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Overview of APHIS’ Indemnity Calculators Stephen L. Ott, Phd Livestock Appraisal-Indemnity-Compensation Specialist.

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Presentation on theme: "Overview of APHIS’ Indemnity Calculators Stephen L. Ott, Phd Livestock Appraisal-Indemnity-Compensation Specialist."— Presentation transcript:

1 Overview of APHIS’ Indemnity Calculators Stephen L. Ott, Phd Livestock Appraisal-Indemnity-Compensation Specialist

2 Available Appraisal Calculators (Spreadsheets) Beef  Breeding, Unweaned Calves, Feeder- Stockers, Feedlot Dairy  Calves, Heifer Replacements, Milk Cows Whitetail Deer  Fawns, Bucks, Does Poultry  Broilers (meat & breeders), Turkeys (meat & breeders), and Table Egg LayersSwine  Breeders, Market Pigs & Hogs

3 Steps in Determining Value via Sales Comparison Approach Assess Asset Quality  Role of VS field personnel Gather Sale Prices of Comparable Assets  Role of AICS  Field Personnel if doing own appraisal  Use publicly reported auction prices  Preferably USDA-AMS reported prices

4 Steps in Determining Value via Sales Comparison Approach Adjust Value For Quality Differences  Appraisal calculators perform this function  Consequently, their appraisal values should be viewed as market based values

5 An Animal Located at Its Premise Will Have ____ Value When Compared to Its Upcoming Auction Barn Selling Price A. Less B. Same C. More

6 Premise Valuation Adjustment Auction Sale Prices: prices paid by buyers Seller pays commission, yardage fees, check-off funds Also animals must be transported to the auction barn

7 Premise Valuation Adjustment Consequently, the net value received by an owner for selling an animal equals the selling price minus various marketing and transportation costs This net value to the owner is what the calculators attempt to estimate

8 If a Ranch’s Business is Producing Beef for Direct Sale to Consumers, Then Animal Value Should Based Upon Its ____ Form A. Live B. Carcass or Meat

9 Form Matters Calculators are for current condition of the animal at time of depopulation, i.e. live Some producers will argue they should receive their planned future selling price  unweaned calves valued as weaned calves  beef steers valued at their direct sale meat value  cervids as the value charged for hunting them

10 Form Matters This higher value desired is associated with a change in future condition  Lighter to Heavier  Unweaned to Weaned  Live to Harvested Change in form has a cost  When additional costs are accounted current market value is obtained This extra value could also be thought as revenue and APHIS doesn’t pay for lost revenue

11 Beef Calculator

12 Originally Developed by Dr. Darrel Peel, Beef Marketing Specialist, Oklahoma State University  For Commercial Herds  Breeding Values are function of national slaughter value for 500 lb cutter grade carcass with fixed regional adjustments  Feeder Values based upon Oklahoma market prices with fixed regional adjustments Complete Revision for 2014  Also for Commercial Herds

13 Breeding Females Both Breeding Cows and Cow-Calf Pairs Based upon regression analysis of USDA- AMS Oklahoma auction prices  Only Oklahoma auctions included quality and black hide parameters in their price reporting

14 Breeding Cows Regression Equation Value ($/head) is a function of  slaughter value (weight x cull cow price),  age,  400 lb feeder price,  pregnancy statue (1 st, 2 nd, 3 rd trimester),  if high quality,  if black hide

15 Cow-Calf Pair Regression Equation Value ($/pair) is a function  slaughter value (cow weight x cull price),  age,  calf value (calf weight x calf price),  if high quality,  if black hide

16 Breeding Females Additional adjustments (from other data sources):  if open for breeding cow,  if pregnant for cow-calf pairs,  if breed registered,  regional differences

17 Breeding Females User Data Entry:  cow weight and age,  calf weight (if applicable),  pregnancy status,  if high quality,  if black hide,  if breed registered,  region

