Focus

AssistanceFARM

Economic Impact of Beef Cattle Best Management Practices

in South Texas:

Artificial Insemination

E-30303/12

FARM Assistance Focus 2009-8

Department of Agricultural EconomicsTexas AgriLife Extension Service

The Texas A&M University System

farmassistance.tamu.edu

Mac YoungExtension Program

Specialist–Risk Management

Joe PaschalProfessor and

Extension Livestock Specialist

Steven KloseAssociate Professor

and Extension Economist

Cody RingerExtension Assistant

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South Texas cow-calf operations may increase their profitability by artificially inseminating their cows, according to research by the Texas AgriLife Extension Service. The analysis found that, compared to ranches that do not use artificial insemination (AI), South Texas ranchers may increase:

■ Net cash farm income by about $108.95 per cow per year, for a net increase of about $22.35 per cow per year

■ Liquidity, or average cash reserves, by almost $160 per cow over 10 years

The study used the Financial and Risk Management (FARM) Assistance strategic planning model to evaluate the financial effects of these three practices. It analyzed a simulated 2,000-acre ranch with 200 cows (one animal unit to 10-acre stocking rate) and eight bulls (one bull to 25 cows).

Artificial insemination Artificial insemination offers several benefits to ranchers:

■ The genetics of a cow herd is improved through the use of semen from sires that have the desired traits.

■ The number of bulls needed is reduced. In this study, the number of bulls was decreased, from eight to four.

■ When combined with estrus synchronization, the calving season is shortened. All of the cows will come into heat within a short period, usually 48 to 72 hours. AI will enable 50 percent of the calves to be born within the first week of the calving season. All calves will be born within 60 days.

■ Weaning weights will increase if both procedures are used. Even though half of the calves will be born after the first week, they will still average more weight gain than calves from cows not

subjected to estrus synchronization. In a shorter calving season, calves have more time to gain weight and be heavier on average at weaning.

In this study, it was assumed that average weaning weights would increase by 50 pounds (Table 1).

The procedure entails three steps that can be performed by an AI technician or a trained rancher:

1. A synchronization product is administered. A vaginal insert is placed into the cow’s reproductive tract, and a gonadotropin-releasing hormone is injected.

2. Seven days later, the insert is removed and prostaglandin is injected.

3. The cow is inseminated with a single dose of semen between 66 and 72 hours after the removal of the vaginal insert.

Assumptions in the studyThe general assumptions and characteristics are given in Table 1. Specific assumptions were made in each scenario. A typical ranch was assumed to have a 95 percent calving rate. Cows were assumed to be pregnancy-tested and bulls tested for breeding soundness.

The average cost of pregnancy testing was $6.20 per cow, or $1,240 per year, which includes veterinarian ranch visit expenses and per-head charges. The average cost of breeding soundness examination was $57.63 per bull, or $461 per year.

In this analysis, the synchronization cost was estimated at $15 per cow, or $3,000 total. The average artificial insemination cost was $26 per cow, or $5,200 total, including the technician’s costs. It was assumed that 50 percent (100 cows) of the cows would be bred through AI; the remaining cows would be covered by the four clean-up bulls.

The analysis allotted $2,400 for assorted day labor costs. The use of AI increases day labor because the cattle must be handled more often. It was

South Texas cow-calf operations may increase their profitability by artificially inseminating their cows

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assumed that four people would be needed for the artificial insemination process: the veterinarian or technician, the owner of the cattle, and two extra day laborers at $75 per hand per day, or $450. Some ranchers may be able to use less day labor and reduce their costs.

The base year for the 10-year analysis of the ranch was 2009; projections were carried through 2018. The commodity and livestock price trends followed projections by the Food and Agricultural Policy Research Institute (University of Missouri), with costs adjusted for inflation.

The study used typical rates for the region to calculate production inputs, yields, costs, and estimates for overhead charges. The ranch was assumed to have only intermediate term debt. Local cattle prices were obtained from the Live Oak Livestock Commission Company auction report in Three Rivers for May 4, 2009.

To assess the financial implications of AI, the study calculated the ranch’s profitability and liquidity. Profitability measures the extent that a ranch generates income from its resources. Net cash farm income is one measure of profitability.

