There are various balance sheet ratios we can look at to assess our businesses, but the income/expense report is really about the operations piece and is where we will focus our efforts in this article.

Gross income

Gross income is the total income derived from product sales. For a cow-calf producer this includes calf sales and, importantly, cull marketing. There is no right or wrong gross number, but it’s important to realize it sets an upper theoretical limit on profit.

As a simple example, let’s say our cowherd is a single cow and we sold her calf for $1,000. Our gross income is $1,000. If everything else was free, our maximum theoretical profit is $1,000. We sometimes refer to this as gross product or the value of everything that is produced.

Gross margin

Gross margin (GM) is what we get when we take direct costs from our gross income (GI). Gross margin is the money left over to pay overhead costs and produce profit. I think the best description of direct costs for a cattle operation is anything/everything that goes into or through a cow. This includes feed, vaccine, mineral, ear tags, bull semen et cetera. The rough rule of thumb here is that gross margin should be 65 per cent of gross income.

If we go back to our single-cow herd, the cost of feed, vaccines et cetera is our direct cost (DC). Ideally, this would be less than $350 for the year, leaving us with a 65 per cent gross margin.

$1,000 GI – $350 DC = $650 GM

650 ÷ 1,000 = 65 per cent

A further guideline from Ranching for Profit is that feed should be less than 16 per cent of gross income, or roughly half of your direct costs. With our $1,000 income, that sets our feed bill at $160.

Overhead

Overhead is the “stuff” you use to run cows. This includes chutes, tractors, trucks, shops et cetera. Direct operating costs are the cost of running the “stuff.”

Contribution margin

Contribution margin is when we remove direct operating expenses (DOE) from gross margin. Direct operating costs are line items such as labour and fuel. It does not include capital items like the tractor. Basically, these are operational expenses. A guideline is that they should be 45 per cent of gross margin. In our cow example, our gross margin was $650, so our direct costs should be $293 or less.

$650 GM – $293 DOC = $357 DOE

293 ÷ 650 = 45 per cent

One of the reasons to look at contribution margin is to see if you are efficient and more importantly effective in your efforts. Another ratio I like to look at here is GI per full time equivalent (FTE). Your labour is a large component of cost whether you choose to acknowledge it or not. Where I live in Alberta, the government says I am worth $15 per hour no matter what and I suspect most of us are worth a lot more than that. The other thing to realize is that an FTE does not equal 100 hours a week. The goal here is to produce at least $500,000 of gross revenue per FTE. This can vary a bit if margins are very high or very low, but it is a good target.

Total overhead

The guideline here is that total overhead should be less than 40 per cent of your gross income. “Total overhead” means we lump overhead and direct operating costs together.

If we use our single-cow example, this means we would have $400 worth of overheads total, or $107 for “stuff,” after our direct operating costs.

Currently, it is likely unrealistic that calves are only worth $1,000; however, this number was chosen as it works well for illustrative purposes. It also brings up another important consideration.

Given today’s calf prices, we may be working in a $3,000 per calf environment, but it is unlikely this number is sustainable in the long term. It is important to control our expenses — not just relative to our gross income, but in relation to realistic calf and cull prices moving forward. This is where planning versus reflection kicks in.

Additionally, these ratios may change as we move through various stages of business. Gross revenue per FTE may be lower in a startup, as an example.

For more information, a web search for “farm financial ratios” can provide great further insight.

For your reference

Information for this article was adapted from:

• Standardized Financial Benchmarks for Canadian Farm Financial Statements, by Larry Martin and Joerg Zimmerman

• Ranching For Profit

• Farm Management Canada

• Strategic Agribusiness Management Training — S.M.

The post Ratios help tell the financial story on beef farms appeared first on Grainews.

Just like any team through junior high, high school, college or the pros, there are some fundamentals required to make a good team. First, the new recruits need a bit of coaching on where to go, what to do, what to graze, et cetera. This is true not only for new entrants from within the herd, but also purchased cows. Often cows that come into a herd aren’t aware of the systems in place, or even what plants are good grazing.

There are a few problems a cow herd team can have that really cause damage, and surprisingly they are quite similar to those in a human team.

Failing to fit

Some cows may come into a system or a team and just be unable to fit in with what is going on. That doesn’t mean they are not good players, but it may mean their talents are better suited for a different playing style. This could be cows that are in a low-input, grazing system trying to keep up with the power of cows in a more high-octane system — or it could be the reverse. Sometimes players just don’t fit the overall scheme of things. We don’t want to sign a goalie when we are really looking for a power forward.