18 Being Breed Registered Impacts Commercial Cow Value A. Very little B. < 5% C. 5-10% D. > 10%

19 Breeding Bulls & Cull Cow Prices based upon USDA:AMS’ National Weekly Direct Cow and Bull Report Cull cow grades: premium white, breaker (commercial), boner (utility), cutter (canner) Bulls, single meat grade Regional Adjustment User Data Entry: weight, cull cow grade, region

20 Feeders & Stockers Prices from Oklahoma auction markets  Steers: Medium & Large, No. 1; 300 – 1000 lbs  Heifers: Medium & Large, No. 1; 300 – 950 lbs  Price for lbs is imputed  Bulls: Medium & Large, No. 1; 400 – 750 lbs

21 Feeders & Stockers Adjustments  Regional Differences from Peel’s feeder cattle calculator  Holstein Steers: 75% of Beef Steer prices  No adjustment for black hide, already top quality User Data Entry: weight, sex, region, if Holstein

22 Feeders & Stockers: Unweaned Calves Useful if need to split pairs, value cow as breeding female and calf as unweaned calf A slide factor from analysis of light weight calves at Dodge City, KS auction is used to adjust feeder prices Adjustments for regional differences No adjustment for quality or black hide User Data Entry: calf weight and sex, region of country

23 Fats or Feedlot National value for animals lbs Prices from AMS’ National Weekly Direct Slaughter Cattle Report—Formulated and Forward Contract Cattle type: beef steers, beef heifers, dairy steers & heifers Grade: choice & select Prices adjusted downward if carcass weight is greater than 900 lbs Data Entry: number head in each cattle type, weight, and grade categories

24 Dairy Calculators

25 Milk Cow Calculator Has been in use for several years  Five major revisions, plus minor adjustments  Last major revision: May, 2013 Earlier version reviewed by Dr. David Anderson, Professor and Extension Economist, Texas A&M University

26 Appraisal Value of a Dairy Cow Appraisal value is based upon expected value of future dairy production plus current cull value It is determined through a combination of sales comparison and income appraisal methodologies

27 Total Expected Milk Production Expected remaining lactations  Based upon published analysis of Dairy Herd Improvement (DHI) data Total Expected Milk Production (lbs / cow) = expected remaining lactations = expected remaining lactations x DHI average milk production (lbs / cow) x DHI average milk production (lbs / cow) for both Holsteins & Jerseys for both Holsteins & Jerseys

28 Value of Expected Calf Production Expected number of calves a function of expected number of remaining lactations  Adjusted for stillborns and death loss at calving Expected Value ($ / cow) = expected calves = expected calves x calf price (avg. of male & female) x calf price (avg. of male & female)  Calf prices from Dairy Replacement Calculator

29 Milk Production Premium Total milk production premium ($/cow) = Springer price (Holstein & Jerseys) = Springer price (Holstein & Jerseys) – avg. cull value (Holstein & Jerseys) – avg. cull value (Holstein & Jerseys) – value of expected calves to be born – value of expected calves to be born Per pound milk production premium = total milk production premium = total milk production premium ÷ total expected milk production ÷ total expected milk production of DHI avg. Holstein or Jersey of DHI avg. Holstein or Jersey

30 Individual Cow Appraisal Value Appraisal Value ($/head) = + Value of expected milk production  Per pound milk production premium x 305 ME milk production x expected remaining lactations + Value of expected calf production  expected births x newborn survival rate x calf price + Salvage (cull) value  Current weight x cull cow price  Cull cow price is function of both weight (discount for being light) and quality grade

31 Adjustments Other breeds use their own weight, but use Holstein per pound milk production premium and calf value Milk production is adjusted to reflect the impact butterfat content has on milk price Increase calf value if have a positive Predicted Transmitting Ability Net Merit score (Merit $)  Generally for breed registered cows Two Regions: East and West of Mississippi River

32 Price Inputs Springer Holstein Heifer  Most common of dairy cow prices  19 Auctions across the country  Assume prices are for Holsteins unless stated otherwise Cull cow price ($/cwt)  From USDA-AMS’ National Weekly Direct Cow and Bull Report of carcasses 500 lbs and up