Liquidity measures the ability of a ranch to meet its short-term financial obligations without disrupting normal operations. The liquidity of the operation may be measured by the ending cash balance.

The analysis provides insight into the risk and return expectations of the ranch under each management practice.

ResultsComprehensive financial projections, including price and weaning weight risk with and without artificial insemination, are illustrated in Table 2 and Figures 1 and 2. Table 2 shows the average outcomes for selected financial projections, while the graphics illustrate the range of possibilities for the selected variable.

The study used typical rates for the region to calculate production inputs, yields, costs, and estimates for overhead charges

Table 1: 2009 Assumptions for 200-Cow South Texas Representative Commercial Ranch

Parameter No AI With AI

Operator Off-Farm Income $24,000/year

Spouse Off-Farm Income $35,000/year

Family Living Expense $30,000/year

Ownership Tenure 100%

Ranch Size 2000 acres

Royalty Income Not Included

Hunting Income $7/acre

Herbicide Costs/Acre 1.5

Part-Time Labor $2,400/year $2,850/year

Number of Bulls (200 Cows) 8 bulls 4 bulls

Cow Herd Replacement Bred cows

Vet, Medicine & Supplies $25/cow

Salt/Mineral blocks/Year $20/cow

Hay Fed/Cow/Year 1.5 tons

Protein Cubes Fed/Cow/Year 150 lb

Cow Culling Rate/Year 7.5%

Calving Rate 95%

Bull/Steer Weaning Weights 525 lb 575 lb

Heifer Weaning Weights 475 lb 525 lb

Steer Prices $1.08/lb

Heifer Prices $.98/lb

Cull Cow Prices $.50/lb

Cull Bull Prices $.62/lb

Bred Cow Prices $1,100/head

Replacement Bull Prices $2,300/head

Hay Prices $135/ton

Range Cube Prices $0.18/lb

Pregnancy Testing $6.20/cow

BSE Testing $57.63/bull

Synchronization Shot N/A $15/cow

Vet or Technician Fee & Semen N/A $26/cow

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Artificial insemination can impact profitability and financial performance of a cow-calf operation

Table 2: Projected Average Annual Financial Indicators (2009-2018)

10-Year Averages Per Year Cumulative10-Yr CashFlow/Cow

($1,000)

Scenario Total CashReceipts($1,000)

Total CashCosts

($1,000)

Net Cash Farm Income

($1,000)

Net Cash FarmIncome/Cow

($1,000)

No Artificial Insemination 143.01 125.69 17.32 0.09 1.738

Artificial Insemination 153.31 131.52 21.78 0.11 1.894

Figure 1. Projected variability in net cash farm income

No AI (200 Cows)

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10

20

30

40

50

60

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

5% 25% Mean 75% 95%

With AI (200 Cows)

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-10

0

10

20

30

40

50

60

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

5% 25% Mean 75% 95%

$1000 $1000

Figure 2. Ending cash reserves and probability of having to refinance operation note for no artificial insemination (red) and artificial insemination (green)

1 1 1 1 1 1 1 1 1 11 1 1 1 1 1 1 1 1 1

0

50

100

150

200

250

300

350

400

2009 2010 2011 2012 2013 2014 2015 2016 2017 20180

20

40

60

80

100

Base

Artificial insemination can impact profitability and financial performance of a cow-calf operation (Table 2 and Fig. 1). Without this process, net cash farm income averages $17,320 per year for the operation, or about $86.60 per cow per year. With artificial insemination, net cash farm income averages $21,780, or about $108.95 per cow per year, for a net increase of about $22.35 per cow per year.

Liquidity, or average cash reserves, at the end of the 10-year projection improves by almost $160 per cow with artificial insemination (Table 2 and Fig. 2). Off-farm income contributes to the cash flow of the ranching business; however, it affects both scenarios.

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Prudent managers will implement the practices that best fit their operations and management styles

ImplicationsAlthough actual results will vary by producer, artificial insemination may improve a ranch’s bottom line and financial position by improving

genetics, reducing the calving period, and increasing calf weaning weights. Prudent managers will implement the practices that best fit their operations and management styles.

New

AcknowledgmentCharles Looney gave input and advisory

contributions to this project.