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Previous issues of the BEEF Cattle letter
Issue # 572
Ruminant Livestock: Facing New Economic Realities Programs are Set
Certainly, 2007 was a challenge for cattlemen across the Midwest. On top of strengthening feed grain prices which began in the Fall of 2006 and have continued to the present, we've experienced a widespread lack of forage production. In fact, grain and feed prices are as high, and forage inventories as low as they've been anytime in recent history. Most Ohio cattlemen have improvised, in many cases by simply purchasing feed, utilizing alternative feed resources, employing a rigid culling program in their herds, or a combination of all of the above in an effort to get through until spring.
Soil moisture reserves are being adequately restored this winter. This means grass will turn green again in the spring. Yes, forages will grow again. Yet, it's not likely cattlemen or other ruminant livestock producers will experience an abundance of low cost, high quality forage and feedstuffs again for years to come. With so many acres which were traditionally in forages being attracted into row crop production, simply put, the "rules" which dictated that we could consistently "feed a profit" into ruminant livestock have changed. The result is that in the foreseeable future we face new and different economic realities in the livestock industry.
In an effort to remain competitive we need to make management changes. Some as subtle as simply dividing a pasture with one more fence, or as extreme as eliminating round bale feeder rings from the operation. The new reality is that perhaps co-product feeds may become the norm and not the exception. Or, will distillers grains become the primary source of phosphorus for both livestock and as a soil fertility amendment? Could perennial stands of harvested hay, corn grain and bean meal be pushed aside as the staple feed of ruminants? Is it possible that hay acres might be replaced by corn silage production as a lower cost forage option? And, maybe we need to return wheat to the crop rotation, and make annual forages the "traditional" double crop of choice?
Several programs are planned to address the new realities of the economic and management considerations related to ruminant livestock production in Ohio. Each program is two evenings and are planned in four different locations in Ohio. Running from 6:30 p.m. until 9:30 p.m. each evening, the schools will be hosted by Extension offices in Fairfield (February 25 and 27), Knox (March 10 and 17), Highland (March 19 and 26), and Athens (March 20 and 27) Counties. Presentations at each location will be resourced by OSU Extension Beef Team members Francis Fluharty, John Grimes, Rory Lewandowski, Jeff McCutcheon and Stan Smith. Bob Hendershot and Curt Stivison from NRCS/SWCD will also serve as presenters.
These programs will be thought provoking and far reaching, intended for progressive livestock producers who wish to remain competitive in a rapidly evolving economic climate. Come prepared to explore alternatives which are likely "not the way we've always done it."
Contact any of the Extension offices in the host counties for more information or to pre-register. Registration fee is $15 per person to cover cost of hand outs and supporting materials.
Helping The Newborn Calf Breathe - Glenn Selk, OSU Extension Animal Reproduction Specialist
Despite our best efforts at bull selection and heifer development, cows or heifers occasionally need assistance at calving time. It is imperative that the newborn calf begin to breathe as soon as possible. To stimulate the initiation of the respiratory process, a few ideas may help. First, manually clear the mouth and nasal passages of fluids and mucus. Hanging the calf over a fence is not the best method to accomplish this task. The weight of the calf on the fence restricts the movement of the diaphragm muscles. The fence impairs the diaphragm's ability to contract and move. This diaphragm activity is necessary to expand the lungs to draw in air and needed oxygen.
A better method is to briskly tickle the inside of the nostrils of the calf with a straw. This will usually cause the calf to have a reflex action such as a "snort" or cough. The reflex cough or "snort" expands the lungs and allows air to enter. Expect the calf to pant rapidly for a few minutes after breathing is initiated. Panting is the natural response that increases oxygen intake and carbon dioxide release and will allow the calf to reach normal blood gas concentrations.
