Benchmarking and Profitability for Beef Operations
With Randy Saner, Extension Educator, Nebraska Extension; and Matt Stockton, Associate Professor, UNL Agricultural Economics
Benchmarking a cow-calf operation by comparing it to other similar operations, can give producers a tool to look at ways they can improve their business. This webinar will look at 31 commercial beef cow-calf operations with 100 or more cows. The information comes from the 2019 FINBIN database maintained by the University of Minnesota for the states of Nebraska, North Dakota, and South Dakota. We will discuss what key factors makes a beef operation profitable according to this benchmarking data.
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[00:00:00.000]Glennis McClure: webinar i'm glynis maclaurin extension educator and farm and ranch management analyst and the Department of agricultural economics at the University of nebraska Lincoln.
[00:00:11.070]Glennis McClure: Today is part of the weekly series of webinars producers by our extension farm and ranch management team find a complete schedule in past recordings of our webinar at farm w and l.edu.
[00:00:27.390]Glennis McClure: The nebraska real response hotline remains a great resource for ag professionals across the state, providing mental health counseling.
[00:00:35.490]Glennis McClure: information regarding legal assistance financial clinics mediation and more the hotlines toll free number is 1-800-464-0258 resources relating to stress and wellness can also be found at rural wellness dot you and l.edu.
[00:00:55.470]Glennis McClure: benchmark benchmarking a cow calf operation by comparing it to others similar operations can give producers a tool to look at ways they can improve their businesses.
[00:01:07.290]Glennis McClure: Today, our presenters will discuss what key factors makes a beef operation profitable, according to this benchmarking data so today we welcome we're joined by Randy saner a beef systems extension educator with nebraska extension hi Randy thank.
[00:01:27.540]Glennis McClure: You good good and matt Stockton, and every cultural, economic, economics and extension specialist with nebraska extension so hi matt thanks for joining us.
[00:01:37.470]Matt Stockton: hi Gladys.
[00:01:38.820]Glennis McClure: Alright, so i'll go ahead and turn it over to both of you, and I would like to remind our participants, they can use the chat feature to enter any questions and i'll try to.
[00:01:49.980]Glennis McClure: monitor that and let these guys know when there's some questions in the chat and and then and we'll try to answer those kind of as we go sounds like okay go ahead guys.
[00:02:00.810]Randy Saner: So i'm going to share my screen.
[00:02:31.710]Glennis McClure: hey go it looks.
[00:02:33.960]Randy Saner: yeah it's not wanting to share what's going on.
[00:02:37.800]Glennis McClure: Well, I see it, it's just.
[00:02:40.290]Matt Stockton: it's got the got the type on the side.
[00:02:44.610]Matt Stockton: resume slideshow click on that.
[00:02:46.530]Randy Saner: Okay, there we go yeah that makes sense.
[00:02:50.550]Randy Saner: So so i'm my name is Randy senior and i'm I work at the north platte extension Office like her, seven counties in this area of South central nebraska and we're going to talk a little bit about benchmarking and how you can use it in your operation to.
[00:03:10.080]Randy Saner: To hopefully help you look at your cost and your cost structure and your revenues and see if there's ways, you can improve these are i'm going to go to my next slide and matt do you have anything to add to this.
[00:03:22.530]Matt Stockton: Well yeah i'd like to introduce myself i'm matt Stockton and.
[00:03:27.360]Matt Stockton: I work out there, the same place Randy does, but I cover the state i'm a specialist in the differences is just means that I have a little bit different job than Randy.
[00:03:38.730]Matt Stockton: randy's a great guy and he's part of this so glad to be here and what we're going to talk about today.
[00:03:44.310]Matt Stockton: Benchmarking is good, as long as the benchmarks that you're comparing yourself to match your operation, you should always remember that, in other words, under the conditions that you are, you should have a similar comparison otherwise if comparisons can be kind of not so good.
[00:04:05.700]Randy Saner: So as matt was saying so, when we did this comparison we looked at 31 commercial these cow calf operations with 100 or more cows So hopefully that's your category, and then we use.
[00:04:21.300]Randy Saner: been database, which is maintained by the University of Minnesota and these ranches included nebraska North Dakota and South Dakota and.
[00:04:32.010]Randy Saner: They were all there were six ranches per per level that will look at there was actually seven in the highest profitability group.
[00:04:42.210]Randy Saner: They were split into like I said five categories group by profit level lowest low middle high end is.
[00:04:48.630]Matt Stockton: So that just to just to help you understand that what it is, is that these ranch's met certain profit categories, and so the six lowest ranches were put into one group.
[00:04:59.610]Matt Stockton: The next six ranches were put into the low group, and then the middle group and the high group and the highest group bias group, however, get have one more ranch than the others.
[00:05:13.800]Randy Saner: And then we also have the average profit from the whole group.
[00:05:18.990]Randy Saner: And so, so this is the each category has the average profit for those six operations that make up the group so it's an average remember branches will vary, but it's going to be the average of those of those six groups.
[00:05:36.630]Randy Saner: And the differences, driven by both the higher costs and lower revenues and provides the basis of the benchmarking article I also put below this the article link that was put on beef watch.
[00:05:50.160]Randy Saner: So you can click on to that, and you can look at the article and beef watch matt do you have anything to add.
[00:05:56.220]Matt Stockton: No, no that's that's perfect so just remember this benchmarking years to help give you some ideas and thoughts about how your operation might match up and where you might be able to make improvements or where you can recognize hey i'm doing a really good job in that area.
[00:06:12.960]Randy Saner: Before we get into the five group results let's compare some statistics of two of the groups Okay, and the next slide shows some of the physical characteristics averages of the groups.
[00:06:24.840]Randy Saner: From these number from these numbers, you can tell, which is the most profitable.