Not a team player

This could be something as simple as being aggressive toward coaches and ownership, or more complex, such as choosing to leave the playing field at inopportune times (fence-crawling). It sometimes takes a bit of time for a cow to adapt to her new teammates and understand the pecking order — but some things are relatively inexcusable. It partly relates to non-performance, but cows that require extra attention or care relative to their teammates are a drag on the entire roster. It’s often a fine line between a cow learning the game versus a cow being a literal on- and off-field distraction.

Non-performance

This may also seem basic and, as previously mentioned, it may take a while for new recruits to really learn the game. For example, we don’t necessarily expect the calves from first-calf heifers to weigh the same at weaning as calves from mature cows. That said, various teams have different expectations and teammates need to meet these expectations at the risk of shortened careers and being traded.

Sometimes we can end up with a recruit that creates a lot of team drama or is not a good fit. It is often better to trade your way out of this team member and search for a better fit. That also goes for injury-prone players. Every time we add new herd members we need to empower their success, but we also need to hold them accountable and not adjust the rest of the team just to make a few new players happy.

Salary cap

Most operations work on a salary cap. There is only so much money that can go into players and at the end of the day it is nice to have a bit left for the coach and ownership. While we may have our favourite players (remember old No. 27?) it’s important that everyone pulls their weight toward the end goal.

I think it’s also fair to state every team needs a coach whose playing style matches the environment and the players. That is the role of the farm or ranch manager. The players need to clearly understand the expectations of the system and ownership needs to work to ensure the right players are in place. It’s possible to adapt the system to the cows — but be aware of the salary cap and if you want to pay for a team of superstars or grinders.

There are a lot of teams of cows with different playing styles that can be extremely successful. The trick is making sure that the style matches management resources and coaching. Additionally, it’s important to know the system you are working in and ensure players are accountable to whatever standard that requires.

The post Teamwork from a cow’s perspective appeared first on Grainews.

While traditionally the realm of the seedstock industry, commercial DNA testing and changes in the way we manage cattle have led to some big changes in how we think about genetic selection. DNA testing, in broad terms, means using a DNA sample from an animal and performing laboratory testing on that sample to identify parts of the genome that animal contains.

A brief outline of the process: DNA testing starts by collecting a tissue sample or hair follicles from an animal. This sample is then sent to a laboratory where the DNA is extracted and “read.”

New tests will typically read 50,000 to 100,000 pieces of an animal’s DNA. While we have the capability to read millions or even billions of DNA pieces, with 50,000 to 100,000 we can do a really good job of identifying important genetic characteristics of the animal at an affordable price point. Some of the DNA pieces we read are “associated” with specific traits. For example, if a calf carries two copies of the polled gene, specific pieces of DNA will “light up.”

For another example: we may know specific pieces of DNA that are associated with longevity. By looking directly to see if these variants of DNA are present, we can assess the genetic potential of the animal being tested for longevity.

DNA testing can range from sire verification at a roughly $20 price point, specific characteristic testing such as horned/polled or colour at additional cost, or broader trait evaluation at $40 and up. This broader spectrum can include measures of longevity, growth, hybrid vigour, feed efficiency or other traits. Additionally, these slightly higher cost tests can also be used in genetic evaluations (calculation of EPD).

There are various ways we can use this information and incorporate it into our commercial operations.

1 – Use DNA-tested sires

One of the easiest ways for a commercial producer to benefit from DNA testing is to purchase sires that have been DNA-tested prior to sale. This has several benefits. First, the pedigree on the bull being purchased is confirmed with DNA testing, meaning you are getting the DNA you expect when you purchase a sire.

Secondly, high-density DNA testing can be used in genetic evaluation to increase the accuracy of the EPD on the sire you are buying. The inclusion of high-density DNA in a genetic evaluation is roughly equivalent to the knowledge gained from a full calf crop. In other words, DNA can increase the accuracy of EPDs and reduce the risk to a commercial buyer of ending up with the wrong bull for their needs. Finally, when a sire is tested, those DNA results reside in a computer, and we may not need to retest the sire if we wish to start testing in our own cowherd and learning about factors such as sire efficiency and parentage.