Income Tax Rules For Weather Related Sales Of Livestock - Bill Whittle, Extension Agent, Farm Business Management, Virginia Tech
Weather often raise havoc with the income stream on a farm. This year's drought is no exception as livestock farmers wrestle with short feed supplies coupled with substantial increases in feed costs. A common response is to reduce herd size by selling more livestock than in a normal year. However, this has the potential of creating dramatically higher taxable income. To assist farmers with leveling such taxable income spikes, the federal tax code has two provisions (elections) that address the issue of increased income when forced to sell more livestock than normal because of a weather related situation.
Though the provisions are similar in that gain (income) on excess sales is postponed to a future year, these elections are also very different in the length of postponement, the classes of livestock involved, and the information required. The first election, IRC 1033(e) or involuntary conversion, applies to the sale of breeding, dairy, and draft animals if the livestock are sold because of weather-related conditions. This provision allows the farmer to postpone recognizing 2007 gain from animals sold in excess of normal annual sales or if the farmer purchases replacement livestock within two years from the end of the tax year in which the sale occurs. If the locality receives a federal disaster designation, the deferment time is extended to four years, and may be further extended if adverse weather conditions continue for more than three years. Replacing the livestock generally requires purchasing like-kind livestock; beef cows for beef cows and dairy for dairy. However, if the weather conditions that created the involuntary conversion make replacing the livestock infeasible, then the livestock can be replaced with any property used in the farming business.
For all postponed gain, the purchase cost of each replacement animal must equal or exceed the gain from the drought-forced sale. If replacements cost less than the postponed gain, the excess gain is included as income for the year of replacement. If you choose not to replace the animals, then you must file an amended return and report the income for 2007.
Record keeping is a must for proper tax management, and IRC 1033(e) requires that specific information be included when you file taxes for the sale year, including evidence that weather conditions forced the sale of livestock.
However, federal drought designation is not required. Other required information includes the amount of gain realized on the sale, and the number and kind of livestock normally sold. When livestock are replaced under IRC 1033(e) the records required for filing include the date of purchase of replacements, and cost, number, and kind of replacement livestock or property. The basis in the replacement livestock will equal the basis in the livestock sold plus any amount invested in the replacement livestock that exceeds the proceeds from the sale.
The second election, IRC 451(e), is for farmers in areas that receive a federal weather related disaster designation and applies to the sale of any animals in excess of normal sales. IRC 451(e) does not require replacing animals, but allows you to defer income from the sale of animals in excess of what is normally sold for one year. Requirements for using IRC 451(e) include: 1) farming must be the principal business; 2) the cash method of accounting is used; 3) the excess livestock sold would normally be sold in the following year; and 4) the weather-related conditions that caused an area to be declared eligible for federal assistance must have caused the sale of livestock.
A final component of both provisions is that it is not necessary that the livestock be raised or sold in the declared disaster area but just that the weather related conditions caused the sale. The sale can take place before or after an area is declared eligible for federal assistance as long as the same weather-related conditions caused the sale.
These tax management elections can prevent a large increase in taxable income due to sales forced by this year's drought. It is important to discuss your situation with your tax preparer prior to the tax deadlines so that you can take advantage of these provisions, if applicable.
Forage Focus: Preparing For a Not Quite As Dry Spring - Dr. John B. Hall, Extension Beef Specialist, VA Tech
Most forecasts indicate that Virginia will experience improvement in drought conditions during 2008. However, according to the National Drought Monitor and NOAA rainfall for the spring months may still be behind normal. They predict that it will not be as dry as 2007. February is a great month to prepare for this "not quite as dry" grazing season.
Pasture care and renovation: February is still a good time to put down lime and maybe some fertilizer. If you haven't sent off a soil sample, do it now! The pH should be in the 6.5 to 7.0 range. This will help both legumes and grasses utilize nutrients efficiently. Late winter is early enough in the growing year to allow lime to make changes in pH before most of the growing season.