[00:06:30.690]Randy Saner: Or, hopefully, you can so we're going to ask you some questions here, we want you to think about the relationship between costs and productivity, and how does the productivity affect profitability by productivity, we means pounds of Kathleen per cow.
[00:06:48.120]Matt Stockton: For cancer rates right.
[00:06:50.580]Matt Stockton: Things like that the other thing is, we want you to think about marginal value as you, you know, one of the things as economist and as business people what you think about is does that next unit of.
[00:07:02.880]Matt Stockton: input, give me back what it's worth and that's that's the cost relationship we want you to think about and want you to think about that in relationship to what we're about to show you.
[00:07:19.830]Randy Saner: So we have comparison of group a or B and.
[00:07:26.010]Randy Saner: If we look at group a so which one of these tools more profitable like a group a it has a higher pregnancy rate.
[00:07:35.700]Randy Saner: It has a better calving rate it has better weaning rate.
[00:07:42.090]Randy Saner: And it has a better death rate.
[00:07:44.850]Randy Saner: as compared to group B.
[00:07:48.870]Matt Stockton: Which okay so we're let's just go over these numbers really quickly basically you got 99% of pregnancy rate versus a 95% pregnancy rate.
[00:07:58.020]Matt Stockton: Is 95% of bad right I don't think 95% is a bad rate the 99.2 is an exceptional rate isn't it.
[00:08:05.790]Matt Stockton: And then their pregnancy last there's a little bit higher last but then, of course, you have a higher later later pregnancy or group a that that offsets what from be.
[00:08:14.520]Matt Stockton: And then from the call rate there's quite a bit of difference you've got an 8% call right versus the 12.3% all right that's going to affect your replacement and replacement costs.
[00:08:24.630]Matt Stockton: And then you've got the 93.2 we need rate where versus an 88.1% win rate, so it has a higher weenie rate death rates for the cavs are about the same.
[00:08:38.070]Matt Stockton: Well, actually they're a little different a little higher death rate for the second one and but cow death rate is about the same.
[00:08:47.130]Randy Saner: So we rank them by the five groups that we we had okay so from Lewis, probably has probably had ranks for for each of these groups and he saw what the pregnancy rates were so the first group group a.
[00:09:04.020]Randy Saner: They were like first so they have the highest pregnancy rate, they were fourth in pregnancy loss, but they were number one and all these other other categories, except for weaning way and.
[00:09:19.980]Randy Saner: pounds of Kathy expose they were two and three, when we look at group B.
[00:09:26.550]Randy Saner: We see that.
[00:09:28.980]Randy Saner: They were actually forth in pregnancy rate first in calling rate in Kathy rate or a pregnancy loss i'm sorry because they had less pregnant.
[00:09:40.080]Randy Saner: lowest the lowest calling rate, they were second compared to the green Bay, they were fourth in calving rate of all the groups so that's all the profitability groups, they were fourth in weaning rate for all the profitability groups and they were fourth.
[00:09:59.190]Randy Saner: In lowest cat in death.
[00:10:04.680]Randy Saner: So you can see cow is cows, with the same weaning way they were second in and pounds of calf for cow expose which is really an important thing we look at for profitability, they were third versus group a which was second.
[00:10:21.210]Matt Stockton: So we want to ask this question which one, do you think is most profitable once you really think about that any.
[00:10:36.840]Randy Saner: So we compare the results group D had $111 and 80 cents per cow net return group a had $10 and 70 cents per account net return, so all those high rates that grief a had did not make them more profitable.
[00:10:54.960]Randy Saner: So why.
[00:10:56.760]Matt Stockton: yeah, so this is this is something that that kind of when we were looking at the numbers, we go wow that's.
[00:11:03.570]Matt Stockton: This kind of illustrates the point and we're going to get into the gory details of this whole thing as we go through this benchmarking, but the thing is isn't that kind of a.
[00:11:12.630]Matt Stockton: You know baby kind of, contrary to what you might be thinking you know the higher my pregnancy rate more money on make dire I have this, the more money i'll make.
[00:11:20.430]Matt Stockton: The more I have less CAP last, the more money on make eccentric cetera and this actually says that that's not the case, so the question then becomes Why is that not the case.
[00:11:35.430]Randy Saner: yeah if we look behind the higher rip the has a higher revenue and has lower costs, or does it add some combination of the two is that one of the others, and all those things so we're gonna look at the details here next.
[00:11:54.600]Randy Saner: So we're going to compare the five profit groups and we'll talk about why be is better than a.
[00:12:04.290]Randy Saner: So when we look at returns or net returns of the five profit groups, you can see that this highest profit had 1100 one $111 and 18 cents per cow.
[00:12:19.320]Randy Saner: And now, was a difference of almost seven over $700 between that high profit group and the lowest profit.
[00:12:29.700]Matt Stockton: So when when you really think about it that's a pretty big spread so the question is when you're doing your best marketing and as we show the the numbers and you'll have them available slides later.
[00:12:39.900]Matt Stockton: You can begin to compare some of the areas that we're going to talk about and how you might compare that and look at that why or what you might be able to change on your own operation.
[00:12:50.820]Randy Saner: yeah and one thing to look at even even the average group in.
[00:12:54.750]Randy Saner: Was.
[00:12:56.220]Randy Saner: A minus hundred and $40 and 99 cents because of these right here.
[00:13:07.590]Matt Stockton: So, remember that this is going to be on a per account.
[00:13:09.870]Matt Stockton: basis we're not talking 400 pounds of CAP we're talking about, in other words, taking all the cows that are exposed to the bull what what what was the cost per cow.
[00:13:25.410]Randy Saner: So look at all costs we have we have dragged of course overhead management Labor costs drag costs are going to be those variable costs like feed that hilo while i'm probably missing if you were.
