Cattle prices peaked at unprecedented levels in 2014, fell off a cliff in 2015, and have taken a another steep nosedive in 2016. When you look at the chart above you can see that prices for weaned steers have fallen sharply back to 2012-13 levels this summer.  Most livestock economists agree that prices will continue to decline through the rest of this decade, as national herd expansion continues. The cattle business that had been so rewarding for the past three years has become much more challenging. To survive, beef cattle ranchers will have to work even harder at becoming more efficient in the years ahead.

The first thought most people have when faced with declining prices is to simply tighten the belt and spend less, but many successful ranchers have shared with me that “You can’t starve a profit out of a cow, but you can sure feed the profit out of a her!” The point of this age-old saying is valid, the key to profitability is not necessarily how little or how much you spend on feed, seed, and fertilizer, but getting greatest return from investments made.  Improving efficiency is the http://www.secattleadvisor.com/wp-content/uploads/2016/07/US-Avg-550-lb-Steer-price-June-16.pngprimary goal, but to make real progress you have to analyze each phase of the operation to identify those areas where adjustments can make the greatest impact.  To do this, you have to establish some baseline data, summarize and evaluate the data on operational basis, and a per cow, and per acre basis, then set some benchmark targets for the operation to reach in the years ahead.  With clear target benchmarks to serve as a simplified report card, efficiency can be measured and evaluated annually.

Establishing baseline production data

Probably the simplest place to begin to evaluate and improve efficiency is with cattle production and their annual performance.  The following are some of the key records that can be used to establish baseline data for a beef herd.  There are many different types of performance measures that can be taken and recorded, but start with the basics (1-3) on a whole herd level to keep from getting overwhelmed, and then add individual animal data to fine tune the management of your herd.

  1. Herd inventory: This seems simple enough, but this number is constantly changing throughout the year with deaths, births, sales, and purchases, so it is not just how many cows and breeding age heifers are owned in a given year, but at a key point in the year, every year – preferably when the bulls go in with the herd for the start of the breeding season.
  2. Pregnancy rate (%): Reproduction is a very important aspect of ranch management. Every other phase of production management should focus on getting cows and heifers pregnant in a 70 to 90-day period, so this should be measured annually and the success rate recorded.  It also provides a real opportunity to cull open cattle as soon as possible.  With no calf to sell, the cow or heifer becomes the income to offset expenses for the year.
    • Pregnancy Rate = Number of cows diagnosed pregnant * 100
      Number of cows exposed to be bred
  3. Weaning data: The total number, weight, and average weight of calves weaned, preferably at a fairly consistent time each year. If all calves are not weaned and sold at the same time, this number will be much more variable, but can be adjusted based on age.
    • Weaning Rate (%) – there are several factors involved with how many calves are actually sold for income each year. For Cow-calf producers this is your bottom line, how many live calves do you produce to market each year.
      • Weaning Rate = Number of calves weaned    * 100
        Number of cows exposed to be bred
    • Average Cow Production (lbs.) – This is the ultimate production measure of a cow-calf operation that sells calves at weaning. This is probably the most common benchmark used to compare year to year, and operation to operation.  Notice though, this is different from figuring an average weaning weight, because it includes all the breeding cows, not just the live calves at weaning.
      • Pounds weaned per cow = Total weight of all weaned calves * 100
        Number of cows exposed to be bred
  1. Individual animal identification: This management practice can have significant impacts on efficiency if production records are kept and are used for replacement selection, culling, and animal performance evaluation. It does take both.  The number is of limited value if no production history is recorded. Progress can be made utilizing whole herd records and averages, but with a history of production for each individual animal, you can select replacements from the International Year Letter Designation for Animal Identificationtop performing individuals in a herd, and more importantly for culling out the poorest performers. The most common numbering system is simply the year and the order of birth (example 29th calf born in 2016 would either be 629 or 296).  Another method has emerged with computer based record keeping, because every 10 years there will be another 629, so many breed associations and farms have moved to the alphabet year system (example for 29th calf in 2016 would either be 29D or D29).
  2. Individual performance data:The list of individual animal performance records that can be maintained is endless, but there are several key records that should be kept for each calf a cow produces: birth date, birth weight, sex, calving ease, death loss, calving interval, and 205 day adjusted weaning weights, and herd ratios. Ratios compare each individual to the average (100) of the herd, so a calf with a 105 ratio is 5% above average for that specific group.  Identifying and weighing calves allows a cow production history to be established, so that culling and selection decisions can be made.
    • 205 day Adjusted Weight = Actual weaning weight- birth weight * 205 + BWt.                  
      Age in Days (weaning date- birth date)
    • Weaning weight ratio =  Individual record 205 adjusted wt.   * 100
      Average of all animals treated alike

Establishing baseline financial data

If you are truly in the “cattle business,” then there are also some basic financial records needed to build baseline data for a cow-calf herd.