Fertilizer especially P and K will help pasture plants recover and strengthen root systems. Limited amount of nitrogen may assist with early tillering and some recovery. However, over fertilization with nitrogen may not help plants. Animal manures especially poultry litter are good fertilizer sources. However, poultry litter can be hard to obtain because of high demand. Line-up poultry litter or other manures early before the spring demand for fertilizer hits. Make sure that litter that is used for fertilizer does not contain dead birds. If it does contain bird carcasses, producers need to scan the fields and remove any dead birds that are present before cattle graze the pasture. There have been several reports of cattle killed by botulism from dead poultry associated with litter fertilization. It is important to follow nutrient management plans and adhere to set backs from water ways when using animal manures.
Frost seeding of clovers should be easy this year as most pastures are very short. Broadcast 4 to 6 lbs of red clover seed or 1 to 2 lbs of ladino clover seed per acre. Either lightly drag the pasture or allow cattle to tread in the seed. The freezing and thawing action of the ground will also allow for good seed contact with these clovers. This is an extremely effective method of increasing clover in grass pastures. It has been very successful at our farm and many others. For more information about frost seeding see the VCE publication "No-Till Seeding of Forage Grasses and Legumes" on-line at http://www.ext.vt.edu/pubs/forage/418-007/418-007.pdf
February is too early to no-till seed grasses, but most no-till seeding should be done in March (early April in some mountain counties). However, many pastures will need reseeding this year. Several soil conservation districts and farmers co-ops rent no-till seeders for pastures renovation. Demand on this equipment will be high, so producers need to sign-up for equipment as soon as possible. Also, producers should make sure they understand how to properly use the equipment in order to place seed at the proper depth. Recommended mixtures for overseeding existing pastures are orchardgrass (6-10 lbs/acre) + red clover (4-6 lbs./acre) OR fescue (5-10 lbs./acre) + red clover (4-6 lbs./acre) + ladino clover (1-2 lbs./acre).
Grazing Control: In order for pastures to recover, it will be important to use controlled grazing. Cattle should only be left on a pasture for one week before moving to the next pasture. In addition, cows should only consume about ½ of the available grass. It will be important to only allow cows to graze down to a minimum of 3 inches in early spring. By June, pastures should only be grazed down to 4 to 6 inches. The shorter height in early spring will encourage development of frost seeded or no-till planted forages. Increased grazing heights in the summer will improve regrowth and stand vigor.
A simple method for controlled grazing is to use temporary fence and a solar or battery powered charger. Another method is to use one strand of 12 gauge high tensile fence placed 36 to 40 inches above the ground on T-posts fitted with plastic insulators. The high tensile method is "semi-permanent" so one would create all the paddocks needed for the grazing season in the spring. The advantage is it does not have to be moved every time cattle need to be rotated; however, the T-posts can easily be moved if the fence is not exactly in the right place. The semi-permanent option is good for part-time producers and locations with heavy deer traffic.
Water, Water, Water: Many operations suffered from lack of drinking water for cattle during the late summer and fall. Late winter is the time to make improvements to the watering systems. Wells, spring developments, ponds, and temporary storage are all considerations for watering systems. Wells are the most expensive, but most reliable. With the down-turn in the construction/housing industry, it may be easier to find a well driller now than the middle of August. Spring developments and ponds can supply considerable water even with limited flow. For example, a spring on the farm I rent was down to 1.5 to 2 gallons per minute flow last fall. With proper development and storage, a water flow of 1 gallon per minute can provide sufficient water for 50 head of cattle. A ram pump can also be used to move water from streams or ponds to a storage tank for redistribution.
Planning ahead for pasture renovation, grazing strategies, and water supply will save many headaches this spring and summer.
Weekly Roberts Agricultural Commodity Market Report - Mike Roberts, Commodity Marketing Agent, Virginia Tech
LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday. February '08 - June '08 contracts were off while August '08 - February '09 were gainers on thoughts the U.S. cattle herd is shrinking. FEB'07LC futures finished off $0.650/cwt at $90.750/cwt. The APR'08LC contract closed at $93.825cwt, off $0.550/cwt while the JUNE'08LC contract finished down $0.425/cwt at $92.575/cwt. The nearbys were pressured by the announcement on Friday that Tyson Foods was stopping cattle slaughter at Emporia, KS. That plant processes 4,000 head per day. This news followed months of losses due to more slaughter capacity than there are cattle. According to HedgersEdge.com the average beef plant margin for Monday was estimated at a negative 20.55/head, $0.30/head worse than Friday but $0.25/head better than a week ago. Estimated breakeven for packers was placed at $88.41/cwt while packers were able to buy at $90.03/cwt, a difference of a minus $1.62/cwt. On Friday, USDA placed the monthly Cattle-on-Feed numbers at 101% of a year ago while decreasing December placements to 99% of last year. The market was expecting an increase of 102.7%. December marketings were up at 101% of last year vs. the average expectation for 100.4%. USDA is expected to publish its semi-annual U.S. Cattle Inventory report this coming Friday which was supporting news for deferreds. The 5-area cash cattle average price published by USDA was steady to firm ranging from $90-$90.50/cwt. USDA on Monday place the choice boxed beef cutout at $142.96/cwt, up $0.220/cwt. Cash sellers should go ahead and sell those heavy calves off pastures. A $0.25 cent/bu increase in a bu of corn increases the cost of a 500-600 weight calf by about $3.50/cwt. It increases the cost of a 700-900 weight feeder by about a $1.00/cwt. It might be a good idea to price corn at the low points as markets take profits. This volatility will continue until the U.S. crop is planted as corn wars with soybeans for planted acres.
FEEDER CATTLE at the CME were up Monday. JAN'08FC futures closed at $99.550cwt, up $0.950/cwt. The MAR'08FC contract finished at $102.675/cwt, up $0.575/cwt. Feeders were supported by reports of higher cash cattle in Oklahoma City and other northern markets. The Oklahoma City market is closely watched. Gains happened despite higher corn because the market is expecting lower feeder placements. The CME Feeder Cattle Index for January 24 was placed at $98.090/cwt, up $0.39/cwt. Feeder sellers should consider selling cattle on this uptick while pricing corn on any downticks in that market.
CORN on the Chicago Board of Trade (CBOT) closed up on Monday. The MAR'08 contract finished up 3.6¢/bu at $4.982/bu. The DEC'08 contract closed up 0.6¢/bu at $5.104/bu. Gains in wheat, good export numbers and a crude oil rebound were supportive. Improved weather in South America and worries over recession were not. USDA placed corn-inspected for export at 61.094 mi bu vs. expectations for between 34-40 mi bu. Improving weather in the Brazilian corn-crop areas was seen as helping the crop there. The CBOT increased margins for corn trading to $1,350, up from $1,283 effective for Monday night trading amid concerns for market volatility. Trading sources said the large number of long positions in corn futures made ripe conditions for profit-taking if large funds and speculators in long positions liquidated positions. The supplement to Friday's CFTC Commitment of Traders report showed funds decreasing bull positions in CBOT corn to 233, 616 contracts, down 10,000 lots from Friday and down 15,713 lots from the previous week. The March contract traded above all key moving averages as the RSI approached 60. An RSI of 70 or above is considered an indication of an overbought market. Cash corn bids were steady to somewhat weaker amid some sales. Cash bids for corn in the U.S. Mid-Atlantic States were steady at 4.0-6.0¢/bu higher. If you have any of the '07 crop left, it would be a very good idea to price at least half of it while forward contracting 10%-20% of the '08 crop. Out of the money May Call Options might be a considered if you are concerned about rising prices. Prices could trend higher on increased volatility as spring approaches and soybeans compete for acres.
Visit the OSU Beef Team calendar of meetings and upcoming events
BEEF Cattle is a weekly publication of Ohio State University Extension in Fairfield County and the OSU Beef Team. Contributors include members of the Beef Team and other beef cattle specialists and economists from across the U.S.
All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status. Keith L. Smith, Associate Vice President for Ag. Admin. and Director, OSU Extension. TDD No. 800-589-8292 (Ohio only) or 614-292-1868
Fairfield County Agriculture and Natural Resources