[00:13:44.040]Randy Saner: overhead or your Labor to management and then you get your overhead which totals, but when you look at cost look at the difference between the highest profitability, which is 611 84 and the lowest which is 1800.
[00:14:01.350]Matt Stockton: That and what.
[00:14:02.460]Randy Saner: That is a big difference.
[00:14:05.010]Matt Stockton: it's a huge difference, but what's really cracks me up is when you look at the high versus the highest I mean there's there's about $100 difference in cost between these two so, in other words what we're saying is that group a, which was the high.
[00:14:19.800]Matt Stockton: As $100 more cost then group B, which was the one that was the highest and so there's quite a bit of difference, so the question is, where does that come from I don't I don't know if a lot on your guys's screen, but I can't we can't see all the other asked on there any way to do that.
[00:14:37.650]Randy Saner: Let me move this thing I think I can do.
[00:14:47.100]Matt Stockton: If not we'll just.
[00:14:50.160]Randy Saner: person is talking, I think that way, we can see it better Okay, let me see if I can do that okay okay.
[00:14:59.190]Randy Saner: how's that man.
[00:15:00.780]Matt Stockton: I my screen I gotta figure out how to do it for myself as long as everybody can see those numbers on i'm good with that and.
[00:15:07.950]Randy Saner: We can be good.
[00:15:09.870]Glennis McClure: We can see them question, though, how do you know how they figured like their management Labor costs is it mostly with their pain for Labor or is it or the figuring.
[00:15:22.110]Matt Stockton: that's hired Labor and there's also management Labor which is separated out that $63.
[00:15:31.410]Matt Stockton: there's a there's a cost like okay so like your direct costs are things like veterinarian and all those types of things and there's some Labor and stuff in there as well.
[00:15:42.030]Matt Stockton: But then, then, that the Labor management is the after the factor so that's edited and separately and that's why Labor management so there's Labor in several different places.
[00:15:52.500]Matt Stockton: So that Labor management is more.
[00:15:54.210]Matt Stockton: Like the management and the individual cost of the operators, whereas there's Labor costs also under the direct costs.
[00:16:04.980]Matt Stockton: Does that help at home yeah.
[00:16:08.970]Randy Saner: And again, you know you can see, see even even direct costs, you know.
[00:16:14.880]Randy Saner: between the highest and high, which was high was a and highest was be um there's 100 and almost $100 difference there indirect costs, but when we look at all the cost again it's about $100.
[00:16:31.530]Matt Stockton: So that's where the that's where the cost difference is mostly coming from his direct costs so that's brings us to the point is, we need to talk about direct costs and why that why that difference is there and I think the next slide shows us that Randy.
[00:16:46.620]Randy Saner: Yes, yes, so there's the high group and the highest group, and you can see.
[00:16:56.850]Matt Stockton: 45 that we broke.
[00:16:58.140]Matt Stockton: broke out there, direct costs right Randy right.
[00:17:00.360]Randy Saner: Right, so we have supplement has one cost, we have pastor costs and then everything else is in the Gray bar and you can see.
[00:17:10.860]Randy Saner: percentage wise there's not a lot of difference, I mean high growth high profit group paid more for pastor and more for for their their supplement and hey and they also paid more for their their the rest of their costs, which would be like that those things so.
[00:17:32.160]Randy Saner: Not a lot of difference, but overall, if you look at all their fee cost they're just a hair higher and their fee cost right.
[00:17:39.960]Matt Stockton: Well, actually I looked at this and i'm agreeing with Randy but at the same time, when you got.
[00:17:45.810]Matt Stockton: The pastor cost is the 19% of which is $83 for the low for the highest group and the high group as $147 almost double that.
[00:17:58.800]Matt Stockton: So it's paying twice as much for pasture almost as the highest group and that's where a lot of the savings is only saving $20.
[00:18:08.490]Matt Stockton: difference between the the other feed costs so where the cost is coming for the high group, a lot of it's coming from the the actual pasture what they're paying for pasture whatever not.
[00:18:21.810]Randy Saner: Right right so some pasture so as a producer your pastor costs are pretty important and they're part of your fee cost, but when you break them out, sometimes they can make the difference in in how profitable, you are.
[00:18:38.670]Matt Stockton: Right, because you know cows eat a lot of feeding the primary source of feed for a cow.
[00:18:44.550]Matt Stockton: is going to come from your your passion, now there are other feet costs and stuff in there obviously there's a and there's another stuff and that's where the $222 or the $242 come from, but the other thing too is even looking at the.
[00:19:00.090]Matt Stockton: The other costs that are non feed that are direct cause like veterinarian and some of these other things, while they're paying a lesser percent in the high group they're paying more money by about 20.
[00:19:11.220]Matt Stockton: Not quite $20 about $16 more so in each category, the high group is paying more for each of the inputs, that the look the highest group is paying less for.
[00:19:24.000]Glennis McClure: So there is a question also on this kind of related back to the pasture because that is a significant expense for sure, so do you know, was that actual pasture rent paid or other or was it like valuing their pasture.
[00:19:39.030]Glennis McClure: You know, based on their location that kind of thing, do you know how they figured that.
[00:19:43.680]Matt Stockton: yeah it would be figured all those ways Okay, in other words, this, this was a, this is the actual cost that the producers indicated in their records or their financial.
[00:19:55.170]Matt Stockton: That they paid or they figured the cost for pastor it could be they own the ground.
[00:20:00.300]Matt Stockton: And calculated that way, it could be that they rented the ground they calculated that way so remember there's five different producers in each group and so they're they're all different way, but what it shows, though, is, however, you do that.
[00:20:12.570]Matt Stockton: That value per cow is less for the highest group that it is for the high group.
[00:20:22.590]Randy Saner: And kind of stands out.