33 User Input Parameters The Milk Cow Calculator is very user data intensive  11 user entered parameters Good News: the calculator has default values for every input parameter  Some default values are a function of breed and lactation

34 Milk Production Parameters Lactation 305 ME production (lbs) 305 ME Milk Butterfat (%) Days-in-milk Alternatively: Have calculator determine 305 ME based on:  Daily Milk Production (lbs)  Herd Milk Production Avg. (lbs / cow)  Milk Butterfat (%)  Days-in-milk  Lactation

35 Cull Cow Parameters Current weight (lbs):  Cull price is reduced for cows having carcass less than 500 lbs  Default cull weights are function of breed and lactation Quality grades: premium white, commercial (aka breaker), utility (aka boner), or cutter/canner  Default values: 1 st lactation: commercial; 2 nd lactation: utility; 3 rd lactation and greater: cutter

36 Pregnancy Status Probability will be pregnant by 280 days-in-milk  If open too many days-in-milk, then pregnancy probability begins to decline  Value less than 100% reduces number of expected future lactations  Default 100% if < 180 DIM, then declines to 0% by 280 DIM 0% probability implies the cow will be culled at end of current lactation

37 Breed Registered Parameters If registered, initial value is increased by $50  Value of improved genetics is reflected in milk production and value of calves sold Net Merit $ Value  Positive value increases calf value  Default value is $0

38 Dairy Replacement Calculator Price Inputs  Holstein springers, Holstein short-breds, Holstein bull & heifer calves, beef feeder prices Appraisal values are linear Interpolation between above values  With increases for being weaned and bred Breed Adjustment based upon relative appraisal value of 1 st lactation, 0 DIM cows East and West Regions

39 Poultry

40 Poultry Value Determined Using Income and Cost-of-Production Appraisal Methodologies Based upon industry cost and productivity data supplied by Agri-Stats, a benchmarking company Wholesale meat – egg prices from USDA:AMS 10% of gross margin is allocated back to bird value

41 Poultry Tables of Values are Generated  Day-of-age for meat birds  Week-of-age for breeders Broilers: Meat & Breeders Turkeys: Meat & Breeders Table Egg Layers User Data Requirement: bird type, number of head, age

42 Swine Calculators

43 Piglets & Feeders Prices  lb early weaned pigs  Assume 11 lb  40 lb feeder pigs  USDA-AMS’ National Direct Feeder Pig Report Value: linear interpolation between 11 lb piglet and 40 lb feeder Assumed Quality: No. 1 & 2  Discount if No. 3 or 4 User Data Entry: number of animals in each weight - quality category

44 Grower-Finishers & Slaughter Hogs Grower-Finisher Value  Price: USDA-AMS’ Weekly Direct Swine Report  National Negotiated Live (slaughter) price  Base weight: 240 lbs  Linear interpolation between 40 lb & 240 lb values Slaughter Hog Value  Weight x Slaughter Price Discount if No. 3 or 4 Quality User Data Entry: number of head in each weight – quality category

45 Breeding Females Income Approach  Sow value function of expected number of weaned piglets produced and their value  Cost based upon Iowa State University Extension farrowing budget  Positive gross margin generates a premium for breeding gilts  10% of gross margin is allocated back to gilt value  Also value of weaned gilts  Use value of weaned gilts to determine value of sows in multiplier herds

46 Breeding Females Values Generate  Commercial Herds: Gilt – 9 th Parity  Multiplier Herds: Gilt – 6 th Parity Price Inputs  Early Weaned Piglets  Sow Slaughter Prices  Corn & Soybean Meal Prices User Data Entry: number of females in each herd type – parity combination

47 Final Thought Calculators Are a Work- in-Progress Changes Due To:  Data Availability  Alternative – Better Approaches to Determining Value  Seedstock Animals  Feedback from Users

48 Stephen L. Ott Appraisal-Indemnity-Compensation Specialist (office) (cell)


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