2 – DNA-test replacement heifers

A way to get into DNA over time is to focus on testing replacement heifers. In a perfect world, we would test all candidate heifers, then use DNA-derived information to aid in our selection decisions; however, if we’re really constricted on budget, the next best choice might be to test the heifers we choose to breed. Testing heifers allows us over time to develop a fully tested cow herd.

3 – Test the cow herd

This is a full-on commitment, to collect DNA from every cow and begin using the resulting information to inform management decisions. Again, if budget is a concern, there may be groups of cows more valuable to test than others. For example, if you have a set of cows used to generate herd replacements, then these may be a priority for testing over a terminal type set of cows.

4 – Test the calf crop

This approach involves testing all calves (steers and heifers) and can be used for determining management or parentage verification to track cattle through to harvest with full individual data. This results in heifers entering the cowherd over time that are tested, and may also enable tracking of feeder calves on an individual basis with accurate pedigree.

The balance of investment in testing versus the potential return to management is going to vary tremendously across operations and will also impact the number of cattle tested, which cattle are tested, and the types of tests used.

Sire verification is an example. We may want to run multi-sire pastures and determine both which sires are working, but also only keep replacement heifers from specific bulls. Or we may want to step up an extra level and obtain DNA marker test results for various traits we can use to select replacements.

We may further refine our use of the technology to develop a total genetic management program, in which we pre-emptively mate specific sires and dams and match DNA with targeted end points in mind.

DNA testing is continually improving and accelerating the pace with which we can advance our operations, and is a technology that likely fits your operation today, although at varying degrees for individual farms, even if it’s simply through purchasing tested sires.

The post DNA testing can have value in commercial beef sector appeared first on Grainews.

First as a reminder, Figure 1 here shows the general shape of the cow depreciation curve from birth, and the depreciated value of an animal that does not make the cut.

Early in life a heifer is worth what she sells for as a weaned calf or a feeder. In this example, we are assuming a bred heifer has more value than an open feeder heifer.

When that heifer calves, she is hopefully worth at least as much as when she was a bred heifer, and she probably retains that value for at least a couple of years until she starts to age out of the cow herd or comes up open.

The depreciation on an individual cow is represented by the space between the orange and blue lines. In traditional thought, the earlier a cow falls out of the herd, the greater that loss, as we have not had time to recover our establishment expenses on that cow (growing, weaning, breeding, getting into production).

Open cows are a problem, particularly two-year-olds as is visible by the huge gap between the blue value line and the orange cull line on two-year-olds (coming three).

This is not a lot different than what has been written before. However, it assumes one thing: that prices are relatively constant — and they have been anything but the last couple of years. If we look at Canfax values over the last few years, we can see some meteoric change in prices, but in the background, there are also some meteoric changes to cow depreciation.

For this example (Figure 2 here), I used the average of November/December prices from 2012 to 2024 (note that 2024 only includes November pricing) from Canfax for western Canadian bred heifers, bred cows and Alberta D1/2 cows. I assumed that heifers were 1,200 lbs. as two- to three-year-olds, and cows were 1,500 lbs. I assumed cows entered the herd valued as average-priced bred heifers. When we graph the depreciation out on these cows, we get a very different picture than is shown in the depreciation curve in Figure 1.

Depreciation is usually negative; however, if we look at today’s pricing, it’s evident there are very real value increase in many of these cows. As of the time of writing, most classes of cattle have appreciated in value, with older cows being among the highest for appreciation. This is largely because they were brought into the herd at a very low cost, in the middle of a low point in the cattle cycle.

There are a couple of important parts to this graph that are worth noting. First, the difference between the top line and the bottom line reflects that cost and importance of getting cows bred. Open cows have a tremendous value loss. The second thing to focus on is the Open line on three-year-olds and 10- to 11-year-olds.

Even with historically high prices, both of these groups still show depreciation, and it is around $225 of loss for each category of cow. If we look deeper into what is going on here, these cows entered the herd near the top of the cattle cycle. The potential for depreciation is higher when the initial purchase cost is higher.

Finally, it is important to remember that these are values based on cattle in a herd today. It is very unlikely you have all of the heifers from 10 years ago still in your cow herd, and you have already taken depreciation on a lot of the cattle that have come through your operation in the last decade or more, at much greater expense than today.

