To Increase Beef Cow Profits By Harlan Hughes Western Edge Consulting December 2001 1 2 What Is IRM-SPA? What Is IRM-SPA? Standardized Performance Analysis Standardized Performance Analysis 3 4 What Is IRM-SPA? What Is IRM-SPA? Standardized Performance Analysis Standardized Performance Analysis 5 6
Beef Price Cycles Why IRM-SPA? Source: Livestock Market Information Project 7 8 Beef Price Cycles Beef Price Cycles 1980s 1980s 1990s Source: Livestock Market Information Project 9 Source: Livestock Market Information Project 10 Beef Cow Profits In The 1990s (North Dakota Farm Business Management Herds) 200 150 100 50-50 0-100 192 152 176 178 49 5-Year 94-98 Ave = $3 Per Cow -29 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001* Years -51 30 14 97 135 113 Critical Aspects Of ND IRM Program PNorth Dakota s IRM Program Integrates Beef Cow Production, Range Management, Animal Health, And Financial Management. PA Progressive Seven-Step Educational Program Is Available To Help Cattlemen Analyze Their Herd s Unique On-Farm Facts PSoftware Is Now Available To Measure The Production And Economic Performance Of Your Beef Cow Herd. PBottlenecks To Profitability Can Be Identified And Removed. 11 12
How Do You Find Your Bottlenecks To Profitability?! So...What Is? P is the act of comparing your beef cow herd s production and economic facts to the average facts from a set of benchmark herds. 13 14 The Process PMeasures where your numbers beat the benchmark herds averages identify your herd s strengths PMeasures where the benchmark averages beat your numbers identify your herd s potential weaknesses P Requires keeping and using records P Requires sharing information < Can be pooled to protect Confidentiality 15 16 Production Production 17 18
Production CHAPS 2000 Benchmarks 19 20 Critical Production Benchmarks Economic CHAPS 21 22 Economic Economic 23 24
Economic Critical Benchmarks 25 26 Northern Plains 1999 Benchmarks Northern Plains 1999 Benchmarks 27 28 Northern Plains 1999 Benchmarks Northern Plains 1999 Benchmarks 29 30
North Dakota s Learning Teams Kitchen Table Dynamics Publication Available On The Web 31 32 Learning Teams Look For Bottlenecks To Profitability P A = Go to Summary Delivery Options P B = Go to Ranch X Benchmark Example 33 34 Ranch X Two Profit Enhancing Questions That Ranchers Need To Answer To Enhance Profits 1. What does it cost me to produce a hundredweight of calf? 2. Am I a low cost or high cost producer? 35 36
Question 1: 1994 What did it cost Rancher X to produce a hundredweight of calf? 37 38 Ranch X CHAPS Benchmarks Ranch X Let s Look At the IRM-FARMS Analysis Of Ranch X 39 40 What Did It Cost Ranch X To Produce A Hundredweight Of Calf? Step1 Inventory Herd Assets What Did It Cost Rancher X To Produce A Hundredweight Of Calf? Step 2 Compile Gross Income & Feed Costs 41 42
What Did It Cost Rancher X To Produce A Hundredweight Of Calf? Step 3 Calculate Livestock Expenses What Did It CostRancher X To Produce A Hundredweight Of Calf? Step 4 Calculate Overhead Costs & Total Costs 43 44 Unit Cost Of Producing A Cwt Of Calf (Ranch X) Question 2: $455 $108 $329 $78 Is Rancher X A Low-Cost Or High- Cost Producer? 45 46 Northern Plains Benchmark (1994) Benchmarks $466 Unit Cost Of Producing A Cwt Of Calf (Ranch X) $329 Low High $397 $67 $49 $62 $91 $77 $455 $108 High $78 Ok RANCH X? $108 47 48
Ranch X Costs Of Production Per Cow 1994 Data Ranch X Costs Of Production Per Cow 1994 Data Winter Feed Winter Feed Feed = 60% Feed = 60% Other Other Pasture Pasture Vet & Med Supplies Overhead Breeding Vet & Med Supplies Overhead Breeding 49 50 Let s Benchmark Rancher X s Feed Costs Feed Costs Per Cow (Ranch X) 14 0 275 261 51 52 Northern Plains 1994 Benchmark Feed Costs Per Cow (Ranch X) 72 14 Low 1 225 $213 $215 $248 Ranch X? $275 152 0 275 High Fed 3.49 Tons Of Hay Per Cow Average = 2.25 T/Cow High 261 53 54
What Is Telling Us About Ranch X P Absolute UCOP at $108 per Cwt of calf P Is a high cost producer < Feed Costs High Pasture costs very low Stored Feed Costs high <Bottleneck To Profits is Winter Feeding Program Fed 3.49 Tons of Hay Per Cow! Fed 34 lbs Dry Matter/Cow/Day Summary 55 56 P is a competitive tool the key tool for producers to use in decreasing their costs and increasing their production s value. Rob Adams, General Manager, Circle Four Farms, Milford, Utah 57 P gives one the capability to remove bottlenecks to profitability P Profit goes up as bottlenecks are removed P I encourage removing one bottleneck per year 58 P is the single most powerful ranch management practice that a rancher can implement! PIt is a key to the survival of the Family Ranch over the next cattle cycle. P employs knowledge to focus your limited management time on removing bottleneck to profitability < When bottlenecks are removed, profits go up! 59 creates knowledge. And producers need: to be organized around Knowledge, rather than tasks. 60
Final Point RANCH MANAGEMENT PROGRESSION P The decade of the 1970s and 1980s was devoted to Herd Performance Records. P The decade of the 1990s was devoted to IRM-SPA Cost & Return Financial Analyses. P The decade of 2000 is being devoted to: < Value-Based Marketing on marketing side. < on the production side. P Private Industry is now moving into Both. 61 Harlan s Business Card Market Advisor: www.beef-mag.com and www.beefeconomics.blogspot.com Address: 30 Ramble A Road Laramie, Wy 82070 62 The End 63