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HUNTIN' DAYLIGHT -- MEASURING FOR MONEY

by: Wes Ishmael

What if you could spend an extra $2.40 per head on your cows and triple the return on investment, would you do it?

Sweet as it sounds, and skeptical as many of us would be of such a too-good-to-be-true proposition, plenty of cow-calf producers today would ignore the opportunity because they don't know that it and others like it exist. And too many aren't aware of these kinds of blue chip opportunities because too few take the time to collect the specific information necessary.

The example cited above illustrates the economic benefit relative to cost of conducting a Breeding Soundness Examination (BSE) on bulls prior to breeding season; the opportunity to increase the percentage of cows weaned per cow exposed. It is one of several Economic Analyses of Select Health and Animal Health Production Practices, calculated by James McGrann, an extension agricultural economist with Texas A&M University, who is commonly regarded as the Godfather of Standardized Performance Analysis (SPA).

In the BSE example (Table 1), McGrann calculates the cost of the exam, added labor and a 20 percent producer incentive margin above cost at $48.00 per bull. If you figure 20 cows to a bull, that's an additional $2.40 per cow exposed. If knowing the breeding soundness of the bull would increase the weaning percentage an average of two percent with an average weaning weight of 500 lb. and an average selling price of $94/cwt., then the gain is worth $8.08 per head, or $5.68 more net; a benefit to cost ratio of 3.37.

 

Likewise, McGrann calculated the benefit to cost of preg-checking cows (Table 2) at 11.50; the benefit to cost of de-worming suckling calves at 5.22 (Table 3); and the benefit to cost of implanting steers at 2.61 (Table 4).

 

 

 

You can quibble with the specific numbers—input costs and expected outputs—all you want. In fact, McGrann says, “When interpreting these results, it is important to communicate with local veterinarians and other producers on expected response rather than using the values in these examples.”

Moreover, McGrann emphasizes, “Measuring actual performance is important. It is also important to understand that one experience or observation is not adequate to make conclusions. This is why it's important to back up measured results by review of “controlled research” results from unbiased sources.”

With these qualifiers, though, you can't argue the point that when you know rather than guess at some of these rudimentary performance measures, then take the time to push a pencil of what-if, there is lots of opportunity in each of these production areas, and others, to make significant economic gain.

Taking Stock of the Forest

“Making a living in a shrinking market will continue to be a challenge for the cow/calf producer,” says McGrann. “Increasing carcass weights does have a limit. When this limit is reached, and if beef demand grows, the industry may be forced to focus on cow-calf reproduction, an area that has not improved in 20 years.”

Call it misery looking for pals or collective snoozing, McGrann points out the opportunities missed by individual producers are similar to those ignored by the industry overall.

“Industry and research focus is now on product consistency, collecting carcass data and genetic selection for carcass and feedlot performance,” says McGrann. “This focus may be neglecting a major inefficiency in the industry by not addressing the reproductive performance of the cow herd…Data shows progress has not been made in increasing reproduction in the past 20 years.”

Specifically, McGrann is basing that assessment on USDA data indicating that approximately 20 percent of exposed cows are not weaning calves nationally. “The rule of thumb, 90 percent bred and 90 percent of these weaning calves, or an 81 percent calf crop based on cows exposed is too close to reality. This means that 20 percent of the exposed cows and heifers are not weaning calves,” he says.

“Southwest SPA data confirm that the top 25 percent net income per cow producers have higher weaning percentages, pounds weaned per exposed cow and control their production costs,” says McGrann. “The top net income quartile weans 4 percent more calves, and 48 more pounds are weaned per exposed cow. The cost per breeding cow of the high net income quartile herds is 57 percent of the cost of the low net income quartile herds. This shows the importance of focusing on these factors when looking for improvement.”

That's true of the industry and individual operations. But, you have to measure first.

SPA Opportunity

For those unfamiliar with it, SPA is a producer-led effort initiated by the National Cattlemen's Beef Association (NCBA). A key aspect of the program is identifying ways to lower the cost of production through cost effective management, while practicing resource stewardship. The objective is to help producers accomplish this by effectively analyzing their production and financial performance.

That may be one reason so few producers have taken advantage of SPA thus far. For one thing, gathering and sorting the data necessary is an intensive process.

As an example, information required for SPA analysis includes:

*Production data, including cowherd management/breeding and weaning dates; owned and leased land use; feed use and beginning of year inventory; weaned calf production, sales value, along with cull or breeding cattle sales.

*Cattle inventories, including the breeding cattle inventory at the beginning of the fiscal year; breeding cow and replacement heifer inventories at the beginning of the breeding season; and the number of breds and opens if the cows are pregnancy-checked.

*Financial data for the fiscal year in which calves are weaned, including, IRS Tax Schedule F, a depreciation schedule, loan payment schedule data, financial statements, balance sheet and income statements; and cattle sales and purchases.

Of course, another reason some folks shy away from the process is that once you have all of the numbers in black and white, the truth can be brutal.

“The first step in improving cow reproduction is to recognize that there is a problem and then focus on this problem,” says McGrann. “Greater effort needs to be made to identify the causes of the lack of increase in reproduction. Reproductive diseases need to be more clearly identified. Nutrition and genetic selection are without a doubt part of the problem. Solutions should be defined that are cost effective and operationally feasible for producers to implement. Identification of ways to motivate producers to change management practices that determine weaning percentage needs to be more clearly defined and communicated.”

“Producing calves that meet desired markets cannot be at the expense of these reproduction and cost control goals,” says McGrann. But, he sums up: “For those producers wishing to operate their cow/calf operations as profitable businesses, controlling costs and achieving high rates of reproduction must be the focus of attention. Using performance measuring tools like SPA help establish goals and measure achievement.”

For more information, check out http://agecoext.tamu.edu

*The values used are a real-world example; individual producers must use their own unique performance and response expectations to analyze cost benefit of these management practices in their own programs.

**Doesn't account for price slide as weight increases



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