holstein

[F350]

Seems like overkill to use NPV (Net Present Value) and the Time Value of Money on such a short-term investment....finishing steers. IMHO

 

[longtimelurker]

Seems like overkill to use NPV (Net Present Value) and the Time Value of Money on such a short-term investment....finishing steers. IMHO

I guess ol massey would rather invest lots of money every 7.5 months for a new calf than pay a little for the cost of gain for the additional 5.5 months. Apparently he or she can buy the pounds cheaper on the hoof, than he or she can put it on thru normal feeding. Could have something to do with those purebreed brangus.

 

[TexasBred]

Seems like overkill to use NPV (Net Present Value) and the Time Value of Money on such a short-term investment....finishing steers. IMHO

Yep...by the time you've calculated the future value down to 6 decimal places....your answer is already wrong. :cry2: :cry2:

 

[MF135]

Seems like overkill to use NPV (Net Present Value) and the Time Value of Money on such a short-term investment....finishing steers. IMHO

I guess ol massey would rather invest lots of money every 7.5 months for a new calf than pay a little for the cost of gain for the additional 5.5 months. Apparently he or she can buy the pounds cheaper on the hoof, than he or she can put it on thru normal feeding. Could have something to do with those purebreed brangus.

You are exposing yourself to substantial risk over those additionaly 5.5 months. I hope your required return is large enough to not only compensate the financial risk, but the non-quantifiable risk such as death/ disease and shrink in general.

This valuation doesn't take into account the the change of purchasing power as a result of inflation. It only determines a discount rate that should be applied to provide a means to compare cash flows at different times on a meaningful "like to like" basis.

Imagine if you could choose between receiving $100 today and $100 in one year, the rational decision is to cash the $100 today.Even though lurker would argue "a dollar is a dollar" :roll: If the money is to be received in one year and assuming the return you could have received if you invested the money today yourself at 5%, you would have to be offered at least $105 in one year so that two options are equivalent (either receiving $100 today or receiving $105 in one year). This is because if you cash $100 today and deposit in an account receiving 5%, you will have $105 in one year.

Now that we have a basic example, surely you can see how this applies to discounting the sum received for finished holsteins at 13 months, compared to the sum received at 7.5 months, so that you can accurately evaluate the two alternatives. The value of the 13 month investment must be discounted by at least the risk-free rate (though cattle require a far higher premium) so that you can compare cash flows.

Once any cross is stabilized, it becomes a "pure" breed.

 

[longtimelurker]

So massey what your telling me is $100 spent on beef cattle in a year is worth $105 at the end of the year, but $100 spent on holstein cattle is still only worth $100 at the end of the year. A dollar is a dollar doesn't matter how you spent it and a year is a year.

 

[TexasBred]

So massey what your telling me is $100 spent on beef cattle in a year is worth $105 at the end of the year, but $100 spent on holstein cattle is still only worth $100 at the end of the year. A dollar is a dollar doesn't matter how you spent it and a year is a year.

Lurker I believe we have a case here where the student is trying to instruct the professor....MF being the student.

 

[AudieWyoming]

I guess it doesn't matter because if you hadn't spent that cash on cattle it would still be safely stuffed away in your mattress or buried in the back yard. @

 

[MF135]

So massey what your telling me is $100 spent on beef cattle in a year is worth $105 at the end of the year, but $100 spent on holstein cattle is still only worth $100 at the end of the year. A dollar is a dollar doesn't matter how you spent it and a year is a year.

No, the value of cash received in 7.5 months is greater than the value of cash received in 13 months. To choose the 13 month investment(holsteins), the return at 13 months must be greater than that of the return at 7.5 months(beefers) plus the interest(the risk free rate at bank) accrued over the additional 5.5 months.

 

[longtimelurker]

So massey what your telling me is $100 spent on beef cattle in a year is worth $105 at the end of the year, but $100 spent on holstein cattle is still only worth $100 at the end of the year. A dollar is a dollar doesn't matter how you spent it and a year is a year.

No, the value of cash received in 7.5 months is greater than the value of cash received in 13 months. To choose the 13 month investment(holsteins), the return at 13 months must be greater than that of the return at 7.5 months(beefers) plus the interest(the risk free rate at bank) accrued over the additional 5.5 months.

Well crap, so the year ends at 7.5 months for beef cattle but it runs 13 months for holstiens?

You know there was a fella on here once who had a 15 month calendar year, you and him should get together.

After the 7.5 months with beef cattle you will need to refill the yard with calves, at a much higher cost per pound than a pound of gain costs, this goes back to your inability to understand days on feed.

 

[MF135]

this goes back to your inability to understand days on feed.

No, It goes back to your inability to apply a discount rate to the additonal days holsteins are on feed. An investment that pays out in 7.5 months has a higher effective annual rate than an investment that pays out in 13 months.

 

[TexasBred]

this goes back to your inability to understand days on feed.

No, It goes back to your inability to apply a discount rate to the additonal days holsteins are on feed. An investment that pays out in 7.5 months has a higher effective annual rate than an investment that pays out in 13 months.

MF..you're also overlooking present value of original purchase. That holstein may have cost Lurker $400 bucks instead of $750.00. (That's in present value $$$)

 

[longtimelurker]

this goes back to your inability to understand days on feed.

