Economic Evaluation of Beef Cattle Production Models and Marketing Alternatives in Hawaii

Final report for SW21-920

Project Type: Research and Education
Funds awarded in 2021: $51,386.00
Projected End Date: 06/30/2022
Host Institution Award ID: G375-21-W8616
Grant Recipient: University of Hawaii at Manoa
Region: Western
State: Hawaii
Principal Investigator:
Dr. Mark Thorne
University of Hawaii at Manoa
Co-Investigators:
Dr. Dillon Feuz
Utah State University
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Project Information

Abstract:

This project will engage in economic research to evaluate alternative beef cattle production models and marketing options for Hawaii. The primary goal of this research will be to develop decision support tools that will allow Hawaii beef producers to objectively evaluate production costs across different production models, potential profit margins for different marketing alternatives, and assess and manage production and market-related risk factors. The project will utilize data compiled from University of Hawaii-Manoa studies into grass-finish beef carcass quality (Kim et al. 2015) and pasture management (Fukumoto et al. 2015, Oshiro and Thorne 2018, Thorne et al. 2016, Thorne et al. 2015) to derive different potential production model choices along with data collected from cooperating producers through surveys and interviews to determine production costs. These data will be formulated into decision support tools that will help producers navigate the transition to the best beef production option for them. Technical guides and extension factsheets will be drafted to support the project findings and disseminated to key audiences including beef cattle producers, land managers, and policy makers.  A series of workshops in each of three counties will engage Hawaii Beef Cattle Producers with curricula designed to increase knowledge on determining production costs, risk management, and marketing decisions. 

Project Objectives:

Research Objectives

  1. Evaluate the production costs and associated risks for different beef cattle production and marketing models currently used in Hawaii.
  2. Evaluate the costs and benefits and associated risks of transitioning from a current production and marketing model to a grass-finish, local market model.
  3. Develop decision support tools to allow beef cattle producers to systematically evaluate the costs and risks associated with transitioning between different production systems and marketing alternatives.

Educational Objectives

  1. Conduct two educational workshops each for Hawaii, Maui, and Kauai counties to a) help producers understand grazing management strategies, cost of production, and marketing risk factors; and b) introduce and instruct beef cattle producers on the use of the web-based decision tools developed.
  2. Provided presentation and training on the use of the decision support tools at the UH Livestock Extension Annual Field Day Program (fall 2021 and 2022) and a seminar for UH-Manoa Faculty.
  3. Produce relevant technical guides and extension factsheets on the use of the decision support tools, assessment of production costs, marketing alternatives, risk management, and grass-finish beef production for Hawaii.
Timeline:

Project planning, survey development and deployment, rancher interviews, Livestock Extension field day program, and the first workshop series will be carried out in the first five months of the project.  Compiling and analyzing data collected from the surveys and rancher interviews will begin in November 2021 and be completed by February 2022. The drafting, review, and editing of the decision support tools, technical guides, and factsheets will begin in December 2021 with a targeted completion date of March of 2022.  The second series of workshops will be carried out between April and May of 2022.  The professional faculty seminar will be held in May 2022. The final report will be drafted in the final month of the project period. See attached chart.

Cooperators

Click linked name(s) to expand/collapse or show everyone's info
  • Chris English - Producer
  • Mlelelani Oshiro
  • Shannon Sand

Research

Hypothesis:

Beef cattle producers make challenging decisions on enterprise and marketing alternatives for their operations through a dizzying array of economic signals, market feedback, and other sources of information. A well-designed Decision Support Tool can help align the most critical information and economic signals to facilitate the decision process.  We hypothesis that the current economic signals in Hawaii can be aligned with 25 years of research data on finishing beef cattle on grass to produce an appropriate Decision Support Tool for Hawaii beef cattle producers.  This tool will help some users to evaluate their existing grass-finish beef programs, and others, to determine if a grass-finish beef program is right for their operation.  

