Chipping away at input costs begins with ranch analysis
It's nearly impossible to go to a cattlemen's meeting nowadays and not hear about the need to cut input costs. Indeed, as cattlemen look for ways to survive high fuel and feed costs, as well as the pressure on calf and feeder-cattle prices, the input side of the ledger is being scrutinized as carefully as a college kid's credit card bill.
However, simply burning the midnight oil and wearing down a few sharp pencils isn't enough. A detailed review of ranch operations — the breeding program, supplemental feeding, labor and even family expenditures — should be made. And for that analysis to be most effective, it should start with an independent appraisal of all a ranch's management practices.
To most, letting an outsider peek into your business is a saddle sore. But it's needed, says Ron Gill, beef cattle specialist for Texas AgriLife Extension in Stephenville.
Gill, along with other Extension beef specialists and economists from Texas A&M and New Mexico State universities, offer various tips for identifying more efficient ranch practices and ways to make them happen.
A practical and effective way of monitoring herd management and production is through the Standardized Performance Analysis (SPA), Gill says. SPA offers a complete, integrated financial, production and marketing analysis of an entire operation using financial statements and other data.
“With SPA, producers can be better informed to meet their business and marketing objectives,” Gill says. “After costs are allocated, you can develop a ranch-management plan that allows you to admire the past, but attack the future.”
Plans can take both a strategic and tactical approach, and involve everything from cutting back on feed-truck trips to shifting your calving season to take better advantage of grass and other forage.
According to the SPA database, found at: http://agrisk.tamu.edu/irmspa.htm, the total cost in 2006 to maintain a female in a herd was $571.73/female, while the cost per cwt. of calf weaned was $121.61.
Numerous operating expenses reside within those totals. However, average expenses for a typical cow-calf operation from 2003-2006 shows that more than 40% of the costs are in four areas:
15.1% for total depreciation,
13.6% for feed purchases,
11.1% for hired labor and management and
4.9% for family-living withdrawals.
While these four areas may appear to be hard to scratch, you can make some improvement, says Ted McCollum, Texas AgriLife Extension beef cattle specialist in Amarillo.
“Consider a short-term action plan that looks at your individual inputs, what you do with them, and how much they cost,” he says. He notes that while costs have always gone up, they're likely more apparent now as margins tighten.
“You have to chip away at those inputs. See if you can extend the life of a depreciating asset (like vehicles), better manage your feeding program and more efficiently use labor. Little things like a cell phone, which I call ‘parasites,’ add to the cost of raising cattle. Can you reduce the costs of things like that? What may seem to be small costs can add up.”
Cut costs carefully
Cutting feed supplements can help reduce costs, but must be managed so production doesn't suffer. “Look at seasonal feed prices,” McCollum says. “Supplements such as cottonseed might be 20% less if contracted in the off-season. Determine if you can feed supplements like ‘cake’ once a week instead of twice.”
An easy way to reduce fuel, labor and long-term equipment depreciation is to make fewer trips to the pasture to deliver feed. “It sounds elementary, but it's a practical way to reduce costs,” he adds.
Fuel expenditures averaged 4.7% of total operating costs in the '03-'06 period. Since then, fuel prices have jumped at least 50%, adding even more urgency to finding ways to reduce trips to the pasture without losing productivity.
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McCollum says feeding a typical 32-39% crude protein (CP) cake once a week instead of spreading out the feeding over two or three days will likely produce similar performance, according to several studies conducted at different locations. You'll still achieve the recommended weekly intake of supplement per cow, but altering the feeding frequency could reduce fuel expenditures, equipment use and time, he says.
Managing inputs can be enhanced by developing and using an operational plan that outlines how to achieve specific and short-run goals and objectives for a week, month, or even a year. “Operational plans are ‘tactical,’ meaning they describe how specific goals will be achieved through day-to-day operations,” McCollum says.
Changing your breeding program based on SPA or another analysis can help improve overall efficiency. “But the decision to make significant changes should only be considered after ranch-specific range, production and financial data demonstrates change is necessary,” says Manny Encinias, New Mexico State University Extension livestock specialist in Clayton.
