South Dakota State University 2010 South Dakota Cow-Calf Business Report™
Table of Contents 1. 2. 3. 4. 5. 6.
7. 8. 9. 10. 11. 12. 13. 14. 15.
Introductory Remarks……………………………………………………………………………………………………………….3 2010 SPA Summary…………………………………………………………………………………………………………………..7 2010 Cow Cost Summary………………………………………………………………………………………………………….8 2010 Financial Summary…………………………………………………………………………………………………………..9 2010 Heifer Development Cost Summary……………………………………………………………………………….11 2010 Feed Cost Summary a. Corn Silage Cost Summary………………………………………………………………………………………..12 b. Grass Hay Cost Summary………………………………………………………………………………………....13 c. Alfalfa Hay Cost Summary………………………………………………………………………………………...14 d. Small-grain hay Cost Summary………………………………………………………………………………….15 2010 Grazing Cost Summary a. Pasture costs…………………………………………………………………………………………………………….16 b. Pasture Rental…………………………………………………………………………………………………………..17 2010 Calf Backgrounding Cost Summary…………………………………………………………………………………18 2002-2010 SPA Trend Summary………………………………………………………………………………………………19 2002-2010 Financial Trend Summary………………………………………………………………………………………21 2005-2010 Cow Cost trend Summary……………………………………………………………………………………..23 2005-2010 Heifer Development Cost Trend Summary…………………………………………………………….23 2005-2010 Feed Cost Trend Summary…………………………………………………………………………………….24 2005-2010 Grazing Cost Trend Summary………………………………………………………………………………..26 2005-2010 Calf Backgrounding Cost Trend Summary………………………………………………………………27
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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 2010 production cycle as well as a trend analysis of data collected in the same manner between 2002 and 2010. 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 53 observations in the 2010 summary and 310 observations in the 2002-2010 trend summaries. 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 44 observations in the 2010 summary and 226 observations in the 2002-2010 trend summaries. Financial Ratio Summary Rate of Return on Assets (ROA) 3
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 businesses runs between 1% and 5%. Each business represented one observation which resulted in a database of 44 observations in the 2010 summary and 226 observations in the 2002-2010 trend summaries. 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 44 observations in the 2010 summary and 226 observations in the 2002-2010 trend summaries. 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 44 observations in the 2010 summary and 226 observations in the 2002-2010 trend summaries. 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 44 observations in the 2010 summary and 226 observations in the 20022010 trend summaries. This ratio is calculated using the following formula: IER = (Business Interest Expense) Gross Business Revenue
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Heifer Development Cost Summary 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 31 observations in the 2010 summary and 133 observations in the 2005-2010 trend summaries. 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 2010 summary, each business represented one observation which resulted in a database of 23 observations for mean cost of production for corn silage, 34 observations for mean cost of production for grass hay, 15 observations for mean cost of production of alfalfa hay, and 7 observations for mean cost of production for small grain hay. The 2005-2010 trend summaries represented a database of 95 observations for mean cost of production for corn silage, 169 observations for mean cost of production for grass hay, 83 observations for mean cost of production of alfalfa hay, and 46 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 2010 summary, each business represented one observation which resulted in a database of 41 observations for pasture cost on deeded acres and 26 observations for pasture cost on 5
leased acres. The 2005-2010 trend summaries represented a database of 179 observations for pasture cost on deeded acres and 132 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. 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 32 observations in the 2010 summary and 107 observations for the 2005-2010 trend summaries.