It is also important to remember that depreciation is offset by production. A cow that is nearly fully depreciated today is likely producing the highest-valued calf of her lifetime, given current markets. How the market impacts depreciation — and potentially your strategies to manage forward — is worth considering in both good times and bad.

Every cow herd has different strategies and different pricing structures, so this example only applies in a broad sense across the spectrum of industry, but awareness of depreciation can be a key driver of ranch profitability.

The post Flipping cow depreciation on its head appeared first on Grainews.

Even good teenagers can be expensive. In our beef cattle production systems, the teenage role is filled by replacement heifers, and like teenagers a bit of understanding about the changes they are going through over those years can help improve the outcomes when we deal with them.

Whether we appreciate it or not, cow depreciation is a massive expense in most cow-calf operations. In many cases, it ranks as one of the top three expenses. Depreciation does not occur in a linear fashion with replacement heifers. Because there is a big upfront cost in either purchase or development, there can be a subsequent large depreciation cost for heifers that leave the herd early in life.

Understanding the basic physiology occurring over the roughly three-year time frame from heifer calf to second-calver can help us to manage this process, our expectations and the resulting cost to our operation. The first thing young heifers are going through is as basic as growth and puberty.

Estrus occurs based on a combination of age and weight/body condition. This means older heifers (those born in the first cycle) have a bit more time to reach the milestones required for ovulation and getting bred in the replacement program. If we expect our replacement heifers to calve at two years of age, they must be bred at 15 months of age.

If we look at a group of heifers born over the span of a 90-day calving season, when the oldest heifers are 15 months old, the youngest are 13 months and may not have even reached a physiological stage where estrus is possible. If we breed early to calve heifers ahead of the main cow herd, this may be exaggerated further. Heifers are less likely to be bred on their first ovulation than on subsequent ovulations, as the hormonal process of ovulation helps with reproductive organ development. For the best success, breeding heifers should be on their second or further ovulation by the time breeding season rolls around.

Traditional knowledge dictates that heifers should be roughly two-thirds of their mature size at first breeding. A lot of research indicates this is not necessarily true and that healthy heifers at 50 to 55 per cent of mature weight at breeding will perform as well and last as long in the cowherd as heifers exposed at a heavier weight range.

To put this in perspective, the two-thirds rule means that you expect an 850-pound breeding heifer to mature into a 1,300-pound cow. Managing to a lower ratio may allow us to reduce development costs and results in smaller mature size. Breeding success is higher when heifers are on a rising plane of nutrition through the breeding season.

If a heifer is not bred and but is still gaining weight over the summer, they are adding value and not taking a depreciation hit (market dependent). From a physiological perspective, a first- or second-trimester bred heifer does not take a lot of extra energy and basically just needs to keep growing and maturing. At this stage, the fetus is quite small and does not demand a lot of excess energy.

Most critical time

In the third trimester the heifer starts to have additional requirements as the fetus develops, her mammary system is starting to come to life and she continues to grow. This leads to the start of what’s likely the most critical time physiologically in her entire life — and is directly connected to the largest potential depreciation hit in a cow’s lifetime.

Firstly, the heifer must calve, and recover from that calving event. This includes basic repair of the reproductive tract. Even a normal unassisted birth will result in some trauma to that tract. However, a difficult birth may result in further damage that requires significantly more biological resources and time for the heifer to repair. Difficult births are one of the leading causes for heifers to fail at rebreeding. Additional physiological changes include milk production and raising a calf. More on that in a bit.

That first-calf heifer is also not yet at full mature size and still has some further growth of her own before she gets to that final mature size. Another interesting part of her development also occurs around the age of two. At roughly this stage of life, she replaces her incisors with a set of permanent incisors.

If our heifer calves at 24 months of age and we want her to calve again at three years old, she needs to rebreed at 27 months of age, or roughly 90 days post-partum. To obtain good conception rates, heifers should be happy, healthy and on a rising plane of nutrition. Physiologically, her body needs to tell her life is good, her nutritional needs are supported, her calf is supported and there are enough extra resources to support a pregnancy. This three-month time frame for rebreeding also roughly coincides with peak lactation, which can easily see a 20 to 30 per cent increase in nutrition requirements.

In a nutshell, physiologically we are asking that the first-calf heifer recover from calving, continue to grow, learn to be a mother, develop/maintain peak lactation, and rebreed while she may be between sets of teeth.

