South Dakota State University 2006 South Dakota Cow-Calf Business Report™
Table of Contents 1. 2. 3. 4. 5. 6.
7. 8.
Introduction……………………………………………………………………………………………………………………..3 2006 SPA Summary……………………………………………………………………………………………………………7 2006 Cow Cost Summary…………………………………………………………………………………………………10 2006 Financial Summary………………………………………………………………………………………………….12 2006 Heifer Development Cost Summary………………………………………………………………………..16 2006 Feed Cost Summary a. Corn Silage Cost Summary…………………………………………………………………………………18 b. Grass Hay Cost Summary…………………………………………………………………………………..20 c. Alfalfa Hay Cost Summary…………………………………………………………………………………22 d. Small Grain Hay Cost Summary…………………………………………………………………………24 2006 Grazing Cost Summary a. Pasture costs…………………………………………………………………………………………………….26 b. Pasture Rental…………………………………………………………………………………………………..28 2006 Calf Backgrounding Cost Summary…………………………………………………………………………30
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Introduction The SDSU-IRM-SPA program was developed with the intent of providing producers with a useful analysis of their business to improve profitability and sustainability. The program provides eastern South Dakota cow calf producers the opportunity to evaluate their operations on an individual basis as well as the ability to compare their data to the database averages provided in this report. The capacity to know and understand these performance measurements will help producers identify the strengths and weaknesses of their operations and recognize opportunities for change. Furthermore, operators can assess data from their operation over a series of years in order to appraise the effectiveness of management changes aimed at improving profitability. Materials and methods The data in this report was collected from eastern South Dakota cow-calf producers whom participated in the SDSU-IRM-SPA program. Additional data was collected through individual consultation. Data in this report represents the 2006 production cycle. Standardized Performance Analysis Summary Standardized Performance Analysis (SPA) data were collected using the SPA system in accordance with the SPA guidelines developed by the IRM Coordinating Committee of the National Cattlemen’s Beef Association. Each herd represents one observation which resulted in a database of 59 observations in the 2006 summary. Total Cow Cost and Calf Cost Breakeven Summary Mean total cow cost refers to the mean of each component of cow cost on a per cow exposed basis over the total number of observations to arrive at a mean cost value for each component. Mean cost values of each component were then summed to arrive at a mean total cow cost per cow exposed. Mean calf cost breakeven was then calculated by dividing mean total cow cost per cow exposed by the pounds of calf weaned per cow exposed to adjust for weaning percentage. Each herd represented one observation which resulted in a database of 46 observations in the 2006 summary. Financial Ratio Summary Rate of Return on Assets (ROA) Mean return on assets serves as an index of business profitability by measuring the efficiency at which business assets are used to generate profit for the business; the higher the ROA, the more profitable the business. Typically, ROA in farm and ranch
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businesses runs between 1% and 5%. Each business represented one observation which resulted in a database of 46 observations in the 2006 summary. This ratio is calculated using the following formula: ROA = (Net Income + Interest Expense – Value of Operators Labor & Management) Total Assets Operating Expense Ratio (OER) The operating expense ratio is a measurement of business efficiency by evaluating the proportion of total business revenue that is used to pay operating expenses. Typically, the OER of a farm or ranch business should run between 50% and 75%. Each business represented one observation which resulted in a database of 46 observations in the 2006 summary. This ratio is calculated using the following formula: OER = (Gross Business Expenses – Business Interest Expense – Depreciation Expense) Gross Business Revenue Depreciation Expense Ratio (DER) The depreciation expense ratio is a measurement of how fast the business is wearing out capital invested in depreciable assets and what proportion of Gross business revenue is needed to maintain the capital used by the business. Typically, the DER of a farm or ranch business should run less than 20%. Each business represented one observation which resulted in a database of 46 observations in the 2006 summary. This ratio is calculated using the following formula: DER=
(Depreciation) Gross Business Revenue
Interest Expense Ratio (IER) The interest expense ratio is a measurement of the proportion of gross revenue committed to interest payments. Typically, the IER of a farm or ranch business should run less than 20%. Each business represented one observation which resulted in a database of 46 observations in the 2006 summary. This ratio is calculated using the following formula: IER = (Business Interest Expense) Gross Business Revenue Heifer Development Cost Summary
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Mean heifer development cost refers to the mean of each component of heifer development cost on a per heifer exposed basis over the total number of observations to arrive at a mean cost value for each component. Mean cost values of each component were then summed to arrive at a mean total heifer development cost per heifer exposed. Heifer development costs include the cost of the heifer at the time of weaning calculated as a purchase cost if the heifer was purchased as a heifer calf or as a transfer cost from the cow calf enterprise in the case of retained heifers. Development costs are then tabulated through the development phase until the heifer is checked for pregnancy. Each herd represented one observation which resulted in a database of 39 observations in the 2006 summary. Cost of Production for Feed Crops Mean cost of production refers to the mean of each component of production cost on a per acre basis over the total number of observations to arrive at a mean cost value for each component. Mean cost values of each component were then summed to arrive at a mean cost of production per acre. Mean cost of production was then divided by mean crop yield to arrive at a mean cost of production per unit. For the 2006 summary, each business represented one observation which resulted in a database of 19 observations for mean cost of production for corn silage, 26 observations for mean cost of production for grass hay, 13 observations for mean cost of production of alfalfa hay, and 7 observations for mean cost of production for small grain hay. Pasture Cost Summary Mean pasture cost refers to the mean of each component of pasture cost for both deeded acres and leased acres on a per acre basis over the total number of observations to arrive at a mean cost value for each component. Mean cost values of each component were then summed to arrive at a mean pasture cost per acre for both deeded and leased pasture acres. Mean pasture cost was then divided by mean pasture yield on an AUM basis to arrive at a mean pasture cost per AUM. For the 2006 summary, each business represented one observation which resulted in a database of 15 observations for pasture cost on deeded acres and 18 observations for pasture cost on leased acres. Calf Backgrounding Cost Summary Mean calf backgrouding cost refers to the mean of each component of calf backgrounding cost on a per head basis over the total number of observations to arrive at a mean cost value for each component. Mean cost values of each component were then summed to arrive at a mean calf backgrounding cost per head.