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2010 Cow-Calf Business Summary Table 1. Standardized Performance Analysis summary report for cow-calf operations in eastern South Dakota for 2010 (n=53). Reproduction and production measures: Pregnancy percentage Weaning percentage
Average 94.1 90.1
Calving distribution: Calves born during 1st 21 Days (%) Calves born during 1st 42 Days (%) Calves born during 1st 63 Days (%)
58.3 27.3 8.7
Production performance measures: Average weaning weight (lbs) Pounds of calf weaned per exposed female (lbs)
510.3 460.0
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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 2010 (n=44). Item Feed Cost
Cost/cow exposed
Pasture Feed Feed Supplements Mineral
147.91 197.68 33.27 23.57
Total Feed Cost
402.43
Operating Costs Breeding Fees Veterinary Supplies Fuel & Oil Repairs Trucking Operating Interest
5.94 23.45 7.72 5.69 8.52 3.20 6.15
Total Operating Cost
60.67
Total Feed & Operating Cost
463.10
Fixed Cost Hired Labor Insurance Utilities Interest Depreciation Miscellaneous
2.95 4.04 4.90 7.98 16.55 3.60
Total Fixed Costs
40.02
Total Cost
503.12
Calf Cost Breakeven ($/Lb. of weaned calf)
1.09
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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 2010 (n=44). A) Mean Rate of Return on Assets (ROA) Avg. = 8.41%
-20%
-10%
0%
10%
20%
Good Acceptable Trouble
B) Mean Operating Expense Ratio (OER) Avg. = 86.21%
0
25%
50%
75%
100%
Good Acceptable Trouble
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C) Mean Depreciation Expense Ratio (DER) Avg. = 15.4%
0
10%
15%
20%
25%
Good Acceptable Trouble
D) Mean Interest Expense Ratio Avg. = 14.02%
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 2010 (n=31). Item Transfer cost (from cow-calf enterprise)
Cost/heifer exposed 502.13
Feed Cost Grain Roughage Feed Supplements Mineral
160.29 83.88 7.59 6.26
Summer Pasture
113.25
Total Feed Costs
371.27
Operating Costs Breeding (Including clean-up) Veterinary Supplies Fuel & Oil Repairs Trucking (Open heifers) Marketing (Open heifers) Operating Interest Total Operating Cost
39.26 15.78 4.72 4.99 5.01 6.88 33.16 27.45 137.25
Total Development Cost Total Cost (Including value of heifer at weaning)
1010.65
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Table 4. Mean cost of production for corn silage for cow-calf operations in eastern South Dakota for 2010 (n=23). Item Operating Costs Seed Fertilizer Chemicals Crop Insurance Fuel & Oil Repairs Custom Hire Hired Labor Operating Interest Miscellaneous Total Operating Costs
Cost/acre 60.60 53.64 30.36 22.03 42.58 37.12 44.25 34.12 4.86 4.15 333.71
Fixed Costs Hired Labor Insurance Utilities Property Taxes Interest Depreciation Miscellaneous
26.07 4.17 5.01 8.48 7.79 24.78 5.13
Total Fixed Costs
81.43
Total Cost
415.14
Average yield per acre (T)
13.63
Cost of Production ($/T)
30.45
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Table 5. Grass hay cost summary for cow-calf operations in eastern South Dakota for 2010 (n=34). Item Cost/acre Operating Costs Fertilizer Chemicals Fuel & Oil Repairs Custom Hire Operating Interest Miscellaneous
9.48 1.12 14.56 15.69 7.89 1.54 5.91
Total Operating Costs
56.19
Fixed Costs Hired Labor Insurance Utilities Property Taxes Interest Depreciation Miscellaneous
4.79 1.83 0.89 5.03 4.94 10.23 4.54
Total Fixed Costs
32.25
Total Cost
88.44
Average yield per acre (T)
1.36
Cost of Production ($/T)
65.02
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Table 6. Alfalfa hay cost summary for cow-calf operations in eastern South Dakota for 2010 (n=15). Item Operating Costs Seed Fertilizer Chemicals Crop Insurance Fuel & Oil Repairs Custom Hire Hired Labor Operating Interest Miscellaneous Total Operating Costs
Cost/acre 2.45 14.81 8.31 1.63 32.14 19.68 12.45 3.54 5.78 4.89 105.68
Fixed Costs Hired Labor Insurance Utilities Property Taxes Interest Depreciation Miscellaneous
7.42 2.58 2.07 8.12 7.33 21.78 5.87
Total Fixed Costs
55.17
Total Cost Average yield per acre Cost of Production ($/T)
160.85 3.27 49.16
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Table 7. Small grain hay cost summary for cow-calf operations in eastern South Dakota for 2010 (n=7). Item Operating Costs
Cost/Acre
Seed Fertilizer Fuel & Oil Repairs Operating Interest Miscellaneous
25.12 23.78 21.52 12.01 4.93 3.77
Total Operating Costs
91.13
Fixed Costs Hired Labor Insurance Utilities Property Taxes Interest Depreciation Miscellaneous Total Fixed Costs Total Cost Average yield per acre Cost of Production ($/T)