No, It goes back to your inability to apply a discount rate to the additonal days holsteins are on feed. An investment that pays out in 7.5 months has a higher effective annual rate than an investment that pays out in 13 months.

MF..you're also overlooking present value of original purchase. That holstein may have cost Lurker $400 bucks instead of $750.00. (That's in present value $$$)

Yep the young man just can't understand a dollar is a dollar and a year is a year.
Breed won't change either of them.

 

[longtimelurker]

this goes back to your inability to understand days on feed.

No, It goes back to your inability to apply a discount rate to the additonal days holsteins are on feed. An investment that pays out in 7.5 months has a higher effective annual rate than an investment that pays out in 13 months.

Okay Massey see if you can follow along.

Same amount of days on feed. 394

Beef
Purchase price: $1161.30 + Feed price: $610.66 = Total Inputs $1771.96
Gross Profit: Steer 1 $1361.22 + Steer 2 $813 = $2174.22

Net Profit $402.26

Holstein
Purchase price: $227.95 + Feed price: $229.69 = Total Inputs $ 457.69
Gross profit: Steer 1 $1226.70 + Steer 2 $ 0 = $1226.70

Net Profit $769.06

Tell me again about present value and discount rate.

 

[F350]

Texasbred took the words out of my mouth. the initial capital outlay delta is being overlooked. also, i don't know where anyone could invest their money and get a decent return these days, so its not like you're missing out on good returns elsewhere.

 

[traderaaron]

this goes back to your inability to understand days on feed.

No, It goes back to your inability to apply a discount rate to the additonal days holsteins are on feed. An investment that pays out in 7.5 months has a higher effective annual rate than an investment that pays out in 13 months.

Okay Massey see if you can follow along.

Same amount of days on feed. 394

Beef
Purchase price: $1161.30 + Feed price: $610.66 = Total Inputs $1771.96
Gross Profit: Steer 1 $1361.22 + Steer 2 $813 = $2174.22

Net Profit $402.26

Holstein
Purchase price: $227.95 + Feed price: $229.69 = Total Inputs $ 457.69
Gross profit: Steer 1 $1226.70 + Steer 2 $ 0 = $1226.70

Net Profit $769.06

Tell me again about present value and discount rate.

Can you explain your math or add some details to that?

 

[longtimelurker]

Holstein in weight 255, out weight 1410, cost of gain $.1989
Beefer in weight 553, out weight 1389, cost of gain $.5363


These are figures right off a close out sheet. For the same time period. Of course there are no shown expenses for vet, meds, protien, minerals or yardage as these price are equal per day regardless of breed.

However in fairness I should include a vet and med bill for the beef breeds in this example, as there will be 2 head of beef steers during this comparable period of time, instead of one. I would have twice the vet and med bill.

 

[traderaaron]

Holstein in weight 255, out weight 1410, cost of gain $.1989
Beefer in weight 553, out weight 1389, cost of gain $.5363


These are figures right off a close out sheet. For the same time period. Of course there are no shown expenses for vet, meds, protien, minerals or yardage as these price are equal per day regardless of breed.

However in fairness I should include a vet and med bill for the beef breeds in this example, as there will be 2 head of beef steers during this comparable period of time, instead of one. I would have twice the vet and med bill.

I am just wondering how you have a cost of gain even on beef steers that is 30% lower than the best feedlot numbers I've seen this year (that's all costs included).

Here's how I equate holstein versus beef steers:

A fat holstein steer this week is right around $87 @1380# and a 300# steer cost $112.75, using the lowest cost of gain I've seen around here of .70 for beef steers the positive cash flow is $106.35.

A fat beet steer this week is $93 and at El Reno I saw 390# steers for $125, at the same .70 cost of gain that is a positive cash flow of $83.40.

As long as you can buy something to replace what you just sold and cover all your incurred costs on what you just sold at a cash flow profit then it doesn't matter whether it's a holstein or beef steer, that's my take, for what it's worth.

 

[longtimelurker]

Holstein in weight 255, out weight 1410, cost of gain $.1989
Beefer in weight 553, out weight 1389, cost of gain $.5363


These are figures right off a close out sheet. For the same time period. Of course there are no shown expenses for vet, meds, protien, minerals or yardage as these price are equal per day regardless of breed.

However in fairness I should include a vet and med bill for the beef breeds in this example, as there will be 2 head of beef steers during this comparable period of time, instead of one. I would have twice the vet and med bill.

I am just wondering how you have a cost of gain even on beef steers that is 30% lower than the best feedlot numbers I've seen this year (that's all costs included).

Here's how I equate holstein versus beef steers:

A fat holstein steer this week is right around $87 @1380# and a 300# steer cost $112.75, using the lowest cost of gain I've seen around here of .70 for beef steers the positive cash flow is $106.35.

A fat beet steer this week is $93 and at El Reno I saw 390# steers for $125, at the same .70 cost of gain that is a positive cash flow of $83.40.

As long as you can buy something to replace what you just sold and cover all your incurred costs on what you just sold at a cash flow profit then it doesn't matter whether it's a holstein or beef steer, that's my take, for what it's worth.

$1.50 corn

 

[TexasBred]

How..havent' seen corn that cheap in years....How Lurker??

 

[MF135]

How..havent' seen corn that cheap in years....How Lurker??

I've ask him this question several time and still no response. $.19 cost of gain???