In a physiological context, it is readily apparent that it is much more difficult to get a first-calf heifer rebred than it is to breed a virgin heifer. It is also where we see the highest depreciation rates, as an open three-year-old generally has a massive value difference when compared to a bred three-year-old or a bred heifer. We also have not had enough calves from that female to cover the development costs or purchase price.

No matter how you slice it, teenagers can be challenging. Understanding this can help us in our operation to decide what extra support to provide to these cattle (or whether to provide extra support) or if we should own these young cattle in the first place or examine alternative replacement strategies.

If your ranch pregnancy checks or markets open cows, it may be worth tracking the percentage of first calf heifers that wind up on the truck heading into their third year. It may help you adjust management to reduce the depreciation costs associated with cows that take an early exit from the herd. Because the depreciation cost is so high, there may be cheaper alternatives providing further support to that specific set of animals as they grow through those teenage years.

The post The teenage years, beef cow edition appeared first on Grainews.

This was a fantastic chance to see new developments but also to put boots on the ground and see what drives the forage industry in Europe and globally. It was reiterated over and over on the tour that our production systems are quite different between the Prairies and the parts of Europe we toured, but the concerns in agriculture are universal and every farmer we visited would be at home in any Canadian small-town coffee shop.

The first stops on the tour were in the Netherlands. This is a country with a population density of 1,353 persons per square mile. In a western Canadian context, that equates to an average of 338 people living on every quarter-section, or just over two people per acre. The interface between farming and the public is very apparent and it means farmers face a lot of regulation.

The agricultural industry in the Netherlands has a significant focus on forage production. The dairy industry is a major player in the Netherlands and very much a forage-based industry with a year-round growing season. The productivity is incredible in an environment with lots of fertility and very little limitation to moisture. Forage blends tend to rely heavily on blends of perennial ryegrasses and legumes. Leaving a hot, dry, smoky summer at home, I was staggered by the productivity of the environments we were shown.

A vast difference from the Prairies is that many operations harvest forages fresh daily and feed them, rather than grazing — although we also toured several operations where stored feed was a very important component of their business.

One of the beef operations we toured silages perennial forage crops every month (on the same field). Animal selection pressure was quite different for most of the beef producers in the crowd. The cow herd consisted of larger cows and leaner, more terminal-type genetics. Due to regulations, only intact bulls were on feed and the majority had horns. The dairies we toured were very technology-forward, employing robots and very good forage management.

While the operations were typically smaller than those on the Prairies, the pressures to grow and improve efficiencies were intense and producers must navigate a maze of public pressure and regulation. Several operations had a direct-to-consumer component to their business, including a meat shop and a cidery.

Research and development

The tour stops were suggested by Barenbrug, a global leader in the forage industry, and as such a major highlight of the tour was a visit to the Barenbrug head office to see their operations and research program. Barenbrug has operations across the globe, including North America, with Union Forage being the Barenbrug retailer in Canada.

Its operations in the Netherlands were extremely interesting as we toured one of its major production facilities and saw the core of its research programs.

READ MORE: U.S. seed giant acquires Calgary-based Union Forage

The production and global distribution channels for Barenbrug are a bit staggering, with seed production occurring in 13 countries. The production facility in the Netherlands is the second largest in Europe and produces roughly 20 million tonnes of seed a year. Basically, there were yellow bags of forage seed from floor to ceiling.

The research program was also extremely impressive. The Barenbrug company research budget is roughly 12.5 million euros (about C$18.4 million) per year and has direct operations in nine countries and collaborative efforts in another 12, including Canada.

The program is highly sophisticated and incorporates a lot of DNA sequencing, test plot, greenhouse and lab work. It really adds perspective when you see the steps required to produce a new variety and the fact it takes almost a quarter of a century with traditional breeding to go from inception to market. The use of genomic sequencing has cut almost a third of that time off, reducing inception to market down to 15 to 16 years. Still a big commitment.

Also of interest was the effort that is put into turf products for uses such as sports fields, golf courses and lawns. This is a forage market most of us in the cow business would rarely give a second thought, but globally is in the multi-billions of dollars.

A particular personal highlight was touring through the “biobank” where years and generations of germplasm are stored in order to preserve biodiversity and provide the ability to dip back into the past to resample genetics as our environment or markets change.

After the Netherlands, the tour travelled through Belgium and into France to look at more operations and how they use forages. Simply driving through the countryside, you can see the importance of forage production in European agriculture.

