COWCALF ANALYSIS KEY INDICATORS OF PROFITABILITY

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COW-CALF ANALYSIS -KEY INDICATORS OF
PROFITABILITY

• Range 215
• February 4, 2004

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PROFIT

• PROFIT represents a managers ability to
  manipulate the interface between production and
  economics.
• Money, people and energy flow to where PROFITS
  are the highest..
• Lets talk about PROFIT, and the cow-calf
  enterprise.

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WHICH IS MORE PROFITABLE??
HERD B 95 Calf Crop 600 lb Wean Wt 80 Choice

• HERD A
• 90 Calf Crop
• 450 lb Wean Wt
• 60 Choice

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WHICH IS MORE PROFITABLE??
HERD D Annual Cow Costs 350

• HERD C
• Annual Cow Costs
• 250

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UNIT COST OF PRODUCTION/CWT OF CALF PRODUCED

• 280 / 400 lb 70 / cwt

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UNIT COST OF PRODUCTION/CWT OF CALF PRODUCED

• 280 / 400 lb 70 / cwt
• 350 / 500 lb

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UNIT COST OF PRODUCTION/CWT OF CALF PRODUCED

• 280 / 400 lb 70 / cwt
• 350 / 500 lb 70 / cwt

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UNIT COST OF PRODUCTION/CWT OF CALF PRODUCED

• 280 / 400 lb 70 / cwt
• 350 / 500 lb 70 / cwt
• 420 / 600 lb 70 / cwt

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Unit Cost of Production

• UCOP is a relationship!
• UCOP can be low with either high or low levels of
  cost or production.
• If you have high costs you must have high levels
  of production.
• If you have low levels of production you must
  have low costs.
• Low UCOP is positively associated with High
  Profit!
• Profits Solve Problems!

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Literature Review

• M. B. Johnson (SD Exp. Sta. Bull),1930 study of
  60 ranches from 4 states, 3 consecutive years
• Quantified
• size and type of ranch
• production systems and performance
• financial performance with accrual adjustments
• Recommendations centered around increasing
  weaning rate

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Literature Review

• Dooley et al. ( JAS, 1982), benchmark data from
  two year survey to characterize production of
  cow-calf operations in SD.
• WW - 484 lb
• WR - 78
• Age at weaning - 209 d
• Length of breeding season - 95 d
• Beginning calving - 117th day

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Literature Review

• Hoyt and Odekoven, (1992 SDSU Beef Report)
  summary of 8 years of SD Farm Mgt. data from east
  west river herds.
• WW - 497 lb
• WR - 91
• High profit herds were able to produce larger
  calves at lower cost
• Recommended that investment in depreciable
  purchases be controlled

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Literature Review

• 1992, leaders of cattle industry adopt SPA
  guidelines as industry standard
• Standardized Performance Analysis
• Goal was to have common language and methodology
• Weaning rate of calves weaned / cows
  exposed
• Included production , financial and economic
  analysis

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HERD PROFITABILITYIOWA BCBR (1982-1994)

• PROFIT
• TOP 1/3 LOW 1/3
• NET PROFIT 126 -107
• COW COSTS 310 437
• REVENUE 436 330

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Literature Review, Summary

• General statements
• High profit producers wean heavier calves at
  lower costs (SD, ISU, ND).
• Harvested feed costs are the largest segment of
  annual cow costs should be reduced (SD, ISU,
  ND, IL, MI, NE).
• High profit and low profit producers spend the
  same on Vet. Med. and breeding stock. CattleFax

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Barry Dunn PhD

• Data collection
• Field data, voluntary participation
• Followed SPA guidelines
• 239 individual SPA reviewed
• 185 herds in final data set
• 185 with SPA P
• 148 with SPA P and SPA F

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Region 2 99
Region 3 60
Region 1 26
ND 1
MT 54
MN 3
SD 43
WY 6
IA 6
NE 68
KS 10
Location of participants by State and Region
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North Central SPA, Dunn 1999

• Data divided into 3 profit groups, based on ROA
• High Profit Top 16
• Low Profit Bottom 16
• Medium Profit Middle 68

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North Central SPA, Dunn 1999

• ROA as measurement of profit vs Net Income
• Net Income represents accumulation of
• ROA measures the managerial efficiency of the
  accumulation of based on invested
• Data not presented in terms of size of cowherd
  
• Three measurements of size, size had no affect on
  SPA P or SPA F measurements

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SPA Production Comparison
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SPA Production Comparison
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SPA Production Comparison
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SPA Financial Summary
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SPA Financial Comparison
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SPA Financial Comparison
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SPA Financial Comparison
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Summary

• When compared to Low or Medium, High profit
  enterprises have
• gt weaning
• No differences in
• Weaning weight
• Death loss
• Pregnancy
• Replacement rate
• Calving distribution
• No differences in size of operation.

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Summary

• High profit enterprises have
• lt Investment (High Low vs Medium)
• lt Total costs
• lt Vet Med (High Medium vs Low)
• lt Depreciation
• lt Breakeven (UCOP)
• gt Revenue
• gt Net Income

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Summary, So HOW?

• How do I lower investment?
• Find a way not to need IT !
• Grazing vs. Hay!
• Supplement vs. Feed Quality!
• Rent rather than own!
• Time of calving!
• Winter Protection
• Feed
• Equipment
• Increase Bull to Cow ratio
• Two year old bulls vs. Ylgs.
• Run bulls 1 year longer

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How many cows?

• The Net Income in the High Profit group can pay
  off all debt in 10 years and provide 35,000 of
  family living with 200 cows!
• To provide 35,000 of family living with the
  Medium Profit group, it will take 972 cows and
  you will pay off no debt!