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Calf backgrounding costs include the cost of the calf at the time of weaning calculated as a purchase cost if the calf was purchased or as a transfer cost from the cow calf enterprise in the case of retained calves. backgrounding costs are then tabulated through the backgrounding phase until the calf is marketed. Observations that finished calves or fed longer than 90 days or 900 pounds were not included. Each business represented one observation which resulted in a database of 9 observations in the 2006 summary.
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2006 Cow-Calf Business Summary Table 1. Standardized Performance Analysis summary report for cow-calf operations in eastern South Dakota for 2006 (n=59). Reproduction and production measures: Pregnancy percentage Weaning percentage
Average 94.7 87.9
Calving distribution: Calves born during 1st 21 Days (%) Calves born during 1st 42 Days (%) Calves born during 1st 63 Days (%)
63.9 25.2 7.8
Production performance measures: Average weaning weight (lbs) Pounds of calf weaned per exposed female (lbs)
513.0 455.0
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Table 2. Mean total cow cost and mean calf cost breakeven summary for cow-calf operations in eastern South Dakota for 2006 (n=46). Item Feed Cost
Cost/cow exposed
Pasture Feed Feed Supplements Mineral
89.19 183.88 31.12 22.66
Total Feed Cost
327.85
Operating Costs Breeding Fees Veterinary Supplies Fuel & Oil Repairs Trucking Operating Interest
5.12 26.37 8.81 7.46 7.33 3.89 5.86
Total Operating Cost
64.84
Total Feed & Operating Cost
392.69
Fixed Cost Hired Labor Insurance Utilities Interest Depreciation Miscellaneous
2.61 3.89 4.28 7.69 18.92 3.44
Total Fixed Costs
40.83
Total Cost Calf Cost Breakeven ($/Lb. of weaned calf)
433.52 0.94
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Figure 1. Financial ratio summary for A) mean return on assets, B) mean operating expense ratio, C) mean depreciation expense ratio, and D) mean interest expense ratio for cow-calf operations in eastern South Dakota for 2006 (n=46). A) Mean Rate of Return on Assets (ROA) Avg. = 7.89%
-20%
-10%
0%
10%
20%
Good Acceptable Trouble
B) Mean Operating Expense Ratio (OER) Avg. = 82.1%
0
25%
50%
75%
100%
Good Acceptable Trouble
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C) Mean Depreciation Expense Ratio (DER) Avg. = 15.8%
0
10%
15%
20%
25%
Good Acceptable Trouble
D) Mean Interest Expense Ratio Avg. = 16.1%
0
10%
15%
20%
25%
Good Acceptable Trouble
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Table 3. Heifer development cost summary for cow-calf operations in eastern South Dakota for 2006 (n=39). Item Transfer cost (from cow-calf enterprise)
Cost/heifer exposed 496.90
Feed Cost Grain Roughage Feed Supplements Mineral
158.36 90.12 5.98 4.68
Summer Pasture
107.22
Total Feed Costs
366.36
Operating Costs Breeding (Including clean-up) Veterinary Supplies Fuel & Oil Repairs Trucking (Open heifers) Marketing (Open heifers) Operating Interest
38.14 12.21 4.56 4.91 4.01 9.69 35.33 24.89
Total Operating Cost
133.74
Total Development Cost
500.10
Total Cost (Including value of heifer at weaning)
997.00
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Table 4. Mean cost of production for corn silage for cow-calf operations in eastern South Dakota for 2006 (n=19). Item Operating Costs Seed Fertilizer Chemicals Crop Insurance Fuel & Oil Repairs Custom Hire Hired Labor Operating Interest Miscellaneous Total Operating Costs
Cost/acre 56.99 59.36 28.87 21.55 57.44 36.25 39.87 0.44 3.05 4.88 308.70
Fixed Costs Hired Labor Insurance Utilities Property Taxes Interest Depreciation Miscellaneous
24.92 4.96 4.71 8.56 7.01 27.12 7.78