There are significant differences between the French environment and that of the Netherlands; the drier climate means more grain production in the mix and a bit less reliance on forages. Dairy is a high priority in the animal agriculture space, although it is slightly more common to see beef cows along the road in France in comparison to the Netherlands.

Another factor in France is the focus on terroir, or capturing regional variation and preserving local cultures. This was reflected in the choice of dairy breeds in use (lots of Normande in in the area we visited) and in the local cidery we visited, as well as the cheeses and wines. We saw some good regional farmer/company partnerships in the on-farm test plots in France.

A special highlight of the trip was a stop at Vimy Ridge. It certainly put into perspective what is important in life and the sacrifices those before us have made to allow us to do things we may take for granted today, such as going on a forage tour. Vimy Ridge was the best use of my taxpayer dollars I have ever experienced and is highly recommended.

Overall the tour was a great experience and the opportunity provided by Barenbrug and Union Forage to gain a broader perspective on forage and agriculture brings out several key points that I think apply in our Canadian context.

• Well-managed forages can provide a solid basis for productivity and profitability.
• Science and technology are rapidly advancing in the forage industry and we should take advantage of this.
• The effort that goes into forage breeding and seed production can and should be taken advantage of at the farm level.
• We are more the same than we are different. Farmer concerns are shared across borders. Public knowledge of our craft, finding willing successors, and regulatory burdens are common threads in every country.
• Our businesses and our nations are built upon the shoulders of those before us. It is important to honour this by building forward as well.

The post An EU forage tour shows value of seed science appeared first on Grainews.

Notice the use of the word feed. Feeding — that is, the act of providing feed — can also be one of the highest costs for an operation. In some cases, it may be higher than the actual cost of the feed.

To create a reasonably clear division, a good rule of thumb is that all the expenses going into the feed stack/bin are a feed cost. Yardage would refer to those costs on the other side of that feed stack that are not feed. This set would include corrals and repairs, waterers and electricity, feeding equipment, corral cleaning, fuel and labour. I like thinking about the concept of yardage, as it puts into perspective our operational choices and their impact on our bottom line. A couple of simple examples showcase some of the impacts of our choices and provide some food for thought.

Let’s consider feeding with a loader tractor. For this example, I used the Saskatchewan Custom Rate Guide for a front wheel assist tractor up to 160 horsepower. This represents a typical chore tractor in a lot of the country. Rental rates are listed from $55.40 to $108.37 per hour. The rate is higher the more horsepower we have. Custom work (which includes labour, fuel and repairs) is listed from $124.36 to $209.41 per hour. Whether you agree with these costs or not, it will serve to demonstrate the point.

If we feed 100 cows with our tractor and it takes one hour per day, at the lowest custom rate guide cost, we have $1.24 per cow/per day in yardage for the tractor and labour. If we can feed 200 cows in that same time frame (one hour per day) our yardage cost is now half, or 62 cents per head per day. This demonstrates the importance of efficiency in the feeding operation.

It also demonstrates that yardage costs can add up in a hurry. In this example, if we fed 100 cows for a 200-day winter, we have $250 per cow tied up in just our tractor and labour costs. There may be other ways to use that tractor that are more efficient and can result in significant savings.

The same rule of scale applies to facilities. If we invest $20,000 in corrals, spend $1,000 per year on repairs and plan a 20-year life span, a simple division puts us at roughly $2,000 per year. If we use the corral for our 100 cows for 100 days per year, the yardage cost is 20 cents per head per day. If the same facility can be used for more animals or over more days, the yardage cost of facilities is reduced. If a facility can be built with a longer lifespan — for example, putting an electric wire inside slab corrals — we may also be able to reduce yardage costs.

Knowing your own yardage costs is a valuable piece of management knowledge, but these two simple examples expose an interesting catch-22, particularly for those of us who use extended grazing systems. By feeding more cattle or feeding for longer, some yardage costs, such as facilities, may be reduced, particularly on a per-head per-day basis.

Conversely, by feeding longer, some yardage costs may be increased, such as labour, machinery or corral-cleaning expenses. This exposes one of the largest weaknesses in the way we think about yardage and why considering overhead costs may be more impactful.

Let’s look back at our tractor example. By not putting our 100 cows into a confined feeding situation, we can save on yardage; however, if we still own the tractor — just choosing not to use it — our savings are not the entire $1.24 per day. We still have an overhead cost for the tractor. That cost may be significantly lower than feeding daily with the tractor, but is still a cost.

