events, which are referred to as the Oceanic Niño Index (ONI). These events have the greatest effect in the winter months when El Niño tends to have cooler, wetter weather and La Niña coincides with warmer drier winters. Can knowledge of these cycles
assist in making wise PRFI deci- sions? Beginning in 1950, years were
classifi ed as an El Niño, La Niña, or neutral year and analyzed for net returns averaged across all years and all 11 intervals. The results showed that net re-
turn for 34 neutral years and 14 El Niño years was about $0.45 per acre compared to 14 La Niña years that had a net return of $1.15 per acre — or more than 2 times as much. Clearly such information can be
useful, but this analysis was made after the fact. The closing date for
PRFI is Nov. 15, which means that decisions must be made based on the mid-October predictions of the ONI for the coming year. Historical ONI predictions are
available at the Columbia University International Research Institute for Climate and Society for the 9-year period from 2003 to 2011. The predictions were 66 percent
accurate. However, predictions of the 2 La Niña years (2008 and 2011) were 100 percent accurate. Averaged across all intervals, net
returns for the 7 neutral or El Niño years were only slightly above 0 but for the 2 La Niña years the net returns were $1.62 per acre. Decisions about how to partici-
pate in PRFI can be boiled down to 2 questions. First, how much risk can the ranch handle? Second, what are the expectations for rainfall dis- tribution in the coming crop year?
TULIA FEEDLOT INC.
CUSTOM CATTLE FEEDING 7405 FM 928 Tulia, Texas 79088
Phone: 806-668-4731
If you want to discuss
the particulars of feeding your cattle, call
Tulia Feedlot, Inc.
Manager: John Van Pelt
Asst. Manager: Grady Van Pelt
Artwork by Dino Cornay 80 The Cattleman October 2013
thecattlemanmagazine.com
The Burly Corporation of North America Burleson, Texas
For dealers in your area call Burly at:
800-772-8100 817-295-1128
Cattle Chutes • Headgates • Palpation Cages Calf Tables • Sheeted Tubs and Alleys Open Sweeps and Alleys • Panels Hydraulic Chutes
Over the long-term, maximizing
the coverage level and the protection factor will maximize net return. It will also maximize the loss in any interval that receives rainfall in excess of the selected coverage level. But, the insured has to be able to pay the total premium in any given year without it having a catastrophic effect on the business. Calculate the maximum poten-
tial premium for the chosen cover- age and protection and consider the impact of this cost on the business. PRFI will always provide a positive net return over the long term, but bankruptcy does not allow you to participate in the long term. The best strategy for distributing
coverage across intervals is to base decisions on the most current long- term weather forecasts available prior to taking out the insurance and on the historic indexes for pre-
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