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OSU Extension - Fairfield County

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Phone: 740.653.5419

and the

OSU Extension BEEF Team

BEEF Cattle questions may be directed to the OSU Extension BEEF Team through Stephen Boyles or Stan Smith, Editor

Previous issues of the BEEF Cattle letter

Issue # 369

December 10, 2003

Are High Cattle Prices Going To Cause You Income Tax Problems? - David Miller, Ag and NR Specialist, Farm Management, OSU Extension

If you are in the cattle business, there is a good chance this year's farm income is going to be higher than normal. Higher income may mean your 2003 tax liability could be higher also. No one wants any surprises when the tax bill is due next year so what can be done now?

First, determine where you are regarding income and expenses for the year-to-date. Don't forget to include all non-farm income and deductible expenses. No one likes to keep records, but a good set of complete and up-to-date records are essential for this. Computerized financial records are really useful for this purpose and make this task a lot easier. Once you've estimated your 2003 net farm income and off-farm income, have your tax preparer estimate your income and self-employment tax liability. If you have access to the web, some financial websites have tax estimators that are fairly easy to use.

OK, income is up and the tax bill is too high, so what are the alternatives? Pre-payment of 2004 expenses is an excellent tax management strategy. Fill up the fuel tanks soon. Purchase needed feed inventories. Buy next year's seed, fertilizer and chemicals in 2003. Buy next year's fencing materials and other repair items before January 1. To be deductible for 2003, these have to be actual purchases and not just deposits to be applied towards next year's operating needs. For machinery and equipment purchased and placed in service in 2003, consider using additional 179 expensing to reduce taxable income. While buying equipment just to reduce taxes is not a recommendation, replacing needed equipment now rather than waiting until next year might make sense for 2003. If you qualify, a deductible IRA will reduce your tax bill and add to your retirement funds.

Nothing makes year-end tax management easier than plenty of cash, but what if you are short of cash? Borrowed funds from a line of credit can be used to pre-pay 2004 expenses. Using a credit card to pay for these purchases is the same as borrowing money from the bank. Business purchases made with a credit card in December 2003 are deductible in 2003 even though the credit card bill is not paid until 2004. However, charging purchases at the farm supply store are not deductible until the farm supply store bill is actually paid. But if you don't have enough cash and you use either a credit card or an operating line to pre-pay 2004 expenses, make sure you will have the money to repay the loan or the credit card bill later. Otherwise, don't do it! And don't even consider using a cash advance from the latest "pre-approved" credit card offer you received no matter how good the teaser rate is!

Having higher income due to higher cattle prices is a nice problem to have. However you need to do some tax planning prior to year's end to estimate your 2003 tax bill. Prepaying expenses is a good tax management strategy in high income years, especially if you have the needed cash and don't have to borrow. As always, consult with your tax advisor about your situation, and to get an early start on the paperwork, go to this link and download any IRS Forms you might need.

Contact Steve Boyles (boyles.4@osu.edu, 614-292-7669) or Dan Frobose (frobose.1@osu.edu, 419-354-6916) if you have any questions about the program.

Ensuring Future Success of Pregnant Replacement Heifers - John B. Hall, Extension Animal Scientist, Beef, VA Tech

Proper pregnant heifer management is essential for the successful transition to a productive cow. By the time a pregnant heifer will calve, a typical beef producer will have between $900 to $1500 dollars invested in her. Pregnant replacement heifers are the highest expense - lowest return animal on the beef farm, as they have generated no income for the operation to this point. Careful systematic management of the pregnant replacement heifer will reap large benefits. Key management areas are: Prepartum (precalving) nutrition, Calving management, Calving assistance, Neonatal calf management, Postpartum nutrition, and Rebreeding.