Even with extended grazing systems, if our yard remains a parking lot for feeding equipment, we will have an overhead cost for that equipment. Not all yardage costs are bad. Some yardage costs may be a good thing. A good water supply may have a yardage cost, but can positively impact performance, or an investment in feeders/troughs and feed delivery is a yardage cost, but may be rapidly offset by feed savings.

Three key points to remember about yardage are:

• Your yardage cost is probably higher than you think, and you need to run your own numbers.
• We fight yardage costs; we need to be as efficient as possible. This may include feeding more cattle, feeding faster or improving cattle performance.
• Reducing yardage is not the same thing as reducing overheads, although it can be.

There is nothing inherently wrong with feeding cattle or having yardage costs. The activity of providing feed and support for cattle can provide value to the operation. In some situations, folks just like feeding cattle and yardage is a secondary consideration to personal enjoyment. In other cases, adding yardage costs such as facilities is required for safety, efficiency, and quality of life. That said, yardage costs can be a significant drain on profitability of a beef cattle operation and perhaps more importantly simply tackling yardage costs may not eliminate overhead costs to the operation.

While every operation will have a different set of resources and thus a different feeding solution, knowing your yardage costs is vital to create a profitable beef cattle enterprise.

The post Rethinking yardage costs appeared first on Grainews.

Profitivity is a combination of profitability, productivity and positivity. For an operation to thrive, these three things are important to get right. Profit and production may be somewhat self-explanatory, but planning for a positive attitude is also essential. There is very little point in planning in a negative direction or ranching just for ranching’s sake.

Being accountable for the Profitivity triad is a challenge. Most of us in production agriculture like the production piece. Seeing new calves up and running, smelling fresh-cut hay, or seeing a pen of steers blossom is very gratifying, but production is not enough. In order of profitivity importance, I would probably place positivity first, profit second and productivity in third place.

I sincerely think it is important and OK to ask some basic questions about our farms and ranches. “Is this place fun?” or, put another way, “If I saw a job posting for our operation, would I want to work there?”

Building a positive end goal or vision for the ranch and the ranch team (even if it is a team of one) and for life is a key first step in the planning process, and it is probably the hardest. There are a few really good resources for this, but one of my favourite places to start is with Simon Sinek and his book Start With Why. If you are not a reader, just search him up on Google, YouTube or your favourite podcast supplier.

On a more personal level, if the positivity challenge is an internal struggle, resources such as Do More Ag are extremely valuable. It is nearly impossible to build a positive business if you are going through personal struggles and feel you don’t have a place to turn to for help.

Profit planning is lodged firmly in spot No. 2. Understanding how much money you want to net at the end of the year and what you want to do with that money is a good framework for creating effectiveness.

Planning for profit will also help to focus the production equations. Rather than going through the motions of production and hoping to make money, profit planning clearly defines what we should be doing, rather than what we want to be doing.

Is this investment or input going to move us toward our goal? Is the profit goal realistic given our operational size? What obvious things am I missing? There are a lot of good profit planning tools out there, but a basic understanding of your costs is a great first step. How much are my direct costs (things that physically go into the cow) to run a cow? What are your total overhead costs?

Once we make a profit decision, the next step is to look at the production side. Is the profit I want achievable with our operation? What production levels will support my profit goal? What production costs should I invest in? Do I have the right production system or am I producing the right things?

Diminishing returns

A simple tangible example could be creep feeding. Creep feeding obviously helps to increase weaning weight and potential revenues from weaned calf sales. Creep feeding is also obviously not free, as there are feed and labour costs involved. Whether creep feeding is a good or bad production decision should be balanced against the net benefit and your profit goals.

The other key part of the productivity piece is to make sure we are measuring the right production measures. Are we concerned with production per acre? Or per cow? Are there other things we are concerned about in terms of production, like disease risk, or ecological function? Or measuring if we are effective or not? How much time do I invest and for what return? Am I completely played out and still falling behind? Do we measure things like our time in our operation?

Over the years I’ve learned it is essential to place positivity first and the best investment on a farm or ranch is nearly always investing in the people, but I would firmly place profit ahead of production. It’s interesting to me that while giving presentations on our own operation I often run into the dichotomy of production versus profit.

