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Volume 10, Number 3 - March 2004

This Month in Ag Connection

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Taxation Tidbit: Hedging Or Speculating - Depends On Who's At Risk

Too frequently, farm operators with multiple and wholly owned entities become lax regarding which entity initiates hedging or speculative transactions. Consequently, the characterization and timing of loss deductions are at risk. Hedging losses result in ordinary losses which are deductible without limits, while speculative losses are capital losses and net capital losses are limited to a deductible loss of $3,000 per year.

A 2003 Tax Court case, Welter v. Commissioner, clarifies the point that to be considered hedging rather than speculating, the commodity future's transaction must be initiated and maintained by the entity needing the price risk protection. In the Welter case, Mr. Welter formed multiple corporations to carry-on the farming business. However prior to forming the corporations he had been engaged in commodity transactions. Following the forming of the corporations, Mr. Welter continued to maintain the futures account in his personal name and placed various hedging transactions for price risk management related commodities produced by his corporations. The court held the commodity losses were speculative in nature since the hedged commodities belonged to the corporations and not to Mr. Welter, as a shareholder. Thus, the net speculative capital losses were limited to $3,000 per year.

Farmers are increasing their use of hedging in their price risk management strategies. For farmers with multiple organizational entities it is critical they initiate and maintain these hedging accounts in the entity where the price risk exists.

(Author: Parman Green, Farm Business Specialist)

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Feeding Poultry Litter To Ruminants Banned

The USDA's Interim Final Rule on the Mammalian Protein Ban (MPB) now includes a ban on feeding poultry litter to ruminant animals. Poultry litter consists of bedding, spilled feed, feathers, and fecal matter that are collected from poultry facilities. Enforcement of this ban can begin at any time, but the date has not been established. It is suggested that producers not purchase or stockpile any additional poultry litter with the intention of using it as ruminant feed.

The reason for this ban is poultry feed may legally contain protein that is prohibited in ruminant feed (examples are bovine meat and bone meal). The concern is that spillage of feed in the poultry house occurs and that spilled feed is then collected as part of the "poultry litter" and added to ruminant feed.

(Author: Mark Stewart, Livestock Specialist)

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Effect Of Age At Weaning Of Fall Born Calves On Herd Profitability

A five-year research project being conducted at the Forage Systems Research Center is trying to identify the optimal time to wean fall born calves. Producers looking at a fall calving production systems want to know if they should wean calves in April or May to take advantage of the high "grass market" or to allow them to nurse another 60 days to take advantage of the milk their dam will produce come spring grass. To identify the optimal time to wean fall calves, the following questions need to be answered on the impacts these systems have on the cow herself.

To date, there has been a big difference in weaning weight and weaning value (Table 1) due to time of weaning. Udder stress appears to be reduced on the cows weaned in June. Udder scores taken 3 days post-weaning have shown cows with April weaned calves had more udder swelling and larger teat sizes than those weaned in June. There was a very apparent increase in milk production on lush spring grass, even in cows that began lactating in September. Udders that look almost dry in March, when the cows are on hay, get full again when the grass starts growing in April.

Preliminary calf data (Table 1) compiled the first two years of the study suggests that weaning fall born calves in June produces larger calves. When June weaned calves are compared to their earlier weaned (April) counterparts, later weaned calves maintain their weight advantage throughout the summer.

Table 1: Two Year Average Calf Performance of Fall Born Steers and Heifers Weaned At Two Different Times
  Calves Weaned In April Calves Weaned In June
Weight in April (lbs.) 510 508
Weight in June (lbs.) 580 645
ADG April to June 1.25 2.43
Post Weaning Weight-July (lbs.) 598 670
ADG June to July 0.1 0.61
Weaning Value - Based on OSU Four Year rolling average, monthly market data $537.34
Based on an average 500 lb. April price of $105.36
Based on an average 650 lb. June price of $96.64

Preliminary cow data (Table 2) suggests there are no differences in body condition scores or pregnancy rates based on time of weaning. Data from the final three years will be used to strengthen the analysis on calf weights and cow performance while gathering the data needed to evaluate long term impacts of udder stress.

Table 2: Two Year Average Cow Body Condition Score
When Weaned At Two Different Times
  Calves Weaned
In April
Calves Weaned
In June
Cow Condition
5.4 5.4
Cow Condition
5.7 5.3
Cow Condition
6.5 6.4
89% 91%
Cow Condition
5.4 5.4

(Source: Chris Zumbrunnen, Dave Davis and Dennis Jacobs )
(Summary: Mark Stewart, Livestock Specialist)

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Relative Feed Value- A Measure of Quality

There are many publications, articles and even books devoted to explaining testing livestock forages and grains. The University of Nebraska has an excellent publication entitled, "Testing Livestock Feeds for Beef Cattle, Dairy Cattle, Sheep and Horses". The publication explains why you should have your feed tested, what feeds should be analyzed, the methods of feed testing, what analysis make economic sense to do and how to interpret those results once you get them back. The Nebraska guide number is G89-915-A and can be downloaded from the internet at:

Relative Feed Value (RFV) is one component of a feed analysis that is usually listed from a sample sent into the lab. This number is indicative of the hay quality and can be considered a "one stop shop" number. RFV can quickly show a producer how good the forage they are purchasing or feeding is. Basically, the higher the RFV the better the forage quality is. For instance, prime forage/hay has an RFV of over 151. Compare this to forage/hay having an RFV of 74, one could surmise that the forage with an RFV of 74 is pretty low quality and might be considered for bedding and not feed.

If a producer has their hay analyzed for both Acid Detergent Fiber (ADF) and Neutral Detergent Fiber (NDF) they can easily plug and chug the values to get the RFV of forage. If most of you are like me, you might need to remind yourself on what exactly the differences are between NDF and ADF. ADF and NDF are both measurements of a feedstuffs quality and digestibility. In both cases, lower values (not higher) are more desirable because, as most of you know, when a plant matures it becomes less digestible. Neutral detergent fiber (NDF) measures the structural parts of the plant, which includes the plant cell wall. NDF gives the "bulk" or "fill" to the diet, limiting intake. As the plant matures, cell wall content (lignin) of the plant increases, as does NDF, which is not very desirable for forage quality. ADF on the other hand consists not only of lignin, but also silica, insoluble crude protein and ash, which are the least digestive parts of the plant. Lower ADF is preferred because it means higher net energy. Again as the plant matures, ADF increases.

Although RFV is a great way to quickly measure hay quality, do not rely on RFV alone to formulate or develop rations. RFV is an energy intake index and doesn't consider or estimate the amount of either protein or minerals in the forage, which are of course VERY important components of a diet. Below is a table showing the uses and how RFV, NDF and ADF are integral in measuring hay quality.

Uses Analysis Calculations
Prime Dairy, Fresh & High Producers <31 <40 >65 >3.0 >151
Good Dairy, Young Heifers, Excellent For Backgrounding 31-35 40-46 62-65 2.6-3.0 125-151
Good Beef, Older Heifers, Marginal For Dairy Cows 36-40 47-53 58-61 2.3-2.5 103-124
Maintenance For Beef or Dry Dairy Cows 41-42 54-60 56-57 2.0-2.2 87-102
Poor Quality 43-45 61-65 53-55 1.8-1.9 75-86


Digestible Dry Matter (DDM)

DDM% = 88.9-(ADF%*0.779)

Dry Matter Intake (DMI)

DMI (on % of Body Weight) = 120/NDF%

Relative Feed Value (RFV)

RFV% = DDM% * DMI (% of BW)/1.29

BW = Body Weight

(Author: Wendy Flatt, Livestock Specialist)

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New Tool To Synchronize Estrus In Gilts

Cattle producers have had multiple options available to help synchronize estrus in cows and heifers. U.S. swine producers have had only one legal option; PG-600® from Intervet. PG-600 causes growth and ovulation of follicles in gilts that are old enough to cycle, but have not yet begun cycling. It does not help in gilts or sows that are already cycling. This winter Matrix® from Intervet was approved for use in the U.S.

Matrix has some similarities to MGA® for cattle. It is delivered in the feed and prevents follicles from growing on the ovary. Upon withdrawal from the feed following 14 days of feeding, normal follicular growth ensues and gilts show heat in 4-9 days according to the label. Most gilts will be in heat within two or three days of each other. This product could have tremendous utility for systems that do not farrow weekly in that a greater proportion of gilts could be made to fit into the breeding window. Even in weekly systems, if estrus could be accurately controlled it would allow more efficient management of the gilt pool and facilitate gilt development programs.

So is it too good to be true? No, but there are some items to consider. In the U.S. it is being sold as an oil based solution that is topdressed on the feed daily. A pre-measured applicator comes with the product if bought in case lots. It is imperative that each gilt be allowed to eat individually. Over-consumption will not likely be problematic, but underfeeding can result in the development of ovarian cysts. Care must be taken when handling the product as the oil is readily absorbed through the skin, and anyone who handles it should wear non-permeable gloves. And then there's the cost. The same formula has been available for use with horses for years (called Regu-mate®), and it is my understanding that the pricing will be the same. Depending on the supplier I would anticipate it costing at least $1 per day, and up to $2 (so $14-$28 per head). For more information see:

(Author: Tim Safranski, Swine Breeding Specialist, University of Missouri)

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Beef Artificial Insemination School

  • March 23 - 25, 2004
  • 8:30 a.m. to 4:30 p.m. daily
  • For more information, call 573-642-0755.

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Publishing Information

Ag Connection is published monthly for Central Missouri Region producers and is supported by University of Missouri Extension, the Commercial Agriculture program, the Missouri Agricultural Experiment Station and the MU College of Agriculture, Food and Natural Resources. Managing Editor: Kent Shannon.