A comparison of the costs and returns of dry feeding beef cattle against the costs and returns of feed production using Linear programming: A thesis submitted in partial fulfilment of the requirements for the degree of Master of Agricultural Science at Lincoln University

Date on thesis is 1997, graduation conferred to 2001The purpose of this investigation is to reexamine the costs and returns of crop production and dry feeding beef cattle in the South Island of New Zealand and to investigate the effects of changes in price ratios on profitability. Linear programming (LP) was chosen to perform the analysis because of its ability to find the most profitable combination of constrained resources. For each of 28 dryland and 14 irrigated land groups and a range of commonly grown crops the price received for each crop is incremented until the maximum allowable area of the crop is grown. Initially the price is set low enough so that the crop is not included in the solution. The minimum price at which each of 13 representative crops enter the solution is then compared to the 1990 price. With a few exceptions, the difference between the minimum entry prices and the 1990 prices are very small. It was therefore decided to use the 1990 prices in the beef dry feeding model since this price set gives a wider range of feeds for the same time period and under similar conditions. The price required by farmers to grow the 13 representative crops varies between land groups and the presence or absence of irrigation, being dependent on not only the costs and returns for the individual crops but also on rotational constraints. Cashflows and the time value of money are also important in determining the optimal rotation. The cropping model indicates that there is an adequate range of crops which can be profitably grown on farms to support a feed industry at 1990 prices. That is, there is scope to increase feed production, and the prices received by farmers in 1990 for common feeds are close to or above their minimum opportunity price. The second part of the study involves the development of a beef dry feeding model. This model excludes seasonality of feed supply constraints, area constraints and labour constraints. If profitable, an animal is purchased and grown, at a growth rate determined by the model and for a number of weight ranges determined by the model, until sold. Growth rates between 0 .4 kilograms per day and 1.6 kilograms per day are possible within each of 15 fifty-kilogram growth periods. The model shows that with the prevailing price ratio, pasture and forages fed in-situ remain the most profitable system for feeding beef cattle in New Zealand. Without a change in the relative price of beef, feeding dry roughages and concentrates reduces the margin on an average steer eight fold ($682.00 to $82.16). With no change in the relative price of beef, the cost of pasture and forages would have to increase more than fivefold in order for dry roughages and concentrates to become more profitable. The results from this analysis suggest that profit is maximised by grazing beef animals at fast growth rates (minimising daily cost and reducing feed used on non-productive maintenance) to heavy weights. The sensitivities of a number of assumptions (daily charges, the shape of the beef schedule, the buy-in live weight and buy-in price) were tested and found to be unresponsive. A second series of runs was done to investigate whether changes in the prices of different feedstuffs relative to each other and to the price of beef changes the most profitable feeding system and if so at what values. In the first instance the model was run without in-situ feeds, which reduced the margin by a factor of eight. Next the effects of changes to the prices of groups of feeds was investigated by applying a multiplier to all feeds within each of the main groups of feeds in turn. For the in-situ price multiplier and roughage price multiplier it is not until the cost of supplying pasture increases by a factor of five that concentrate feeding becomes economic. It is not surprising that the cost per unit energy for barley (the concentrate brought into the solution) and luceme hay are approximately five times more expensive than grazed pasture. The model shows that where there is no barrier to market entry based on particular quality traits associated with concentrate feeding, feeding of anything other than in-situ forages is sub-optimal in terms of profit. Changes in the relative beef price do not alter this conclusion so that premiums, unless they are tied to concentrate feeding per se, will not offset the additional cost of such feed. Moreover, the changes in relative feed prices necessary to change the optimum ration to include concentrate feeds are such as to be most unlikely to occur in New Zealand in the foreseeable future. A final set of runs was undertaken to investigate whether there are any interactions between relative prices of the most profitable feeding policy. One minor interaction was found but this had a minimal effect on the optimum ration. The results obtained from the beef dry feeding model can be applied to a wide range of beef feeding situations, ranging from supplementary feeding to more traditional feedlot operations, because capital has not been included in the analysis. The use of price ratios between feeds and beef prices ensure that the analysis is not only applicable to the data used here but can be applied more generally