained by any certified applicator wishing to do pesticide applicator work (commercial, non-commercial or consultant) or must be obtained by his/her employer.

A service technician shall be issued an identification card upon satisfactory completion of the service technician examination. 

Testing fees are $50 per exam. Those individuals who are certifying for the first time will pay $50 for the Core Exam and $50 for each category exam or $50 for Service Technicians. Those who are recertifying will pay $50 for the Category Exams only. 

Private Applicators should be advised that, although all current licenses expire this year, you need not to attend this testing session, as your exam is a take-home, open-book exam. The licenses are renewed on 5-year rotations so, if you recertify now, your license will be valid through December 31, 2023. You should also be aware that, as of now, the Private Applicator test is still a take-home exam but there is a discussion of making it a proctored exam in the future, meaning that you will have to attend a testing session and complete a closed-book exam.

The testing site, Carter County OSU Extension Office, is located at 25 A St. NW Ave., Suite 200. Our entrance is located next to the Election Board, at the new Carter County Administration building, formerly the Noble Energy building. You may park on the north side of the complex, on Broadway Ave., either in the lot on the east side of the Ardmoreite Building or the lot across the street (south) of the Ardmoreite Building. You will then need to walk around to the south side of the office complex to our entrance.

Find out what’s happening on the Oklahoma Cooperative Extension Calendar at https://calendar.okstate.edu/oces/#/?i=2

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Oklahoma State University, in compliance with Title VI and VII of the Civil Rights Act of 1964, Executive Order 11246 as amended, and Title IX of the Education Amendments of 1972 (Higher Education Act), the Americans with Disabilities Act of 1990, and other federal and state laws and regulations, does not discriminate on the basis of race, color, national origin, genetic information, sex, age, sexual orientation, gender identity, religion, disability, or status as a veteran, in any of its policies, practices or procedures. This provision includes, but is not limited to admissions, employment, financial aid, and educational services. The Director of Equal Opportunity, 408 Whitehurst, OSU, Stillwater, OK 74078-1035; Phone 405-744-5371; email: eeo@okstate.edu has been designated to handle inquiries regarding non-discrimination policies.  Any person who believes that discriminatory practices have been engaged in based on gender may discuss his or her concerns and file informal or formal complaints of possible violations of Title IX with OSU’s Title IX Coordinator 405-744-9154.

By and large, the 2019 hay crop is, as they say, “in the barn.” Meeting the supplemental protein needs for the cows and replacement heifers consuming that forage must be done properly and economically. Protein is a vital nutrient for the ruminant because protein is necessary for the multiplication of, and the feed digestion by the microbes in the rumen. The microbial population in the rumen of cows is largely responsible for digesting cellulose in standing or harvested forages.

Higher quality forages are more readily digested in the rumen and have higher rate of passage through the digestive tract of the cow than do lower quality roughages. Therefore, the cow can consume more of the high-quality forage on a daily basis and receives more total digestible nutrients (TDN) from each pound of feed consumed. If adequate protein is available to cows consuming lower quality roughages, then the rate of passage and the digestibility is improved compared to cows that are inadequately supplemented while consuming the same low-quality forage.

Producers may be surprised to know the large differences in protein supplement needed to meet the cow’s requirement depending on the quality of forage that makes up most of the diet. Below is a table of the pounds of 40% protein supplement needed daily for moderate-sized (1100 pound) beef cows in different stages of production and consuming differing quality of grass hays. Larger cows and cows that produce above average milk production will consume more forage and need even more supplement to match their requirements. The table above describes the protein-only needs of the beef cow. Energy deficiency may occur and result in some weight and body condition loss. Energy needs will be increased if cows are already in thin body condition and must be improved before calving next spring. Also, winter weather conditions can greatly increase energy needs. In many instances, the energy requirements can be met with lower protein supplements (for example 20% protein range supplements) fed at about twice the rate as noted in the table above.

Forage quality differences are important, whether the supplement choice is high protein (40%) or lower protein (20% protein). Learn about testing hay for protein content by visiting with your OSU County Extension Office or downloading Oklahoma Cooperative Extension Fact Sheet PSS- 2589 Collecting Forage Samples for Analysis.

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Oklahoma State University, in compliance with Title VI and VII of the Civil Rights Act of 1964, Executive Order 11246 as amended, and Title IX of the Education Amendments of 1972 (Higher Education Act), the Americans with Disabilities Act of 1990, and other federal and state laws and regulations, does not discriminate on the basis of race, color, national origin, genetic information, sex, age, sexual orientation, gender identity, religion, disability, or status as a veteran, in any of its policies, practices or procedures. This provision includes, but is not limited to admissions, employment, financial aid, and educational services. The Director of Equal Opportunity, 408 Whitehurst, OSU, Stillwater, OK 74078-1035; Phone 405-744-5371; email: eeo@okstate.edu has been designated to handle inquiries regarding non-discrimination policies.  Any person who believes that discriminatory practices have been engaged in based on gender may discuss his or her concerns and file informal or formal complaints of possible violations of Title IX with OSU’s Title IX Coordinator 405-744-9154.