Pre-partum nutrition: Management of the pregnant replacement heifer actually starts at pregnancy examination when heifers should be given a booster vaccination for leptospirosis (Lepto). As soon as they leave the preg. check chute, pregnant heifers need to be treated as a separate group. In smaller operations, the most reasonable option may be to group pregnant heifers with virgin replacement heifers or with young cows pregnant with their second calf. The objective is to have pregnant heifers reach 90% of their mature weight by calving with a body condition score of 6 or 7. The average heifer in Virginia (1200# mature weight) should weigh 1080 to 1100 lbs. at calving. Heifers need to gain 1.25 to 1.75 lbs. per day between pregnancy diagnosis and 60 days before calving. Most or all of this gain can be achieved with high quality forage including stockpiled fescue, alfalfa-grass hay, silage or high quality pasture. Supplementation in the form of corn, corn gluten, soy hulls or barley may be needed at the rate of 3 to 5 lbs. per heifer per day. A balanced complete high selenium mineral should be fed free choice. During the last 60 days before calving, heifers will need to gain 2.5 lbs. per day. About 60% of this gain is continued growth and development of the heifer while the remaining 40% of the gain is the rapid growth of the calf and supporting structures (uterus, placenta and fluid). Restricting nutrition during the last 60 days before calving will not reduce calving problems and may increase calf losses (Table 1). In addition to high quality forages, heifers will need to be fed 6 to 10 lbs. or about 1% of their body weight in grain each day. The amount and type of grain will depend on the forage test. Recent research indicates that there may be an advantage to substituting 3 to 4 lbs. of whole cottonseed or whole soybeans for part of the grain. The added fat in these two oilseeds increases calf vigor and reduces the time heifers need to breed back.

Table 1. Impacts of feed restriction in late gestation on first-calf heifers and their calves.

	Nutrition level during last	60 days before calving
Production Trait	Restricted	Normal to High
Heifer body weight at calving	<85% of mature weight	90%+ of mature wgt
Heifer body condition score at calving	4 or 5	6 or 7
Days from calving to heifers first cycle	120 +	75-110
Calf birth weight	5-8 lbs lower than normal	Up to 5 lbs. heavier
Calving difficulty	Increased	No effect
Calf vigor	Decreased	Increased
Incidence of diarrhea and respiratory infection	Increased	Normal
% live calves at 24 hours	80%	90%
% calves alive at weaning	70%	85%
Pounds of calf weaned per cow calving	Reduced by 50 to 75 lbs.	Normal for herd

Adapted from Corah et al, 1975;

Calving management: Heifers should be bred to calve two to four weeks ahead of the cowherd. The earlier calving date will give heifers more time to recover from calving and begin estrous cycles by the start of the breeding season. An added advantage of calving ahead of the cowherd is more attention can be given to the heifer and her calf. Heifers should calve in a clean, well-drained area that can easily be observed 4 to 6 times a day. A southeast-facing slope that can be seen from the house or road is ideal. Clean pastures are not only free of mud and manure, but they should be areas where cows have not grazed for several months.

Especially clean areas for calving heifers are critical because heifers have lower levels of immunity than mature cows. As a result, they have lower antibody levels in their colostrum. Heifers also produce fewer pounds of colostrum than cows. Therefore, calves from heifers have less disease resistance than calves from cows. Calving heifers ahead of cows decreases the exposure of these calves to disease organisms that cause scours and respiratory disease. Calving assistance. Approximately 20% to 25% of the beef heifers in the US will require some assistance in delivering their first calf. With proper development and service sire selection, the assistance rate can be reduced to about 10%. In comparison, only 2 to 5 % of mature cows will require assistance.

Producers must be prepared to assist heifers with calving. Producers need to know the signs of labor in cattle. Several good publications and videos are available for a refresher on stages of labor and when to assist. Heifers should be assisted at the first sign of trouble. Research indicates that heifers that are allowed to struggle during delivery have calves that are less vigorous and more susceptible to disease. In addition, heifers that experience dystocia have a 10 to 15% lower rebreeding rate. That's why checking heifers frequently is important.

If heifers are in hard (second stage) labor, they should be checked for problems after 30 minutes to 1 hour without any progress towards delivery. As long as the cervix is well dilated and no malpresentations exist, delivery of the calf can be assisted. Producers should understand how to solve common, simple malpresentations such as a leg back or head turned. A veterinarian should correct more difficult malpresentations. A veterinarian should be called if producers have made no progress towards delivery after assisting heifers for 1/2 hour.

