F350
Well-known member
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.F350":2ts8p3ms said: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:F350":2ftne3q3 said:Seems like overkill to use NPV (Net Present Value) and the Time Value of Money on such a short-term investment....finishing steers. IMHO
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.longtimelurker":g214njq4 said: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.F350":g214njq4 said:Seems like overkill to use NPV (Net Present Value) and the Time Value of Money on such a short-term investment....finishing steers. IMHO
Lurker I believe we have a case here where the student is trying to instruct the professor....MF being the student.longtimelurker":31rsq615 said: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":2b8lu50z said: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.
Well crap, so the year ends at 7.5 months for beef cattle but it runs 13 months for holstiens?MF135":3k82q34p said: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":3k82q34p said: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.
longtimelurker":3tcc7mue said:this goes back to your inability to understand days on feed.
MF135":2vyniwwi said:longtimelurker":2vyniwwi said: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.
Yep the young man just can't understand a dollar is a dollar and a year is a year.TexasBred":a2b11jyv said:MF135":a2b11jyv said:longtimelurker":a2b11jyv said: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 $$$)
Okay Massey see if you can follow along.MF135":1ro0so7w said:longtimelurker":1ro0so7w said: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.
longtimelurker":3okcvrgs said:Okay Massey see if you can follow along.MF135":3okcvrgs said:longtimelurker":3okcvrgs said: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.
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.
longtimelurker":zk9mi86s said: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.
$1.50 corntraderaaron":mzrq914f said:longtimelurker":mzrq914f said: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.
I've ask him this question several time and still no response. $.19 cost of gain???TexasBred":3sekcrfn said:How..havent' seen corn that cheap in years....How Lurker??