4.88 3.41 1.56 7.22 8.21 9.55 2.73 37.56 128.69 2.07 62.14
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Table 8. Deeded pasture cost summary for cow-calf operations in eastern South Dakota for 2010 (n=41). Item Operating Costs
Cost/acre
Fertilizer Fuel & Oil Repairs Miscellaneous
1.12 3.45 2.12 1.88
Total Operating Costs
8.57
Fixed Costs Hired Labor Insurance Utilities Property Taxes Interest Miscellaneous
0.83 1.26 1.41 5.66 5.02 1.17
Total Fixed Costs
15.35
Total Cost
23.92
Average yield per acre (AUM/A)
1.15
Cost of Production ($/AUM)
20.63
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Table 9. Rented pasture cost summary for cow-calf operations in eastern South Dakota for 2010 (n=26). Item Operating Costs
Cost/Acre
Fertilizer Fuel & Oil Repairs Land Cost Miscellaneous
0.23 1.89 0.77 40.02 2.43
Total Operating Costs
45.34
Fixed Costs Hired Labor Miscellaneous
0.35 2.33
Total Fixed Costs
2.68
Total Cost Average yield per acre (AUM/A) Cost of Production ($/AUM)
48.02 1.15 41.78
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Table 10. Calf backgrounding cost summary for cow-calf operations in eastern South Dakota for 2010 (n=32). Item Feed Cost Corn Distillers Roughage Feed Supplements Mineral Total Feed Cost Operating Costs Veterinary Supplies Fuel & Oil Repairs Trucking Marketing Operating Interest Total Operating Cost Total Feed & Operating Cost Fixed Cost Hired Labor Insurance Utilities Interest Depreciation Miscellaneous Total Fixed Costs
Cost/head 32.87 20.48 23.16 9.28 10.12 95.91 1.94 2.37 9.07 6.11 7.89 5.36 6.89 39.63 135.54 3.21 1.96 3.12 3.88 4.07 3.11 19.35
Total Cost
154.89
Average start weight (lb) Average days on feed (days) Average end weight (lb)
548 72 752 18
Average daily gain (lb/day) Cost of gain ($/lb)
2.83 0.758 Trend Summary Report
Standardized Performance Analysis Trend Summary 2002-2010
Figure 2. Mean pregnancy percentage and standard deviation for cow-calf operations in eastern South Dakota for 2002 – 2010 (n=310).
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Figure 3. Mean weaning percentage and standard deviation for cow-calf operations in eastern South Dakota for 2002 – 2010 (n=310).
Figure 4. Mean percent (%) of calves born day 1 – 21, day 22-42, and day 43-63 of the calving season and standard deviation for cow-calf operations in eastern South Dakota for 2002 – 2010 (n=310).
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Figure 5. Mean weaning weight and standard deviation for cow-calf operations in eastern South Dakota for 2002 – 2010 (n=310).
Figure 6. Mean pounds of calf weaned per cow exposed and standard deviation for cowcalf operations in eastern South Dakota for 2002-2010 (n=310).
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Figure 7. Mean breakeven calf cost and standard deviation for cow-calf operations in eastern South Dakota for 2002-2010 (n=226).
Figure 8. Mean percent return on assets and standard deviation for cow-calf operations in eastern South Dakota for 2002-2010 (n=226).
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Figure 9. Mean operating expense ratio and standard deviation for cow-calf operations in eastern South Dakota for 2002-2010 (n=226).
Figure 10. Mean total cow costs for cow-calf operations in eastern South Dakota for 2002-2010 (n=226).
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Figure 11. Mean heifer development costs for cow-calf operations in eastern South Dakota for 2005-2010 (n=133).
Figure 12. Mean cost of production for corn silage for cow-calf operations in eastern South Dakota for 2005-2010 (n=95).
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Figure 13. Mean cost of production for grass hay for cow-calf operations in eastern South Dakota for 2005-2010 (n=169).
Figure 14. Mean cost of production for alfalfa hay for cow-calf operations in eastern South Dakota for 2005-2010 (n=83).
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Figure 15. Mean cost of production for small grain hay for cow-calf operations in eastern South Dakota for 2005-2010 (n=46).
Figure 16. Mean cost per AUM for deeded and leased acres for cow-calf operations in eastern South Dakota for 2005-2010 (n=311).
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Figure 17. Mean calf backgrounding cost for cow-calf operations in eastern South Dakota for 2005-2010 (n=107).
Figure 18. Mean cost of gain for backgrounding calves for cow-calf operations in eastern South Dakota for 2005-2010 (n=107). 27