Materials and methods:

Research Objectives

  1. Evaluate the production costs and associated risks for different beef cattle production and marketing models currently used in Hawaii.
  2. Evaluate the costs and benefits and associated risks of transitioning from a current production and marketing model to a grass-finish, local market model.
  3. Develop decision support tools to allow beef cattle producers to systematically evaluate the costs and risks associated with transitioning between different production systems and marketing alternatives.

Methods and Materials

Objective 1

We will use surveys and interviews of cooperating ranches to gather data on current production costs and marketing decisions across the state. Surveys will be sent out to the Hawaii Cattlemen’s Council member list along with other existing listservs catering to the Hawaii Beef Cattle Industry within the first three months of the project. The survey will quarry ranchers on various cost structures for their operations including herd management (breeding, calving, weaning, vaccination, veterinarian costs etc.), equipment and infrastructure maintenance, labor, water, and feed, forage, and supplement costs. Respondents will also be asked about various risk factors that limit their ability to maximize production and net returns (i.e. labor, drought, disease, pests, etc.).  Additionally, survey respondents will be asked to provide details on current marketing strategies utilized (mainland vs Hawaii market options) and associated costs and net returns. Interviews with cooperating ranches that market animals both to the mainland and locally will be conducted to collect similar data as gathered in the survey within the first four months of the project.  These interviews will either be conducted in person, or through online video conferencing depending on the status of COVID-19 restrictions. These data will be used to validate the survey results and create known boundaries for operational costs, marketing costs, net returns, and risk factors.

Objective 2

We will utilize data from studies conducted over the past 25 years by University of Hawaii-Manoa research and extension faculty on grass-finish beef carcass quality (Kim 1995, Fukumoto et al. 1995, Fukumoto et al. 1999, Fukumoto and Kim 2007; Kim et al. 2007, and Kim et al. 2015) and the effects of weaning age, forage quality, and grazing management on finishing cattle on grass (Fukumoto et al. 2015, Oshiro et al. 2018, Thorne et al. 2016, Thorne et al. 2015a and b) to develop and evaluate a general model for a finished beef animal for Hawaii (i.e. 5-6 frame beef animal weighing 499 – 544 kg at 24 months of age). The ability of different pasture systems across the state of Hawaii to finish the model grass-finish beef animal will be evaluated using existing annual forage production and quality data collected over the past 20 years (Fukumoto et al. 2015, 2016a, and 2016b; and Thorne unpublished data). This will result in an array of grass-finish production models specific to the different pasture systems across the state and will help identify system limitations, associated costs, risks, and potential net returns based on local market options. It is anticipated that this objective will be completed within six months of the start date of the project.

Objective 3

The data derived from objectives one and two will be used to develop a suite of web-based decision support tools that will help beef cattle producers evaluate different production systems and marketing alternatives; especially as it pertains to the decision to transition from a mainland production and marketing model to a local, grass-finish beef program. The tools will be validated for accuracy utilizing data from the cooperating ranches. Additionally, the cooperating ranches will use and evaluate the functionality, logic, and output of the tools. Their feedback will be used to refine the tools prior to release. The tool wills be made available through the Hawaii Rangelands Website (https://globalrangelands.org/state/hawii) managed by the project PI as part of the University of Hawaii-Manoa’s contribution to the Rangelands Partnership, a multi-state project. 

Research results and discussion:

Objective 1

An extensive survey of the Hawaii beef cattle industry was conducted in 2017 by Asem-Hiablie et al. (2018).  One-on-one, interviews with ranchers (8) at the beginning of the project, indicated that there was little change in the industry in the four years since the Asem-Hiablie et al. (2018) study was published. Consequently, we elected not to conduct a duplicate survey and relied instead on the reported results of the Asem-Hiablie et al. (2018) study for developing market risk modeling across production practices and marketing options (mainland vs. local, grass-finish).  