Moving winter calving dates to spring and even summer is a long-term management decision that warrants evaluation in the era of high fuel and supplemental feed costs. “Transitioning from winter to a spring-calving season is advantageous across most production environments,” Encinias says. “Weaning weights may be reduced, but this change could provide opportunities to continue marketing on traditional dates without sacrificing significant tonnage.”
Calving during late spring and summer most closely matches a cow's requirements for lactation with forage quality and may provide the largest supplementation savings and reduction in annual cow costs in Southwestern production environments. “However, summer calving requires important marketing decisions,” Encinias says, “as calves will likely be considerably younger and lighter than spring-born calves if marketed in the fall.”
In comparing supplementation strategies and associated costs, it's critical to have good, ranch-specific data that describes forage quality, mature cow size, and lactation potential, as well as a set of guidelines outlining the nutrient requirements for your cows during different stages of production.
In making a comparison, Encinias looks at forage-quality data for warm-season grasses found in south-central New Mexico and assumes the cowherd has an average mature cow body weight of 1,200 lbs. with a moderate lactation potential (20 lbs./day).
He says cows calving in December will require about 948 lbs. of a 32% CP supplement annually for a cost of about $123 (based on a $260/ton delivered price to the ranch) to meet CP deficiencies throughout the year. Supplement requirements are reduced to about 843 lbs. and $109 for March calving; 715 lbs. and $92 for May calving; 701 lbs. and $91 for June calving; and 824 lbs. and $107 for August calving.
“With this dataset, the May and June calving systems are the best options to reduce supplementation costs,” Encinias says. But he and his colleagues warn that drought, which can strike any year, can elevate supplemental needs and costs.
Strategies that target supplementation during the last trimester of pregnancy through breeding result in similar trends across calving dates, but even greater savings. “A lot of producers in the Southwest would be surprised at how well a late-summer or early-fall calving season pencils out,” Encinias says, “when you only supplement the cows during the periods of highest demand, sell calves during spring highs, and let the cows regain body condition on green grass.”
He advises those considering a calving-season change to first develop a marketing plan for their calves. For example, with summer calving, a retained-ownership program may work for producers with access to winter-wheat pasture or other forage that will enable them to market calves the following spring.
Encinias also advises ranchers to analyze the impacts of environmental extremes (i.e., cold and heat stress) on calf survivability and reproductive performance, before moving their calving season.
“You shouldn't change what you haven't already measured,” he says. “You should rely on your ranch-specific data relative to your production environment and look at the pros and cons of moving a calving season forward because it will be extremely more difficult to move a calving season backward.”
Look outside the box
Consider different profit centers that can be generated from the land, Gill says, but exercise the same analytical eye used when looking at input costs. Hunting leases can add substantial income to some ranches, but they can also pose excessive costs. An alternative accounting system may also be needed to take full advantage of depreciation and other available deductions.
“Set realistic goals and timelines,” Gill advises, “then monitor the progress and production response.”
Larry Stalcup is a freelance writer based in Amarillo, TX.
Feed purchasing & management
Ted McCollum, Texas AgriLife Extension beef cattle specialist, says that — with higher grain, oilseed and other feed costs likely here for a long time — producers should consider numerous measures to enhance their feed purchasing and management while still maintaining optimum nutrition programs. His suggestions include:
Re-evaluate stocking rates and adjust to forage conditions. Lightening up can potentially reduce feed requirements.
Study grazing-management plans that group cows into larger numbers during the supplementation season. This may reduce time, fuel and equipment required to check and feed cattle.
Study grazing plans that reserve units nearer to headquarters or camps for winter use to help reduce distance required to haul feed and check cattle, as well as possibly reduce supplements required.
Investigate seasonal supplement prices to determine if feed can be priced and carried during periods of lower prices.
Work to possibly reduce frequency of supplementation.
Look at supplement alternatives that can reduce tonnage needed.
Group cows based on feed requirements for the winter to increase the feeding program's effectiveness.
Determine why significant amounts of hay and other purchased roughages are being fed and look at ways to adjust purchases to save money.