[00:20:25.440]Randy Saner: Absolutely, I agree, OK.
[00:20:28.590]Randy Saner: I will go to the next slide if there's been questions.
[00:20:37.410]Randy Saner: Eric yeah.
[00:20:39.630]Randy Saner: So we're gonna like your replacement costs now on a per hour basis of what we saw.
[00:20:48.420]Matt Stockton: This is an interesting category because.
[00:20:52.170]Matt Stockton: Cows get called towels die and cows, need to be replaced you'll see two things on this graph and Randy did you want to talk about this first.
[00:21:02.220]Randy Saner: Go no go ahead and all kind of.
[00:21:04.050]Matt Stockton: Okay, I didn't want to Okay, so the the orange there is inventory change so, in other words, if you lost cows in your hurt.
[00:21:13.320]Matt Stockton: And didn't replace them all the way, that would be that negative 9871, in other words that cost was accounted for for keeping the earth at a static size.
[00:21:23.130]Matt Stockton: But if you had a positive number there What that means is that you actually increased an inventory and you added value to your herd.
[00:21:30.420]Matt Stockton: So you have more valuable work on a per account basis, so you increase your hurt so that's how you interpret that orange line, now the blue line.
[00:21:39.990]Matt Stockton: is heard maintenance, this means that on a per cow basis, this is how much it costs you to replace cows.
[00:21:48.150]Matt Stockton: And to replace animals, whatever cows and stuff you replace both whatever and put them in and it costs on a per account basis so what's interesting is remember if you go back to the statistics.
[00:22:01.620]Matt Stockton: you'll remember that the highest heard, which is one on here on the father's side, where it says highest they had a higher rate than the high heard, and yet they have a lower replacement.
[00:22:16.590]Matt Stockton: cost or maintenance costs so that means you're probably doing something for cow replacement that's different than what the other people are doing they're keeping their costs down, even though their.
[00:22:28.320]Matt Stockton: recall rate is a slightly higher, which is kind of an interesting thing on a per account basis so i'm not sure exactly what they're doing there but there's probably ways to do that at a think about that.
[00:22:39.750]Matt Stockton: And the type of cows are buying what they're doing and how they're doing it what they're going about doing is is where that is it's kind of in there and there's no way for us to tell you what those things are.
[00:22:49.830]Matt Stockton: What we can tell you, though, is that the cost them less per cow.
[00:22:53.880]Matt Stockton: To replace then, then the high hurt and that's, the most important thing to take home from this, but if you notice the bottom one it's got the highest cost.
[00:23:04.410]Matt Stockton: For cow maintenance costs and look at the number of cows lost as well, so they're not there something's going on there that's this not working for them, as far as cost is concerned.
[00:23:19.890]Randy Saner: And I would add that that it would be hard to sustain your herd immunity this category is going to be hard to sustain that operation long term.
[00:23:30.300]Randy Saner: If these are the kinds of things that happen this could be just a yearly thing where they had a health problem or something, but over time to do this, this could get producers in trouble because they're losing members and they're also no problem.
[00:23:51.000]Randy Saner: Okay let's go to calf revenue, and this is on a per account basis for all cows.
[00:23:57.600]Randy Saner: Cows that are exposed to double that's how we figured it so it's not counted actually CAD it's the cows are you put with the bowl, and this is this is how we figured the revenue because remember you have some that don't breed and they're included in this.
[00:24:12.990]Matt Stockton: And they end up not having are we eating the calf one of those things.
[00:24:17.010]Randy Saner: are losing calf yep okay.
[00:24:22.200]Randy Saner: So so we're looking at the value of the cavs sold, you can you can see that.
[00:24:29.760]Randy Saner: You know this group, a this high group actually had just just a little higher value than the group be the highest group by about.
[00:24:44.550]Randy Saner: $70 or so so i'm.
[00:24:50.580]Randy Saner: just getting the most money for your cat or or you know her cow doesn't always mean you're the most profitable.
[00:25:00.150]Randy Saner: matt you might expand on that.
[00:25:02.250]Matt Stockton: Absolutely i'm thinking about this revenues important and and these cats are valued in different ways, you notice that there's a blue line.
[00:25:13.170]Matt Stockton: In an orange bar or blue bar and orange bar the orange bar represents that those animals are being transferred to a different operation in this case, what we're looking at here the highest is probably they're either being.
[00:25:27.630]Matt Stockton: going to for pre conditioning or they're going to be something else before they're sold or they're going to go to.
[00:25:36.570]Matt Stockton: Another operation which could be a year lean operation or even to the feedlot their CAP that's.
[00:25:43.290]Matt Stockton: So it depends on what they're doing with those but apparently the leads high operations, there seems to be.
[00:25:48.630]Matt Stockton: quite a bit of that going on that doesn't mean they get more revenue, but it does mean that they are going to have.
[00:25:54.630]Matt Stockton: A you know it seems to be working for them, whatever they're doing, whereas the other group.
[00:25:58.890]Matt Stockton: sells a lot more calves in fact more than 50% of their calves are going to probably sell then, then you know or 50% of the value calves are selling.
[00:26:07.770]Matt Stockton: But the whole point here is it revenue is only half the equation when we talked about cost, we were looking at the fact that the high group.
[00:26:17.820]Matt Stockton: which is what we wanted to compare the high and the highest most the high group had a lot more cost now they had a lot more Catherine Hello more this a lot more that but.
[00:26:27.960]Matt Stockton: And so that might account for that difference in revenue, because they have a little bit more, in fact, if we're going to get to this in a minute and we probably.
[00:26:36.870]Matt Stockton: want to talk about it, is it there was 491 pounds of calf for every cow exposed to the bowl and there was 490 pounds and the highest.
[00:26:49.800]Matt Stockton: So there's only one pound difference in the amount of CAP for cow that they produced, even though there was a difference in pregnancy rate a difference in this and different.
[00:26:57.600]Matt Stockton: Because what's happened to is the highest group was actually leaning heavier calves.
[00:27:02.250]Matt Stockton: I don't know why you know you'd have to really look at that, but they were managed to had their management together essential way.
[00:27:08.400]Matt Stockton: That they were winning more calves they weren't they have lower pregnancy rates and lower other things, but they were able to win the heavier calves.
[00:27:15.660]Matt Stockton: At the at the at the lower cost and that's why that they're the most profitable so.
[00:27:22.290]Matt Stockton: What is beginning to tell you is that you can get lots of productivity if you're willing to pay for it, but the question is.
[00:27:28.350]Matt Stockton: The productivity you're paying for are you getting the return that you need to cover those costs and make the most profit.
[00:27:34.650]Matt Stockton: And it seems to me in this case that the highest group has that kind of.
[00:27:38.760]Matt Stockton: More dialed in, then the high group because the high group, even though they're great production managers, doing everything.
[00:27:44.910]Matt Stockton: Getting the pregnancies and doing all the things that they're supposed to be doing it's costing them more than it should and so they're not able to become the highest amount of profitable, you know they made $10 and the other guys made $111 so there's a pretty big difference there.
[00:28:01.320]Glennis McClure: There is a question, the chat can you explain the transferred out part and how does that differ from the cavs sold.
[00:28:09.870]Matt Stockton: Okay, so transferred out is because this is this data is collected in a.
[00:28:16.110]Matt Stockton: In fin been it's put into a a form, where they list things by what happens to the animal.
[00:28:22.860]Matt Stockton: But the animal has to be valued so when an animal is transferred out the market value of that animal is used for whatever.
[00:28:30.840]Matt Stockton: valued out at the value that that CAP is at the time it's transferred to another enterprise this.
[00:28:37.140]Matt Stockton: been been data is that what we're looking at is cow calf data it's not yearling data that's a separate enterprise, so when those calves were transferred.
[00:28:46.950]Matt Stockton: To a to a to a yearling or if they were transferred to.
[00:28:51.630]Matt Stockton: Effort development, so, in other words you have a temperate development you're going to buy this basically you're buying that animal for one enterprise and putting it to another enterprise meaning, you can like raise it.
[00:29:02.010]Matt Stockton: As as a replacement animal or you're going to do whatever that's that's what a transfer is, whereas this actual sales means you just took it to the auction or you did a video option that you did some way you know private treaty or whatever you sold it.
[00:29:17.790]Matt Stockton: on the market.
[00:29:26.310]Matt Stockton: bandy do you have any comments oh.
[00:29:28.290]Randy Saner: No, I think I think we've explained it pretty well and maybe at the end i've got a comment on that, but i'll be in so we're in fact about calf value per hundred weight.
[00:29:39.870]Randy Saner: 400 pounds and talk about what you have to get for a calf to break even.
[00:29:49.410]Randy Saner: So first we'll talk about parties has sold in the in the price received.
[00:29:55.560]Randy Saner: If you notice the high versus the highest of the high actually had you know pound there a pound higher right.
[00:30:03.630]Randy Saner: There price was maybe not as good.
[00:30:09.570]Randy Saner: per hundred way so that could have cost them a little bit in in in revenue, but you can see there's not but really the most productive heard was this middle heard right at 514 pounds for cal expose.
[00:30:27.000]Randy Saner: And yet they were not very profitable.
[00:30:29.640]Matt Stockton: Right yep sorry be don't be confused by the orange bars that's the actual price that the that the data sheet says that they receive per CAP for the actual size of the calf they sold.
[00:30:46.680]Matt Stockton: that's not the price per hundred they receive it's a different value that they actually see for the number of pounds per cow.
[00:30:54.930]Matt Stockton: Which is exposed, so you Those are two separate numbers coming from two different places, so don't multiply the one number times the other number and expect to come up with the value that's not gonna work.
[00:31:06.690]Matt Stockton: Okay, I just don't want you to be somebody does that have to go well, that doesn't make sense, why did the cows, the 514 pounds with $1 56 not or you know have more money, I mean don't don't do that okay.
[00:31:19.500]Matt Stockton: Sorry Randy but.
[00:31:21.000]Randy Saner: that's Okay, but but, again, the highest productive cow, you know they were the they have them are the weaning weight as far as we can expose.
[00:31:30.930]Randy Saner: I was this middle agreement, yet they were they actually lost a little money versus 490 so just looking at productivity or trying to buy pounds of way without looking at cost will not benefiting.
[00:31:48.690]Matt Stockton: It supports the idea that.
[00:31:51.270]Matt Stockton: This marginal idea that we talked about in the beginning, in other words the inputs that you use need to pay for themselves, so if you're you're paying $35 a head for Beck toss.
[00:32:01.920]Matt Stockton: And you're losing some out of that, but if you added another.
[00:32:05.700]Matt Stockton: dollar or $2 for veterinary costs and it doesn't bring back that money on a per account basis, then you shouldn't probably be doing it, even though it might increase your.
[00:32:15.330]Matt Stockton: Pregnancy rate or might increase something as well as what we're saying you need to have that that balance so that.
[00:32:20.730]Matt Stockton: Whatever you're investing is returning something back to you in at least breaking even or profit.
[00:32:26.850]Matt Stockton: that's kind of this situation, you see here is that's what's happening here is that they're getting these extra big calves, but they're paying too much.
[00:32:35.460]Matt Stockton: To get those calves is what we're seeing here by their rank in profitability and that's what Randy that's what you're saying right Randy.
[00:32:42.690]Randy Saner: Right, an example would be done through this example would be lets say you bought a cow that had 11 more pounds of weaning waiting or cans.
[00:32:53.430]Randy Saner: But that cow it took 30 more dollars to feed that cow at 11 pounds at $1 50 a pound, you know that's not going to cover that $30 worth of feed cost and so maybe that's not the best use of that dollars spent is what we're saying that that makes.
[00:33:12.450]Matt Stockton: Absolutely beautiful example Randy beautiful.
[00:33:18.030]Randy Saner: we're going to go the next slide now okay so we're looking at breakeven values based on cost per hundred way 400 pounds and basically we're just doing this only thing we're going to talk about is well, you have to get out of your calves to pay their way to break even.
[00:33:39.180]Matt Stockton: And this isn't hundred waves right mandy.
[00:33:41.310]Randy Saner: This 100 weights right right So if you want to think you're preparing just divide by 100 instead of 125 to be $1 25 for the highest group.
[00:33:52.200]Matt Stockton: So this, this is my cost right, and so what we're saying is.
[00:33:55.920]Matt Stockton: Yes, a cost me $125 for every hundred weight of CAP I produced so if I got $1 the dollar 25 or 125 per hundred way I would break even.
[00:34:11.520]Randy Saner: Right right and, as you can see the difference between the highest highest group that's about 20 $25 difference, but when you get up here to these low groups, you know when is cans every about $3 and 75 cents a pound.
[00:34:28.320]Matt Stockton: This.
[00:34:29.790]Randy Saner: Here is going to be not going to be sustained he can't be sustainable at this level of cost.
[00:34:36.690]Randy Saner: So, so, then we need to look and figure out what we can do to reduce that cost to get us here, where these groups here, probably a lot of years could make money, the dollar 91 there's not even been very many years we've been able to do that so um.
[00:34:53.040]Matt Stockton: Why don't you show on the next slide Randy.
[00:34:55.200]Randy Saner: Right yeah that would make sense Okay, so in 2019 which is this is 2019 data look at how many times the the highest price we got all year was like one one at 29 so that's saying that a couple of those groups they're not even going to break even, which is what is, which is what it showed.
[00:35:20.280]Randy Saner: But most most of the year, it was anywhere from 165 if we sold in November, it was probably the lowest and it was 156 so those high and highest cattle are going to going to break even and make a little bit of money, the rest of them are probably going to lose money.
[00:35:39.570]Matt Stockton: Right.
[00:35:40.500]Randy Saner: So you can kind of look at this historical data and say hey you know where Am I added my cost of production, if my calves are not you know if i've got this much in them.
[00:35:53.460]Randy Saner: And it's more than what you can get for a calf price, then you probably need to think about how can I cut my costs, what can I do get to that level.
[00:36:04.770]Randy Saner: of cost per pound or cost per hundred.
[00:36:08.010]Matt Stockton: Absolutely The thing is, too, is that these are average prices for the month, which means if the market various at all, you could get a higher or lower price.
[00:36:16.440]Matt Stockton: And that's The other thing that you need to realize is that that's where the marketing comes in that's where the decision making about when and how to market or the edge or to do those things.
[00:36:26.190]Matt Stockton: and make a benefit because if you can get that extra 10 cents or 20 cents, or whatever you can get per pound on average.
[00:36:33.660]Matt Stockton: Then, then you can lock them, you can say what my cost of production is covered and then I can make more of a profit so.
[00:36:39.300]Matt Stockton: Marketing becomes critical as part of the equation in the fact that it can increase revenue without changing any of your production or doing anything that way just means that you have to.
[00:36:49.290]Matt Stockton: Try to do the best job you can marking, it also means that you can grab get a low price too so that's why you have to do a good job, marketing, because you want to avoid the lows.
[00:36:58.680]Matt Stockton: As much as you want to get the highest price, even though the highest price is not always possible, you want to get the best price, you can.
[00:37:10.320]Randy Saner: So we're going to talk about in conclusion.
[00:37:15.900]Randy Saner: Keeping keeping everything the same you need to get about almost 65 pounds more for that that group a that high profit group versus the highest profit group.
[00:37:28.320]Randy Saner: So you're going to have to increase your weight 65 pounds, but when you do that remember your costs can go up because you may it may take more feed for the cows okay um.
[00:37:38.880]Matt Stockton: Another way to look at that Randy I don't mean to interrupt.
[00:37:42.180]Matt Stockton: Your flow on that one, I want to say.
[00:37:44.250]Matt Stockton: What it means is for all the inputs that you put in there at the cost you put them in you would expect 65 more pounds of calf.
[00:37:55.740]Matt Stockton: However, that comes either as more with less ones last or less more pregnancy or whatever you would expect you to add that 65 pounds to pay for that added cost of the same profit as the group B or the highest profitability.
[00:38:19.320]Randy Saner: The other thing The other thing we might add, is.
[00:38:23.250]Randy Saner: That highest group actually got government payments which helped them some, if I remember right man, it was around $65 a cow.
[00:38:33.060]Matt Stockton: was, for it was it was it was on a head basis, and it was about 43 to $45.
[00:38:41.610]Randy Saner: Government payments can be important, and we know that, with the corona fact that we had this year, hopefully people went out, and you know.
[00:38:51.390]Randy Saner: applied for that it kind of we don't know what they were it could have been you know that they had some kind of problem, like a drought or they they were in a storm and are some of those things but.
[00:39:06.330]Matt Stockton: The government, where they use.
[00:39:07.440]Randy Saner: them learning the difference yeah.
[00:39:09.300]Matt Stockton: They are they use it insurance program that was different than the others they had pastor protection a prf or maybe they had MGM.
[00:39:17.280]Matt Stockton: or they ensure their livestock that way, the other thing is when you think about that, even with the 43 or $45 they still made $50 more than the next one, so even without the government payments they made a significantly more money without any payments from the government than the other.
[00:39:38.130]Matt Stockton: Other groups, including the Group, the high group.
[00:39:42.810]Randy Saner: right that the risk management, though, if it was risk management might have paid off in so looking at risk management in the year when we're dry and stuff maybe a.
[00:39:54.570]Randy Saner: benefit for producers and marketing with our volta markets that we have it might be beneficial for producers to look at that because it might give them some more money.
[00:40:06.240]Randy Saner: it's a it's a thought to think about is basically in as volatile times, as we are now.
[00:40:14.250]Randy Saner: I also put our source on here, where we got this information, and you can you can go to that website at.
[00:40:21.990]Randy Saner: dot you m and.edu and and pull this information now.
[00:40:27.330]Matt Stockton: The raw data.
[00:40:28.950]Randy Saner: Right.
[00:40:29.670]Matt Stockton: But I want you may take you a little while to get through it, which is fine, but I think if you want to do it it's a worthwhile and you could even set some different parameters and bring up some different kinds of hurts probably.
[00:40:42.330]Matt Stockton: The other thing is the high farm would need about 21 cents more.
[00:40:47.490]Matt Stockton: per pound for every calf sold you get the same profit that the so, in other words, if we did everything identical, except for the.
[00:40:56.700]Matt Stockton: High farmer the the group a farm if they went out and had done a better job of marketing and got 21 cents more they would have the same profit as the highest group.
[00:41:09.720]Randy Saner: Which just shows the importance of marketing does it can't make a big difference.
[00:41:15.180]Glennis McClure: Okay, so there's a question, do you want to talk a little bit more about what Finn Ben stands for, is it an association I know it's funny University of Minnesota and, as you mentioned matt you can do different.
[00:41:29.760]Glennis McClure: searches or whatever was were these What did you say early on, where these.
[00:41:36.180]Glennis McClure: farms were located or you know which state they came from.
[00:41:40.860]Randy Saner: So, so they were from nebraska South Dakota North Dakota and they come from the business management programs in the state so come from nebraska they have a business management.
[00:41:52.950]Randy Saner: More to Code as farm business associations and southern South Dakota, and so they were they were combined Kansas has a similar one you can go into Kansas and look at there's.
[00:42:03.750]Randy Saner: But we liked it because it has nebraska data and that's why we use this one, it had some last meeting.
[00:42:09.780]Matt Stockton: I will mention that nebraska probably is the smallest sample in that Okay, but there is what this is a university of Minnesota has.
[00:42:19.950]Matt Stockton: Different they do a lot of financial analysis of their farms, for their system and what they do, they also have a network and a computer established through grant funding and other funding.
[00:42:31.320]Matt Stockton: That they've established all this it's an archive of all these records that have been kept for all of these farms and that archive, then you can go in and say Okay, I want to look at.
[00:42:42.240]Matt Stockton: farms with this parameter so so certain size, a certain geographic location and it will bring those farms or ranches up.
[00:42:51.960]Matt Stockton: Whatever specifications you put in there now some of the things you search for may not exist, it may not have a farm in there, so it won't be in there.
[00:42:59.490]Matt Stockton: So these are basically we we found 31 farms under the parameters that we searched for, and that was like Randy said.
[00:43:06.930]Matt Stockton: mercial calvert's because if you did non commercial cowards, you would probably also have registered herds and you know breeding type.
[00:43:14.070]Matt Stockton: You know, livestock and some other things in there that were be raising cows and you didn't want to mix that with a commercial cow calf operation.
[00:43:21.660]Matt Stockton: So that's why the parameters were put in that way, but that's a thin bit is it's an archive.
[00:43:26.220]Matt Stockton: it's a place where all these records are stored you don't know individual producers, but you can bring up averages of different groups, because they don't want you to be able to identify a specific operation there's some privacy and there's some protection for that sort of thing.
[00:43:41.250]Randy Saner: And what i'll say matt is, you cannot just do nebraska alone, you have to add South Dakota North Dakota didn't have enough orange because they'll only give you if you have enough forms on there to make it work so.
[00:43:55.980]Randy Saner: The thing is, if you want to get involved in this, you can go to the basket business Center put your data in there, and you can get this data back from for free, are you getting there, but you could get these kinds of things backseat to do a better job and benchmarking.
[00:44:13.830]Randy Saner: right because gina Barrett and.
[00:44:15.690]Matt Stockton: And and her group they have all these records and there's annual reports of those as well, which are for nebraska of different types of farms and things that you can look at.
[00:44:28.650]Glennis McClure: And I don't know again just the fin been itself what it actually stands for Minnesota Minnesota farm financial data says farm financial, but again I think the been i'm not sure, but I think the band.
[00:44:40.200]Matt Stockton: is like a storage place, I think.
[00:44:42.210]Glennis McClure: yeah it's like a depository of information.
[00:44:44.670]Glennis McClure: archive oh yeah yeah so and you can get obviously you can get crops you guys are talking about the account side of things that you can get a lot of crop information off of them to and whole farm actually whole farm financial information as well is.
[00:44:59.160]Matt Stockton: There any.
[00:44:59.880]Matt Stockton: Was there any other questions.
[00:45:02.580]Matt Stockton: Let us see.
[00:45:03.690]Glennis McClure: I don't think that's so far anybody has any more questions, please type those in the chat.
[00:45:10.710]Matt Stockton: Or, I have a.
[00:45:12.360]Matt Stockton: parting comment, what is important to think about is it what is your operations best setup to do where is your.
[00:45:21.540]Matt Stockton: Where is your competitive competitive advantage, where, can you were to your skill set and how can you do that, basically, speaking.
[00:45:31.260]Matt Stockton: Capital markets and prices are hard to change just because of the quality or Catalan and what I mean by that is.
