The Economics of Replacing Endophyte Infected Fescue

Agricultural Economics - Extension No. 2005-01C
Kenneth H. Burdine and Richard Trimble
April 2005

Tall fescue is the predominant forage grass of Kentucky. Endophyte infected fescue has been shown to greatly affect animal performance including lower rates of gain, weaning weights, and conception rates. It has been estimated that 85% of Kentucky’s fescue pastures are endophyte infected, making tall fescue toxicosis a very common problem in Kentucky (Lacefield, Henning, and Phillips).

Producers often consider replacing endophyte infected fescue with endophyte free or novel endophyte fescue in order to increase productivity and lower costs of production. This is an expensive and time consuming process, but it is a process that can have high rewards as well. In order to make an informed decision about replacing an endophyte infected fescue pasture, the producer must understand both the costs and the potential benefits of doing so. A limitation of endophyte free varieties is that they require careful management for stand lengths over five years. Novel endophyte varieties have the survival advantages of endophyte infected stands, of ten years or more, but none of the animal toxicity effects.

Replacement costs per acre have been shown to be quite variable. In situations where the producer is planning to re-establish the stand anyway, the additional cost may be as little as the difference in seed prices. On the the other end of the cost spectrum, a producer may have to use a combination of chemicals and labor to kill the existing stand and re-seed the pasture with a non-endophyte variety. We will now examine this decision for both the cow-calf operation and the backgrounding operation.

Replacement for the Cow-calf Operation

Generally, depending on the operation, it should cost somewhere between $50 and $250 per acre to replace a stand of endophyte infected fescue depending on the method. Another crucial factor is the impact that endophyte free fescue will have on weaning weights. Most research has shown that weaning weights will increase somewhere between 25 and 100 pounds. Variability in these two factors is used to evaluate the replacement decision for the cow-calf operation.

The Pasture and Forage Improvement Investment Tool was used to evaluate this decision for the following cow-calf operation. The analysis is conducted on a per head basis.

Assumptions Before Replacement (Cow-calf)

Assumptions After Replacement (Cow-calf)

*These variables are allowed to vary in order to conduct sensitivity analysis.
**A price slide of $6 per cwt. from this price is used to adjust selling price as weaning weight changes.
***Novel endophyte fescue varieties are more likely to provide stand lengths of ten years or more compared to endophyte free varieties.

Assumption Based Results (Cow-calf)

The following table shows model results when allowing the cost of replacement per acre to vary from $50 to $250 per acre and allowing increased weaning weight to vary from 25 pounds to 100 pounds per calf. Based on these assumptions, replacing endophyte infected fescue yields a positive net present value when replacement costs are justified by increased weaning weights over the life of the stand. Note that when weaning weights only increase by 25 pounds, the replacement decision yields a negative net present value in all but one situation. However, when weaning weights increase by 100 pounds or more, the producer is better off by replacing his or her fescue stand at any reasonable replacement cost per acre.

Table 1. Net Present Value of Endophyte Replacement Decision
Increased Weaning WeightReplacement Costs per Acre
$50.00$100.00$150.00$200.00$250.00
25 lbs.$40.58($5.72)($52.01)($98.31)($144.60)
50 lbs.$106.42$60.13$13.83($32.47)($78.76)
75 lbs.$169.75$123.45$77.16$30.86($15.43)
100 lbs.$230.56$184.26$137.97$91.67$45.38

Another consideration, outside the scope of the model, is the potential impact of replacement on conception rates. The previous analysis assumed no change in conception rates. Conception rates are likely to improve on endophyte free fescue and should also be considered by the cow-calf producer. The economic impact of improved conception rates are a major benefit of replacement and can greatly improve pounds of weaned calf sold per cow.

Replacement for the Stocker Operation

The stocker operator also faces this decision and the same basic cost scenario. The Pasture and Forage Improvement Investment Tool was used to evaluate this decision for a typical stocker operation. Again, this analysis is conducted on a per head basis.

Assumptions Before Replacement (Stocker)

Assumptions After Replacement (Stocker)

*These variables are allowed to vary in order to conduct sensitivity analysis.
**A price slide of $4 per cwt. from this price is used to adjust selling price as weight changes.
***Novel endophyte fescue varieties are more likely to provide stand lengths of ten years or more compared to endophyte free varieties.

Assumption Based Results (Stocker)

The following table shows model results when allowing cost of pasture replacement to vary from $50 to $250 per acre. Increased rates of gain are varied from 0.1 pounds per day to 0.5 pound per day. Based on these specific assumptions, replacing endophyte infected fescue makes sense in many instances. At increased rates of gain of more than 0.3 lbs per day, the investment yields a positive net present value at all practical replacement cost levels.

Table 2. Net Present Value of Endophyte Replacement Decision for the Backgrounding Operation
Increased Rate of GainReplacement Costs per Acre
$50.00$100.00$150.00$200.00$250.00
0.1$73.18$26.88($19.41)($65.71)($112.01)
0.2$162.21$115.91$69.61$23.32($22.98)
0.3$248.87$202.57$156.28$109.98$63.68
0.4$333.16286.87$240.57$194.27$147.98
0.5$415.09$368.79$322.50$276.20$229.90

In the case of both the cow-calf operator and the backgrounder, these are only one set of decision aid results based on the preceding set of assumptions. Although these assumptions are considered to be reasonable and based on the best information available, actual values will vary considerably from one operation to the next. Readers are strongly cautioned against making decisions based solely on this one set of output. It is highly recommended that this decision be discussed with your local county extension agent for agriculture.

For More Information

For additional information, please contact, Kenny Burdine or Richard Trimble.

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