  1. Income: This is the type of records folks don’t mind tracking, but some forms may not always get recorded. You want to track every type of income for an operation:  weaned calves, cull cows, cull bulls, cull heifers, extra hay, equipment sales, custom work for other operations.  Not just total sales, but per unit income ($/cwt, $/bale) as well.
  2. Expenses: Every operation has to make purchases and rely on some custom services. Don’t just keep receipts, but track expenses by category, so that each category can be compared.
  3. Unit cost of production: After adding up the expenses, you can go one step further and determine a cost per cow, or cost per pound of weaned calf. This can also be broken down further for each major category of expenditures.  Knowing these basic level unit costs make on-the-run calculations easier as you manage day-to-day operations.
  4. Revenue per cow: How much did each cow that was exposed to be bred earn in income for the operation?  This can be really helpful as you consider herd expansion or decrease.
  5. Profitability: The first question to answer at the end of each year is, “Did your income exceed your expenses?” Be careful with this number, however because there is one key difference between gross income and net income – depreciation. Many of the valuable assets such as cows, trucks, tractors, cow pens, and hay equipment have to be replaced someday.  Hopefully, there are also funds left for the management to have some income as well.

Record keeping systems

There are a number of options available for both record keeping and analysis of beef cattle herds.  Certainly records can be kept on a legal pad, calendar or pocket notebook, but by the end of the year it can be frustrating to sort through random written records.  There are a few options available that can add some organization to herd records.

  1. Pocket record book: The National Cattlemen’s Association (NCBA) has a pocket record system called the IRM Redbook. This system is good because it stays with you wherever you go, but that can also be a bad thing in a rainstorm, muddy cowpens, or if it gets washed in your jeans pocket.  The Redbook is a great tool, but it was designed for a single production year.  NCBA has also added a companion excel spreadsheet, the Redbook Worksheet, that has the same organization, so records from the pocket record book can be transferred to a computer and kept from year to year.
  2. Notebook record book: Another option is the Florida Ranch Record Book that provides a loose-leaf notebook record keeping system that can be kept in the truck or office. This system was designed for field use to record beef cattle, pastures, and basic financial records. Because the record sheets are in a notebook, sheets can be added or removed and customized for each individual operation. There are even two sheets to be filled out at the end of each year for simple ranch performance and profit analysis. This record book was not designed to provide a complete financial record list for tax preparation or loan application, but it does provide organization for key records collected in the field for everyday use.
  3. Computer software: The most powerful tools for record keeping and ranch management are computer programs developed specifically for this purpose . Many of these programs allow data entry from electronic identification (EID) tag readers, saving a lot of chute-side number writing.  A few even allow mobile phone record entry.  Oklahoma State has a factsheet called Cow-Calf Production Record Software that provides comparisons of commercially available software packages.  Most companies offer a free trial of their software, so you can try it out before purchasing.  These software programs allow for organized record entry, but more importantly, very powerful data sort and analysis that is much more tedious with written records or even simple excel spreadsheets.

Ranch analysis

Once the records are recorded and summarized you will have established some baseline data to better manage a cattle operation.  The records are of little value however, without herd and operation level analysis, and then breaking it down to the unit level (per cow, per pound of weaned calf, per bale, etc.)  The Noble Foundation has a nice spreadsheet to help with end of the year analysis called Cow Calf Net Return.  This is a free Excel spreadsheet you can download that does the math for you. The goal is to boil down all of the key records to a level that makes decision making more simple in the future. Example:  You spent $250/cow on supplemental feed in 2015, so what if you switched to a different system?  Instead of having to figure total costs, it is much easier to do the math on a per unit level.  This is also very valuable as you market calves, because you will have a fairly clear picture of your breakeven costs on $/lb. basis.  The Standardized Performance Analysis (SPA) system was developed to combine both cattle performance and financial records for standardized whole ranch analysis that could be used for comparisons to ranches across the country.

Benchmarks

At the 2016 Florida Beef Cattle Short Course, Dr. Stan Bevers, Texas A&M Livestock Economist, shared his 13 Key Performance Indicator Targets for Beef Cow-calf Operations.  He offers some really good suggestions on targets for production and financial management of cow-calf operations.  While this type of annual, whole ranch evaluation is ideal, it takes extensive production and financial records to develop this sort of annual benchmark targets.

Texas A&M Key Performance Indicator Targets for Cow-calf
 

Take home message

Start with simple record keeping tools, begin whole ranch evaluation at basic level, and gradually building your operational analysis to the point that annual benchmarks can be set, so everyone on an operation can work together to build a profitable, efficient cattle operation that is sustainable through the highs and lows of future cattle markets.  There are quite a few resources available to help ranchers work through this process.  The following are an assortment of help links to information and management tools for beef cattle operations: