Gregory A. Ibendahl, John D. Anderson and Leslie H. Anderson
A cow that fails to conceive must either be kept for a year without revenue or replaced by a bred heifer. This choice is a unique case of comparing investments with different…
Abstract
A cow that fails to conceive must either be kept for a year without revenue or replaced by a bred heifer. This choice is a unique case of comparing investments with different economic lives because the potential replacement asset is just a newer version of the old asset. In this study, a net present value model is developed that eliminates the problem of finding a common timeframe. Results indicate there are often times producers should keep the open cow. Whenever feed costs are low, the price differential between cull cows and replacement heifers is high, or the calf crop value is low, retaining open cows becomes more desirable.
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Allen M. Featherstone, Gregory A. Ibendahl, J. Randy Winter and Aslihan Spaulding
The structure of U.S. agriculture is a topic of relevance to farmers, policy makers, farm organizations, and academics. Over the last century, farm financial structure issues have…
Abstract
The structure of U.S. agriculture is a topic of relevance to farmers, policy makers, farm organizations, and academics. Over the last century, farm financial structure issues have become extremely important as the United States moved from an agrarian economy to a more industrialized one. Traditionally analyzed topics such as optimal capital structure, equity capital markets, entry into production agriculture by beginning farmers, and tax issues remain important. Societal effects caused by changing farm financial structure and the effect on the rural landscape are issues needing further research. Finally, research is needed on farm financial structure changes in other regions of the world that may affect the competitiveness of U.S. agriculture.
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Gregory Ibendahl, Matthew Farrell, Stan Spurlock and Jesse Tack
The cotton industry has seen many technological advances throughout history that have greatly decreased the number of labor hours required to produce a bale of cotton. The latest…
Abstract
Purpose
The cotton industry has seen many technological advances throughout history that have greatly decreased the number of labor hours required to produce a bale of cotton. The latest advancement is a harvesting system that replaces the harvester, boll buggy, and module builder with a single machine. This is an asset replacement decision where there are multiple assets being replaced but the old technology (the defender assets) may all have different remaining lives and optimal lifespans. The purpose of this paper is to find the optimal time to replace the multiple defender assets with a single challenger asset (the improved technology). The goal is to determine if the ages of the boll buggy and the module builder affect the replacement age of the conventional picker.
Design/methodology/approach
The paper extends the Perrin model to allow for multiple defender assets.
Findings
The paper finds that the supporting assets do sometimes affect the decision to replace a conventional cotton picker. If the supporting assets are newer, then the replacement decision may be delayed and if the supporting assets are older then the replacement decision may be accelerated. Field efficiency can affect the decision as well.
Originality/value
While the Perrin model has been used extensively, the authors believe the application to a multiple asset defender is unique. Although this type of replacement decision is not common, there could be other applications as new technology is introduced on the farm.
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Christopher N. Boyer, Andrew P. Griffith and Karen L. DeLong
The objective of this research was to determine the optimal age and pregnancy status for buying and selling replacement of beef females for risk-neutral and risk-averse producers.
Abstract
Purpose
The objective of this research was to determine the optimal age and pregnancy status for buying and selling replacement of beef females for risk-neutral and risk-averse producers.
Design/methodology/approach
A hedonic pricing model was estimated to measure how age, pregnancy status, breed and cull cow prices impact the sale price of these cattle. Data came from an annual heifer and cow sale in Tennessee between 2009 and 2018. A financial simulation model was developed to generate distributions of net present value (NPV) for buying replacement females at various ages and pregnancy status and then selling that female at various ages and pregnancy status.
Findings
The hedonic pricing model indicates sale prices were highest for five-year-old cows that were between four to five months pregnant. NPV was higher for buying heifers versus buying cows and for buying an open female versus a pregnant female. Regardless of age and pregnancy status when purchased, NPV was higher when the female was sold as pregnant prior to the end of her productive life. The risk analysis showed that risk aversion, buying older open cows and selling them as pregnant earlier in their productive life was preferred
Originality/value
This research offers unique insight into how pregnancy status and age at sale impacts the animal's NPV while considering risk. These results have implications for educating producers on purchasing and selling decisions of heifers and cows as well as for lenders who finance these purchases.