Extension educators urge producers to evaluate financial records
December 23, 2016
As producers wait for a rally in the cattle market, it may be a good time to evaluate financial records to find the strengths and weaknesses in the operation. Speakers at the Northeastern Colorado Cattlemen Days provided producers with some tips to help them evaluate the profitability of their operations.
Robert Tigner, an extension educator with the University of Nebraska, asks producers what their highest expenses are, and how they compare to others with the same type of operations. "If you measure it, you need to be able to determine how to reduce it," he explained. "Also, make sure to compare the same type of operation to the benchmarks you are using."
Tigner encouraged stockmen to sit down with some paper and a calculator and determine their total costs. "Don't forget to include fixed costs in your calculations," he stressed. "If you don't include everything, you may not be making enough to reinvest in your operation."
Producers also need to consider depreciation. "It can get you in trouble, especially if you pay too much for anything," he said. Tigner said producers should also evaluate if their assets are earning their way, and how well capital assets are being used to generate gross revenues. As an example, he questioned whether an 18-year-old cow is paying her way. She may still be generating a calf each year, but what does that calf wean?
Tigner shared results of some ranching operations that were analyzed based on management. This research showed a $400 difference in return over direct expenses between ranches operating in the top 35 percent of their peer group versus those in the bottom 20 percent. The difference is $80,000 for a rancher with 200 cows.
Numbers like these are what makes financial evaluation so important. If producers can pinpoint areas they can improve upon, they can move that bottom line, he said. "Evaluate whether management changes can allow you to move into a higher profitability group," Tigner said.
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HAY – DON'T WASTE IT
Feed and pasture still remain the No. 1 expenses in cattle production, Tigner said. He talked to producers about a recent study looking at how to reduce hay loss. Hay wastage can account for 25 to 45 percent of feed loss. "Cattle do not need excess feed," Tigner said. Overfeeding causes trampling, over consumption and cattle defecating on it or using it for bedding.
Hay losses can be minimized by feeding it more often and in a well-designed bale feeder. Feeding hay in bunks can keep losses at 3 to 14 percent, while solid panel hay feeders will have losses of 3 to 10 percent "Large bales fed free choice can result in losses exceeding 45 percent," he said.
Tigner urged producers to feed cows daily, and according to their dietary need. "A quarter more hay is needed when a four-day supply is fed, versus a one-day supply," he explained. "A dry cow will eat up to 15 to 20 percent more hay than her needs, which is almost 500 pounds per cow over a four-month period." For 100 cows, that is 24 tons, and at $90 a ton, this could amount to a savings of $2,160.
WHAT ABOUT SUPPLEMENTS?
Chris Shelley with Colorado State University extension, discussed the importance of supplements in a feeding program. "Your production goals will define your supplement requirements," he said. "It is also important to consider the microbes and the impact the supplements will have on their requirements. The microbes need to be targeted for what they need because they are important to the digestion of feed."
Producers need to remember the seasonal influence on grass production. "Grass nutrition will change based on time of year," Shelley said. "As a producer, you need to understand what is out there, and if it still meets the cattle's dietary needs."
There is still plenty of energy in grass, even when it is dormant." But producers may need to supplement the cattle with some protein to unlock that energy. A lot of range has either unlimited or limited forage during the winter, but the protein is less than 5 percent, Shelley said. "Some ranchers will purchase alfalfa because it is high in energy and protein to supplement their cattle."
Protein is high in nitrogen, which is important for a ruminant. "Ruminants will recycle nitrogen back through the rumen, rather than excrete it," he explained. "Energy supplements don't work the same way because ruminants can not recycle energy through the rumen."
Any time producers choose to supplement their cattle, Shelley said they need to put a pencil to finding the best supplement at the best price. "Supplementation costs can also be reduced by frequency. If producers can reduce how often they put out supplement, it can reduce the cost significantly without having much impact on the cows," he said.
Shelley shared some data showing cattle that were supplemented three times a week showed no difference in performance, weight or body condition score than those that were supplemented seven days a week. However, supplementing three days a week can mean big savings in labor, and vehicle and maintenance costs. "It could be up to a 60 percent reduction in costs," Shelley said.
Other speakers at the meeting were Travis Taylor talking about online tools that can be used to assist in management decisions, Brent Young discussing risk management options when margins are tight, and Kacy Atkinson discussing consumer influence on the beef business. This meeting will be held in Nebraska starting in January. ❖