Total Fixed Costs
85.06
Total Cost
393.76
Average yield per acre (T)
12.11
Cost of Production ($/T)
32.51
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Table 5. Mean cost of production for grass hay for cow-calf operations in eastern South Dakota for 2006 (n=26). Item Cost/acre Operating Costs Fertilizer Chemicals Fuel & Oil Repairs Custom Hire Operating Interest Miscellaneous
11.33 0.41 20.11 7.41 4.11 1.42 4.55
Total Operating Costs
49.34
Fixed Costs Hired Labor Insurance Utilities Property Taxes Interest Depreciation Miscellaneous
3.21 1.56 0.87 5.06 5.98 12.01 2.31
Total Fixed Costs
31.00
Total Cost
80.34
Average yield per acre (T)
1.24
Cost of Production ($/T)
64.88
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Table 6. Mean cost of production for alfalfa hay for cow-calf operations in eastern South Dakota for 2006 (n=13). Item Operating Costs
Cost/acre
Seed Fertilizer Chemicals Crop Insurance Fuel & Oil Repairs Custom Hire Hired Labor Operating Interest Miscellaneous
1.62 16.45 4.32 1.13 37.88 8.72 8.91 1.41 5.83 4.09
Total Operating Costs
90.36
Fixed Costs Hired Labor Insurance Utilities Property Taxes Interest Depreciation Miscellaneous
6.88 2.02 1.41 7.74 5.98 27.81 5.03
Total Fixed Costs
56.87
Total Cost Average yield per acre Cost of Production ($/T)
147.23 3.25 45.26
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Table 7. Mean cost of production for small grain hay for cow-calf operations in eastern South Dakota for 2006 (n=7). Item Operating Costs Seed Fertilizer Fuel & Oil Repairs Operating Interest Miscellaneous Total Operating Costs
Cost/Acre 23.41 68.72 28.21 12.36 5.81 2.11 140.62
Fixed Costs Hired Labor Insurance Utilities Property Taxes Interest Depreciation Miscellaneous
4.14 2.61 1.26 6.87 9.91 12.94 0.92
Total Fixed Costs
38.65
Total Cost Average yield per acre Cost of Production ($/T)
179.27 1.86 96.10
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Table 8. Deeded pasture cost summary for cow-calf operations in eastern South Dakota for 2006 (n=15). Item Operating Costs
Cost/acre
Fertilizer Fuel & Oil Repairs Miscellaneous
0.51 3.38 1.49 0.71
Total Operating Costs
6.09
Fixed Costs Hired Labor Insurance Utilities Property Taxes Interest Miscellaneous
0.83 1.12 1.23 5.63 5.07 0.92
Total Fixed Costs
14.80
Total Cost
20.89
Average yield per acre (AUM/A)
1.05
Cost of Production ($/AUM)
19.83
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Table 9. Rented pasture cost summary for cow-calf operations in eastern South Dakota for 2006 (n=8). Item Operating Costs
Cost/Acre
Fertilizer Fuel & Oil Repairs Land Cost Miscellaneous
0.45 2.62 1.03 39.66 2.74
Total Operating Costs
46.50
Fixed Costs Hired Labor Miscellaneous
0.29 1.68
Total Fixed Costs
1.97
Total Cost Average yield per acre (AUM/A) Cost of Production ($/AUM)
48.47 1.17 41.38
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Table 10. Calf backgrounding cost summary for cow-calf operations in eastern South Dakota for 2006 (n=9). Item Feed Cost Corn Distillers Roughage Feed Supplements Mineral
Cost/head 24.36 13.09 17.88 7.62 8.11
Total Feed Cost
71.06
Operating Costs Veterinary Supplies Fuel & Oil Repairs Trucking Marketing Operating Interest
1.92 3.54 10.03 5.84 7.55 5.77 6.95
Total Operating Cost
41.60
Total Feed & Operating Cost Fixed Cost Hired Labor Insurance Utilities Interest Depreciation Miscellaneous Total Fixed Costs
112.66 2.91 1.38 4.22 5.94 5.81 3.96 24.22
Total Cost
136.88
Average start weight (lb) Average days on feed (days) Average end weight (lb) Average daily gain (lb/day)
562 85 759 2.71
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Cost of gain ($/lb)
0.59
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