The U.S. Drought Monitor continues to classify parts of South Dakota in a level one to level three drought. For many producers, dry conditions have persisted since 2020. These conditions have caused them to make non-traditional management decisions in an effort to keep their operation viable.
Decisions have included selling livestock, changing grazing practices and rental agreements and making changes to feed rations. Each of these decisions needs to be dealt with, whether the drought is persisting or improving in their area.
During times of low precipitation, many decisions regarding the normal livestock inventory need to be made.
"SDSU Extension has a variety of budgeting calculators to assist with the decision-making process,” said Heather Gessner, SDSU Extension Livestock Business Management Field Specialist. “In addition to the calculators, we have staff available to assist with the options available to ranchers.”
"SDSU Extension has a variety of budgeting calculators to assist with the decision-making process. In addition to the calculators, we have staff available to assist with the options available to ranchers.”
— Heather Gessner, SDSU Extension Livestock Business Management Field Specialist
Non-traditional livestock sales may result in changes to the producer’s income tax liability. Selling cows, selling heifers instead of retaining them, selling calves at weaning instead of running them over the winter, and other sales increase the amount of income received throughout the year.
Without expenses from feeding or managing those animals, the total income tax bill can be higher than normal, which will be an increased expense the operation will need to pay.
“I would encourage producers to work with their accountants as they make production decisions,” said Gessner. "The change in sales or additional expenses will be reflected on the Schedule F at the end of the year."
Herd reduction is traditionally done to protect pastureland from overgrazing. With a reduced number of animals in inventory, the per cow fixed costs increase, thus increasing the breakeven price for the calves raised, if the pasture remains ungrazed over the summer.
“As some areas receive rain, producers in those areas may want to consider renting out those acres, or haying them,” said Gessner. “This way, the operation can generate income for family or farm/ranch expenses.”
The process of renting acres requires many considerations. Beyond the rate per acre, or AUM received, the landowner also needs to consider conservation practices they want to be followed on their acres, continuation of the agreement, livestock removal dates and agreement cancellation information. Written leases are highly encouraged to prevent misunderstandings between the parties involved.
The land lease agreement may also come with a livestock share consideration – this option may work for both parties, as calves are used as currency. When this option is being considered, both parties should work through a written share agreement to ensure they know and understand all the included components.
Herd reduction may also provide cash to purchase feed for the remaining cow herd. Given current feed costs and transportation costs, producers should carefully consider the option of having feed delivered to the ranch or hauling cows to the feed source.
Producers in qualifying drought areas may qualify for federal assistance through the Farm Service Agency (FSA) to relocate livestock or haul feed. Producers making these decisions should contact their local FSA office for more information and qualification requirements.
Other feed considerations include reducing the balanced ration cost, as ensuring the ration is balanced for protein and energy is the first step to economically feeding livestock.
The second step to making the lowest cost ration is to evaluate different sources of energy and protein. The feedstuffs used in rations all vary in cost, location, nutrients, and price. Depending on the nutrient required, it may be more economical to purchase a feed and have it delivered long-distance rather than pay a low price for a closer feedstuff.
Source : sdstate.edu