Neonatal calf management: In addition to assisting heifers with delivery, producers may have to help calves during their first hours or day of life. Normal healthy calves should be standing about 1 hour after birth and nursing within 2 hours. Any calf that has not nursed within 4 hours of birth should be assisted with nursing or tube fed warm (101 F) colostrum. Research indicates that the longer after birth a calf takes to nurse the more likely it is to acquire a calfhood illness or die of exposure. Nursing assistance will require restraint of the heifer in a headgate. A facility with a drop panel to allow positioning of the calf beside the cow is invaluable. Many good commercial calving assistance stalls are available for $1500 to $2500. Only a few calves have to be saved to pay for this piece of equipment.

Some heifers are a little slow to catch on to the idea of motherhood. Placing these heifers and their calf in a clean, well lit maternity stall for 48 to 72 hours will often help the cow and calf "mother-up". By no means should every pair be placed in a maternity stall. This only leads to higher incidence of scours.

Newborn calves need to be monitored for signs of hypothermia. Because of their lower birth weight and decreased colostrum consumption, calves born to first-calf heifers are more susceptible to hypothermia. Signs of hypothermia include lethargy, decreased suckling reflex, and cool limbs and mouth. Calves that are chilled need to be brought inside and warmed slowly in a warm room or calf-warmer. Tube feeding warm colostrum will help in re-warming the calf.

Postpartum nutrition: Although body condition score at calving has a dramatic effect on the percentage of first-calf heifers that rebreed, nutrition after calving will also effect pregnancy rates. First-calf heifers need special nutritional treatment. Remember these heifers are still growing as well as lactating and resuming estrous cycles. After calving, the energy requirement for a lactating first-calf heifer increases by 30% and protein requirement by 40% compared to late gestation. First-calf heifers should be fed separately from the mature cowherd. These "new moms" should get the highest quality forage available. Under most conditions, first-calf heifers will require supplemental feeding of 8 to 12 pounds of a high-energy, moderate-protein supplement. Supplements such as 50% corn-50% corn gluten or 80% corn -20% soybean meal will meet the requirements. A high magnesium complete mineral should be fed free choice as well. Contact your Animal Science Extension Agent or nutritionist for assistance with planning a feeding program.

Rebreeding: If first-calf heifers were in BCS 6 or 7 at calving and have been feed a balanced diet after calving, she should not experience rebreeding problems. However, synchronizing these heifers for breeding, even natural service, will "kick start" a few heifers and reduce the interval from calving to rebreeding. Including a progestin such as MGA or a CIDR as part of the synchronization program will increase rebreeding success. Also, first-calf heifers can benefit from 48-hour calf removal at the beginning of the breeding season.

Weekly Purcell Agricultural Commodity Market Report for December 9, 2003

Wayne D. Purcell, Agricultural and Applied Economics, Virginia Tech

http://www.ext.vt.edu/news/periodicals/purcell/

Choice box beef prices appeared to be stabilizing in the $156-$157 area on Monday. Cash cattle trade will be around $100 later this week and well above the $97 close in December futures on Monday. The expiring December managed a new high at $99.92 last week, pushed up by the strong cash prices. The February contract recorded a key reversal top last Wednesday when it recorded a new high at $94.95 and then closed limit down on the day. The markets are lower again on Tuesday. I repeat general advice to maintain short hedges in this market out through April and answer margin calls if necessary. This is not a normal market, and we cannot use normal and tested selective hedging strategies in these unusual conditions.

In feeder cattle, I would continue to sell rallies to the recent $95.35 high on the March contract. Contract high is $97.45 from mid-October, but we will not see that high challenged again. Keep in mind that a $95 March future is pricing cattle into the feedlot that would finish in summer, and the August live cattle futures closed at $74.22 on Monday. A premium of over $23 in March futures is too much and cannot be sustained. Looking ahead, March feeder cattle futures will come down, August live cattle futures will trade up, or both will occur to get back to sustainable economic relationships. Tuesday's lower prices suggest the immediate need is for lower March feeder cattle.

Visit the OSU Beef Team calendar of meetings and upcoming events

BEEF Cattle is a weekly publication of Ohio State University Extension in Fairfield County and the OSU Beef Team. Contributors include members of the Beef Team and other beef cattle specialists and economists from across the U.S.

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