Objective 2

Utilizing data form several UH-Manoa studies on Hawaii grass-finish beef carcass quality (Kim 1995, Fukumoto et al. 1995, Fukumoto et al. 1999, Fukumoto and Kim 2007; Kim et al. 2007, and Kim et al. 2015) and the effects of weaning age, forage quality, and grazing management on finishing cattle on grass (Fukumoto et al. 2015, Oshiro et al. 2018, Thorne et al. 2016, Thorne et al. 2015a and b) we developed a general model (UH Grass-Finish Beef model) for grass-finish beef production in Hawaii.  The UH Grass-Finish Beef model involves finishing a 5-6 frame beef animal weighing 499 – 544 kg at 24 months of age, and this requires an average daily gain (ADG) of 0.77 kg from birth to wean, on a rotational grazed pasture system.  This model was tested across various forage types found across the state using forage production and quality data collected over 20 years (Fukumoto et al. 2015, 2016a, and 2016b; and Thorne unpublished data). The results of these analyses were combined with data from objective one to derive a decision sport tool (objective three).

Objective 3

A decision support tool was developed utilizing data from objectives one and two.  The tool was validated using data from cooperating ranches (four) and feedback on the functionality, logic, and output of the tool was gathered in a series of meetings (virtual and in-person) to refine the tool. The tool allows users to forecast the finish date, age, and weight of an individual or group of steers or heifers based on a starting age, weight, frame score, and pasture management system, stocking rate, and supplementation practices.  The tool predicts the ADG required by the steer or heifer to reach a finish weight by 24 months of age and provides an expected ADG based on the pasture management system (continuous vs. rotational grazed), stocking rate (light, medium, and heavy) and any supplementation provided.  Adjustments to the ADG can be made by the user if they have their own forage quality data.  The tool then determines a market value of the steer or heifer based on feeder cattle futures (Chicago Mercantile Exchange).  This data is then contrasted with the estimated costs and returns of grass-finish beef production collected by the tool to evaluate the opportunity cost of retaining steers and heifers for local slaughter versus selling them to the mainland.  Recommendations on transitioning from a cow-calf to a cow-calf with stocker finisher cattle are then provided based on the evaluation of the opportunity costs.  Grass-Finish Decision Tool exmple

Implications

This tool will allow beef cattle producers in Hawaii evaluate existing grass-finish beef production systems providing them with valuable data to forecast finish date, age, and weight and expected returns.  They can also compare the actual values to the predicted values to gauge the various aspects of their grass-finish system allowing them to make adjustments that might include breeding to change average frame scores, or livestock management decision to include weaning age/weight adjustments.  Additionally, they may use the tool to consider adjustments to their pasture management system, stocking rates, or whether to provide supplementation or not in order to bring their actual values in line with best practices (UH Grass-finish beef model).  The tool also allows beef producers to evaluate the costs and benefits of transitioning from solely a cow-calf enterprise to include a grass-finish enterprise. 

The use of this tool by Hawaii beef cattle producers, especially those currently engaged in, or those considering grass-finish beef production, will lead to increased economic sustainability through increased enterprise and marketing opportunities, and improved profitability.  The tool will also lead to better pasture management (environmental sustainability) and improved beef cattle production efficiency.  Ultimately, this tool will lead to improved food system infrastructure in Hawaii and an improved quality of life for Hawaii beef producers.  

 

Research conclusions:

Using detailed survey data of the Hawaii beef industry along with grass-finish beef production, grazing management, and forage production and quality data from Hawaii studies the project developed a decision support tool to evaluate the risks, costs, and benefits of a grass-finish beef enterprise in Hawaii.  The tool can be used to evaluate an existing grass-finish beef production system compared to best practices defined by the UH Grass-Finish Beef model derived from several years of trials at the University of Hawaii-Manoa, Mealani Experiment Station. Producers can make adjustments through breeding (frame score), livestock management practices (weaning age/weight), pasture management practices (grazing system, stocking rates) and evaluate the cost and benefit of supplementation.  Alternatively, the tool can be used to evaluate the costs and benefits of including a grass-finish enterprise with an existing cow-calf program or converting solely to a stocker-finisher program on grass for local markets.  This tool will ultimately make grass-finish beef production in Hawaii more economically, environmentally, and socially sustainable by improving the decision process and management of grass-finished beef cattle production.