[00:45:37.950]Matt Stockton: You it's hard to differentiate your katelyn get more than a few cents, so you can get a few cents and you should do it.
[00:45:43.920]Matt Stockton: But it's hard to get a tremendous difference in what the markets, offering.
[00:45:47.850]Matt Stockton: So what you need to do is you need to start you know there's hedging there's for all those kinds of things and marketing, but the other thing to do is.
[00:45:55.200]Matt Stockton: Looking at costs the heard that was the highest in this at the lowest cost with good productivity and.
[00:46:04.050]Matt Stockton: i'm not saying you just low cost, because low cost, without productivity isn't going to make you any money.
[00:46:09.720]Matt Stockton: In other words, if you if you cut corners and you're and you've got a 30% call right you obviously you're not going to be the highest in this case, though, we had we had a decent.
[00:46:19.920]Matt Stockton: Pregnancy rate 95% that's pretty decent 99 is obviously better, but when you start looking at all the things that it took to get there.
[00:46:27.960]Matt Stockton: You gotta ask yourself the question it didn't really pay, and the answer the question is not really it didn't pay and if and the DVD that's one of the things that caused the cost to be higher.
[00:46:38.490]Matt Stockton: That didn't pay for itself so each individual producer has to decide and figure out what's what pays and what doesn't pay for his individual operation.
[00:46:49.980]Glennis McClure: You just said, another question, and I know you guys looked at those that were hundred I guess I don't know the size heard parameters you looked at, but was there any relationship between profitability and heard size.
[00:47:03.930]Randy Saner: Yes, if you look at the article on our beef watch.
[00:47:08.340]Randy Saner: website our website.
[00:47:11.220]Randy Saner: In that article, yes, the the bigger hurts tend to be more profitable, but the biggest turd wasn't the most profitable.
[00:47:18.210]Matt Stockton: So it was the middle group.
[00:47:19.830]Randy Saner: yep yep so so size is important to some extent, but it's not.
[00:47:25.560]Randy Saner: people that are smaller still can do do do the thing the big thing is how do you spread your costs over those cows so as he has smaller numbers if there's one person doing it.
[00:47:39.240]Randy Saner: You know your cost Labor and management is going to be higher per cow man, if you guys need to have you explained that maybe you've spent better than I do.
[00:47:49.350]Matt Stockton: Well, I think you did a good job Randy.
[00:47:52.410]Matt Stockton: There is a thing, what we call economies of size and scale I know it's a scary saying what the heck you're talking about all it simply means is that.
[00:48:01.020]Matt Stockton: If you if you are efficient and can maintain your efficiency and increase efficiency by increasing in size, then I would say larger, the larger the herd, the better, up to a point.
[00:48:13.680]Matt Stockton: And that's what he that that capability is different for each person and each management style and each operation.
[00:48:20.340]Matt Stockton: Obviously larger hurts can be more profitable The other thing too is sometimes larger hurts may not be quite as profitable as an individual her.
[00:48:29.970]Matt Stockton: You know, a smaller hurt but per cow, but overall, bring in a lot more money you, in other words, if I got 1000 cows and I make $100 a cow versus I have.
[00:48:42.450]Matt Stockton: 500 cows and I make $101 for cow bow for cow the 50 to 500 is is more profitable, but overall, you may have lost that dollar per cow but you've got 500 more cows.
[00:48:57.540]Matt Stockton: You see, that you see, so the overall profitability value is large enough to maintain your economies of size scale your operation time so size and scale can.
[00:49:09.600]Matt Stockton: contribute to more profitability, but it can also control the volume and volume accounts for total.
[00:49:17.220]Matt Stockton: Total profit and so those goals may not be necessarily perfectly matched, but they can make a difference in whether you can maintain the operation, the way you want to do it, so those things have to be considered, so the answer the question is yes and no.
[00:49:36.030]Randy Saner: It depends on what you want, for income to I mean that.
[00:49:38.460]Matt Stockton: Income can make absolutely and how much land you own and what kind of resources, you have and so i'm a small what I think Randy and I are trying to say is it a small.
[00:49:48.600]Matt Stockton: small operator can be fairly but The thing is, if you can't support a family.
[00:49:53.190]Matt Stockton: With 200 cows, even though you can make more money per cow, but you need 500 cat or six or seven or 1000 cows to get enough volume.
[00:50:02.460]Matt Stockton: To pay for full time farming, then you need to go to the thousand units huge sacrifice a little bit of a PR cow profit.
[00:50:09.780]Matt Stockton: That could happen, but you could also buy you know Labor wise obviously be more efficient if a person could handle 1000 cows and they're only handling 300 and you're paying the same wage rate obviously you're going to gain.
[00:50:21.270]Matt Stockton: cost efficiencies from them, but that that is up to the managers at their ability to manage and things to happen.
[00:50:32.850]Randy Saner: Any other question answers and blessed.
[00:50:36.480]Glennis McClure: I believe so i'll watch here, but I believe that's all we have for questions, so I think with that we'll go ahead and conclude and i'd like to thank everyone for joining us today.
[00:50:49.050]Glennis McClure: A recording of this webinar will be posted at farm w and l.edu where you can register for upcoming webinars.
[00:50:58.860]Glennis McClure: As a reminder, check farm w and l.edu for a schedule and more webinars to come in this series focusing on farm and ranch management issues relevant to nebraskans.
[00:51:09.270]Glennis McClure: you'll be receiving a short survey and actually ryan's just posted that in the chat So if you would go ahead and click on that there's a quick three question survey.
[00:51:21.060]Glennis McClure: To help us with feedback on today's seminar so thanks again for joining us and we'll see you next week, if you follow us on the next webinar okay take care, everyone thanks.
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