Animal Unit Months

Here’s more math for figuring out how to feed our livestock while making a good living on leased pasture. Even if math isn’t your strong suit, we take it one step at a time so that it’s as easy as it can be.

Figuring pasture use rates by Animal Unit (AUM) is more common in the western United States where it is the basis for public lands leased to ranchers for their stock. The nice thing about this method is that it makes it easy to plug numbers into a formula to give you a good idea of how many animals you can feed for how long. The formula factors in pasture quality, and the market price of hay so that you can come up with something fair to both parties.

An Animal Unit Month (AUM) is the amount of forage required to sustain a 1,000 pound cow with her calf at her side for 30 days. That works out to about 26.1 pounds per day. Forage requirements for all the other classes of livestock are shown in relationship to that 1,000 pound cow and her calf.

Here’s the formula:

Number of Animal Units x Average Hay Price Out of the Field Per Ton x Pasture Quality Factor = Rate Per Head Per Month

(Note: This formula works well for irrigated pasture, but may over-estimate non-irrigated, arid range rental rates where there is less forage and very little infrastructure.)

Here’s an example of what the formula looks like using a 1200-pound cow with her calf, during a time when hay is going for $10o per ton, and you’re hoping to rent an excellent grass and legume pasture:

1.20 AU x $100/ton x .20 Quality Factor = $24/AUM

From here the landowner and prospective lease can negotiate price based on expectations for management of the pasture, past experience, water and fence infrastructure and other requirements.

Don’t like that formula?  Here’s another option:

Hay Value Per Ton / 8.5 Rule of Thumb Forage Equivalent x Animal Unit = Rate Per Animal Unit Per Month

Using the same cow-calf pair and hay price, here’s that formula in action:

($100 per ton/8.5) x 1.2 = $14.12 per AUM

This is also just a starting point and depending on the result may point out whether you’ve over- or under-estimated the value of your hay.

Sharing Profit and Risk

If you intend to graze Stocker Cattle, establishing a rental rate based on pounds gained means that the landowner and the lease share the profit if there is one, and the risk if gain isn’t as great as expected. If you’re considering this method, you’ll have to have base values for the cost of gain, the expected gain, how long the animals will graze, and the per animal costs for caring for them through the grazing season.

All of the formulas I found for this method start with a Pasture Charge per Head per Month, also called a Seasonal Cost.  None of them told me where they got that number, but they all started with $10.  So starting with that as my full disclosure, we’ll go through this figuring process.

Pasture Charge Per Head Per Month x Number of Months = Seasonal Cost

$10 x 6 months = $60 per head

We use this as our base and then we divide by the pounds of gain we expect. This will change depending on the kinds of animals you’re running, grazing management, health and parasite load of the livestock and forage quality. This is where the risk sharing comes in. Let’s say that we think our stock will gain 200 pounds each while they’re on pasture.  Now our formula looks like this:

($10 x 6) / 200 pounds = 30¢ per pound of gain.

Thirty cents per pound is our break-even price and if the animals all gain 200 pounds each, that’s what the landowner gets. If the stock gain more, say 240 pounds, here’s what the landowner gets per animal:

240 x .30 = $72 per head

But if the animals only gain 175 lbs each, the landowner gets less money per animal:

175 x .30 = $52.5 per head

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The bigger-calf theory isn’t working right now

The solution is to sell cattle that have higher value of gain than your cost of gain.

It was an interesting week in the market. What I find even more interesting is how people can get so emotional about such things. Cattle marketing is simple math, and that should take the emotion out of things since math is fundamental and never changes.

That said, it is hard to override an old paradigm. This week the paradigms that hold onto conventional wisdom got smacked in the face.

Conventional wisdom says that it pays more to wean a bigger calf. This week I watched an auction that had a good amount of bawling calves sprinkled throughout the run of different weights. While the bigger calves did get more dollars per head, it wasn’t much more. When I calculated the value of that gain it proved what I already knew: The value of gain wasn’t all that great. From the smallest bawler to the heaviest calf, the value of gain was 45 cents.

Can you put the weight on for less than that? The value of gain between some of the other weights was less than 30 cents. I am pretty sure it’s costing more than that to put the weight on. My point is, those extra pounds were actually costing the producer money.

A commentator on the local radio was going on and on about the “rally” in eight-weights at a local sale barn this week. I pulled up the market report and those eight-weights had the lowest value of gain compared with all other weights. At that barn seven- and eight-weights were the only weights that were higher this week, and yet the eight-weights were still undervalued to the lighter feeders, and also undervalued compared with fats. So again convention wisdom got smacked. Just because they were higher didn’t mean that a person was going to profit from selling them.

I have had a few people ask me how this blog is being received by people since I talk a lot about turning cattle quicker instead of holding them and putting more weight on them. I just outlined above the math isn’t adding up by the long-held convention for adding weight to create value.

Here’s the thing, there are three components to maximizing profit, and one is turnover. If you owned a hardware store would you make more money if you were open two days a year, or 365 days a year? I have a friend who used to work in the parts department at a dealership, and he told me if a part didn’t turn over at least every 30 days they quit stocking it. I’m not saying we should trade our stocker cattle every month. What I’m saying is that we need to watch the value of the gain, and price relationships to prevent ourselves from getting cattle too big and becoming undervalued at times.

Next week is the last full week of auctions before some barns will go to their summer schedule. One thing I find interesting and am curious to see how it pans out is some barns are adding a special female sale to the schedule in the middle of summer. This typically doesn’t happen. There obviously is some interest in selling bred cows and pairs at that time, but will there be much buyer interest?