Participation Summary
10 Farmers participating in research

Education

Educational approach:

University of Hawaii travel, and group gathering restrictions as a result of Covid-19 persisted until May 31, 2022.   This limited our ability to carry out the two in-person workshops for each of Hawaii, Maui, and Kauai counties (education objective 1).  Additionally, the annual UH Livestock Extension Field Day program for 2021 and 2022 were canceled and a planned seminar for UH-Manoa Faculty could not be held (education objective 2).  Instead, project educational information was disseminated through virtual programs, including three appearances at a quarterly producer's webinar series (UHM/HCC Livestock Producer's Pau Hana), three appearances for a UH Livestock Extension podcast series (Livestock Producers Wala'au), and a presentation at a virtual Hawaii Cattlemen's Council Annual Meeting November of 2021.  In June of 2022, when travel and gathering restrictions were finally lifted, the project team held two meetings on Hawaii County for cooperating producers (4) to review and evaluate the decision support tool. 

A technical guide on the use of the Grass-Finish Decision Support tool is currently being drafted (education objective 3).  Once the guide is complete, the decision support tool will be uploaded to the Hawaii Rangelands Website and made available for producers to access.  

 

 

Educational & Outreach Activities

10 Consultations
2 Curricula, factsheets or educational tools
7 Webinars / talks / presentations

Participation Summary:

75 Farmers
4 Ag professionals participated
Education/outreach description:

We consulted with 8 beef cattle producers at the beginning of the project to gauge interest, gather information, and evaluate the relevancy of 2017 industry survey data. These consultations were carried out virtually, or one-on-one as allowed per Covid-19 restrictions. Four more consultations were conducted including two producers from the original 8 and two additional individuals. Data from these four ranches were used to validate the tool output, and the ranchers also evaluated the decision support tool user interface, logic and output. In addition to the Grass-Finish Decision support tool that will be made available on the Hawaii Rangelands Website, an accompanying technical guide is being drafted for release later this year.  Once the technical guide is published the tool will be made available on the website.   The project team made three appearances on the Hawaii Livestock Producer's Pau Hana, a quarterly webinar series sponsored by the UHM Cooperative Extension and the Hawaii Cattlemen's council.  These appearances allowed the project team to discuss aspects of the project, instruct participants on livestock production risk management, cost of production, and best practices for grass-finish beef production in tropical environments. Additionally, Dr. Feuz made three appearances on the UHM Cooperative Extension podcast Livestock Producer's Wala'au.  Finally, Dr. Feuz provided a conference presentation at the Hawaii Cattlemen's Council Annual Meeting that was held November of 2021.  While this event was held virtually due to Covid-19 restrictions there were 79 participants (75 producers and 4 ag. professionals).  

Learning Outcomes

10 Farmers reported changes in knowledge, attitudes, skills and/or awareness as a result of their participation
Key areas taught:
  • Increased knowledge of costs of production for beef cattle production
  • Increased knowledge of evaluation of net returns across market and production alternatives
  • increased knowledge of grazing management strategies for grass-finish beef production
  • increased awareness of the use of a web-based decision support tool evaluating grass-finish beef production

Project Outcomes

2 Farmers changed or adopted a practice
3 Farmers intend/plan to change their practice(s)
1 Grant received that built upon this project
1 New working collaboration
Project outcomes:

The decision support tool produced by this project incorporates 25 years of research by University of Hawaii-Manoa faculty on grass-finish beef production into a best practices model. It allows producers to evaluate and adjust their existing grass-finish beef production systems to be increase efficiency and profitability through improved breeding, livestock and grazing management, and better production and marketing decisions. Alternatively, the tool can help other producers determine if incorporating a grass-finish beef enterprise into their existing operations is feasible or not, and if so, help them design it to be as efficient and profitable as possible.  It is anticipated that through the use of this tool there will be increase interest in retaining cattle in Hawaii for local slaughter and markets increasing the food security of the islands and increasing the profitability and sustainability of the Hawaii Beef Cattle Industry as a whole.    

Information Products

    Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.