Woodward, Okla. — One of the main concerns of agriculture producers during the current drought is deciding whether or not to sell their cattle.

“It all depends on your finances and situation,” said Area Extension Farm Management Specialist Dr. Rodney Jones during an OSU Extension drought meeting Thursday at High Plains Technology Center.

Jones said producers need to compare the “net costs” vs. the “net benefits” of keeping or selling their cattle.

Jones said there are many factors to consider before making the decision.

“The main cost will be feed and that will probably be $2 to $3 per day,” he said.

Jones said if the producers sell they will also be able to eliminate other expenses such as labor, repairs and veterinary costs.

Producers also need to consider the price they may receive - something that varies from one situation to the next.

“The prices of the cattle will certainly be lower than they would be if they were not in a drought,” he said.

Another factor to consider is the how long the drought might last.

“Do you think we’ll receive moisture soon or do you think the drought will go on for a while,” Jones said.

Jones said if the drought continues it will be difficult to establish winter forage for the cattle.

“My assumption is the drought is long term based on the current forecasts,” he said.

Jones said the “driving factor” in the decision of keeping and selling is the cost of the cattle now and the cost of replacement cattle in the future.

“We’re not comparing apples to apples because you’re probably selling an early bred calf now, but getting cow with a calf in the spring,” Jones said. “It just depends on what you’re selling and plan to purchase.”

Extension Farm Management/Taxation Specialist JC Hobbs said there are tax related issues to consider if a producer decides to sell the cattle.

Hobbs said there are 2 different tax treatments - involuntary conversion and deferral income for one year.

“The first (involuntary conversion) applies to the sale of livestock held for draft, breeding or dairy purposes,” Hobbs said. “The second (deferral of income for one year) applies to sales of any livestock.”

Under involuntary conversion, producers selling livestock they must purchase replacement livestock within a certain amount of time.

“If producers sell their cattle in 2011 due to the drought, they have until the end of 2014 to purchase replacement livestock,” he said.

But, any livestock they purchase must be used for the same purpose as the cattle that were sold.

“They can’t sell a dairy cow and then buy back a beef cow,” Hobbs said. “Replacement livestock must be used for the same









purpose as those sold, dairy for dairy and breeding for breeding.”

Hobbs gave an example of involuntary conversion.

“A rancher normally sells 40 head of cows annually, but due to the drought in 2011, he sells 100 head of cows,” Hobbs said. “He can elect to defer recognition of income by attaching a statement to his tax return stating he will be replacing the 60 animals sold in excess of normal.”

He said if the rancher sold the 60 head for $60,000 he must buy back at least $60,000 of replacement cows in the required time frame.

Under deferral of income for one year, the drought, flood, or other conditions must be so severe that an area affecting the taxpayer’s area is designated as eligible for federal disaster assistance, Hobbs said.

However, he said, there are requirements that must be met by the tax payer/farmer:  principal business must be farming, must use the cash method of accounting, must show that the animals would normally have been sold in the following year and the weather related condition that caused the area to be declared eligible for federal assistance must have caused the sale.

“The livestock do not have to be raised or sold in the declared disaster area, but the weather related condition that caused an area to be declared eligible for federal assistance must have caused the premature sale of the livestock,” he said, noting the sale can take place before or after any declaration.

The taxpayer’s history is used to determine the number of animals that would have normally been sold compared to those sold prematurely..

“The sale proceeds from these animals that were sold prematurely can be deferred and reported as income in the year following the year of the sale,” Hobbs said.

For example

“A rancher normally sells 40 heard of cows annually, but due to the drought conditions in 2011 he sells 50 head of cows,” Hobbs said. “He elects to defer recognition of income for one year for the 10 head to cows by attaching a statement to his taxes showing that he normally sells 40 (annually), but due to the weather related conditions his county was declared a federal disaster area thus he is electing to defer the income for the 10 cows to 2012.”

OTHER TOPICS DISCUSSED

Area Extension Livestock Specialist Greg Highfill said the state is in an exceptional drought.

He pointed out Woodward County has received just 8.54 inches of rain this year and has recorded 38 days with temperatures over 100 degrees.

Area Extension Agronomist Roger Gribble talked about the effect on crops.

“Some people have been lucky and got rain recently,” he said, noting it was not a lot of rain to make a difference in the drought conditions.

For crops to grow properly 3 inches of moisture must be stored in the first 6 inches of the ground.

However, due to the temperature it is making it hard to store the moisture, he said.

Ellis County Extension Agriculture Educator Justin Barr said hay is hard to come by during these weather conditions.

“Hay is very unavailable at this time. You could possibly go out of Northwest Oklahoma or even the state to get it,” he said.

Barr said when you have hay you don’t want to overfeed or underfeed the cattle.

“If buying hay try to make it last as long as possible,” he said.

Extension Beef Cattle Specialist Dr. David Lalman said the type of hay feeder used can sometimes make the hay last longer.

“When purchasing a hay feeder, determine the effects of the feeder such as hay waste and hay intake and animal performance,” Lalman said. “There are feeders that make wasting hay difficult for the cattle and others make it easier for the cattle.”

Area Livestock Specialist Dr. Britt Hicks discussed nitrates and aflatoxin in forages.

“There have been over 800 nitrate samples which is 5 times more than normal due to the drought,” Hicks said.

 He said to test any suspicious forage.

“When testing be sure it’s a good sample, because without a good sample the test is worthless,” Hicks said.

Hicks said corn hay can contain aflatoxin due to the drought.

“If feeding it (corn hay with aflatoxin) to dairy cattle it can lower their mil production,” he said.