The Woodward News

Local News

August 5, 2011

Drought can force difficult decisions on cattle

Woodward, Okla. — One of the main concerns of agriculture producers during the current drought is deciding whether or not to sell their cattle.

“It all depends on your finances and situation,” said Area Extension Farm Management Specialist Dr. Rodney Jones during an OSU Extension drought meeting Thursday at High Plains Technology Center.

Jones said producers need to compare the “net costs” vs. the “net benefits” of keeping or selling their cattle.

Jones said there are many factors to consider before making the decision.

“The main cost will be feed and that will probably be $2 to $3 per day,” he said.

Jones said if the producers sell they will also be able to eliminate other expenses such as labor, repairs and veterinary costs.

Producers also need to consider the price they may receive - something that varies from one situation to the next.

“The prices of the cattle will certainly be lower than they would be if they were not in a drought,” he said.

Another factor to consider is the how long the drought might last.

“Do you think we’ll receive moisture soon or do you think the drought will go on for a while,” Jones said.

Jones said if the drought continues it will be difficult to establish winter forage for the cattle.

“My assumption is the drought is long term based on the current forecasts,” he said.

Jones said the “driving factor” in the decision of keeping and selling is the cost of the cattle now and the cost of replacement cattle in the future.

“We’re not comparing apples to apples because you’re probably selling an early bred calf now, but getting cow with a calf in the spring,” Jones said. “It just depends on what you’re selling and plan to purchase.”

Extension Farm Management/Taxation Specialist JC Hobbs said there are tax related issues to consider if a producer decides to sell the cattle.

Hobbs said there are 2 different tax treatments - involuntary conversion and deferral income for one year.

“The first (involuntary conversion) applies to the sale of livestock held for draft, breeding or dairy purposes,” Hobbs said. “The second (deferral of income for one year) applies to sales of any livestock.”

Under involuntary conversion, producers selling livestock they must purchase replacement livestock within a certain amount of time.

“If producers sell their cattle in 2011 due to the drought, they have until the end of 2014 to purchase replacement livestock,” he said.

But, any livestock they purchase must be used for the same purpose as the cattle that were sold.

“They can’t sell a dairy cow and then buy back a beef cow,” Hobbs said. “Replacement livestock must be used for the same

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