We tend to be a lower-cost type of producer, but I get a lot of questions about our productivity. While this likely means I have done a poor job of explaining what we do, I think it’s fair to say traditional ideas of production do not always equate to profit and profit may not equate to production, but the two are intertwined. There is often a stereotype that operations that are not extremely productive — for example, weaning heavy calves — are not profitable. The reality is that this may or may not be true.

A basic economic theory driving the production/profit paradigm is that of diminishing returns. This means that for each level of input we will see rising output to a certain point, but past that point each unit of input will progressively yield a lower return on investment. Stated another way, there is a reason we don’t feed 90 pounds of hay per day to a cow. The first 40 pounds is effective and the last 50 pounds are a waste.

Planning for profitivity means understanding your profit goals and your production system and perhaps more importantly measuring the right production, profit and attitude. We may not wean 800-pound calves, but our pastures are highly productive. What drives your profit equation, and does it fit your production?

Having a positive goal and outlook and a profit orientation also makes it easier to be accountable for doing some of those should versus want to jobs, as with planning you can better see how those less fun jobs move you toward your positive goals. It also allows you the mental freedom to quit doing ineffective tasks.

While I have described profitivity in a somewhat linear fashion, it is actually a circular process of planning and replanning. If production cannot meet my profit goal, or my profit goals don’t support my life goals, we need to recirculate through the problem and find a frame of reference and a plan that does work.

Deliberate profitivity planning can create businesses that have effective production, produce profits and create happiness amongst families and employees. Identifying weak points and addressing them through the process can strengthen businesses and lives. Every operation is unique, and every operation will have a different profitivity plan, but working on and in a business that is fun, productive and profitable generally reinforces the positive feedback loop.

The post Rethinking ranch priorities appeared first on Grainews.

Fundamentally, this simple picture does provide some insight into what drives profit on most cow-calf operations and may indicate some management adjustments that can lead to improved profitability.

TOPPING THE LIST

First is forage. We can argue about starting at the more fundamental level of soil health, but the reality is that plants are one of our most powerful management tools for improving soil health. Forage provides the basis for production and animal performance. A key profit-driver is the ability to collect solar energy through layers of leaf material across varying seasons through plant biodiversity.

The more sunlight you can capture per day for more days, the more forage for animals. As forage increases, litter levels also increase, along with soil organic matter, resulting in increased “effective precipitation.” The first profit-driver for most operations is to grow a higher volume of biodiverse forages. From a management perspective, this means timing the density and duration of grazing, and allowing forages time to recover from grazing and regrow.

Generally speaking, well-thought-out investments in forage management pay dividends to ranching operations.

A NUMBERS GAME

Second is reproduction. We often focus on performance or growth, but the reality for most ranches is that more live calves and a lower replacement rate generates more revenue than increased growth. Like most things, this requires some balance, as throwing funds at improving reproduction rates will be outbalanced by the increased number of offspring at some point.

Additionally, if we consider consistent reproduction and the ramifications, it likely means few replacements (more calves to sell), a larger portion of the cow herd in their prime production years (heavier calves compared to heifers), and more calves born early in the calving season (heavier calves at weaning). Natural reproductive fitness does most of these things without a lot of added expenses.

THE VALUE OF INPUTS

As we manipulate the system and work cattle to gain more or produce heavier weights at specific points in the year, we often add costs. Like all costs, these will have a diminishing rate of return. For example, the first bag of mineral may result in enhanced pregnancy rates, but feeding more mineral than the cows can consume would be a colossal waste of money.

It is important (this is where the ranching part comes in) to carefully assess the target and the inputs and really think through this diminishing rate of return. I said all costs have a diminishing rate of return, but I did not say that all costs have a positive rate of return. Some expenses can have negative returns (the cost is more than the return) that only get worse the more you do. We have some examples on our ranch of things we have tried that have had a negative rate of return. They are also things we have stopped doing. Doing none of a negative, is usually a positive.

As a quick reference point, I went to Canfax and pulled the average October price of 550- and 850-pound steers. I then calculated the total value of each and the value difference. On average over the last 10 years, the value of an 850-pound steer in October has been $435 more than a 550-pound steer. I appreciate that every ranch, every rancher and every situation is different, but I believe this is a good rough number that starts to give an indication of the potential spending limits to hit higher weaning weight production targets.

Remember the law of diminishing returns as you work through your own numbers and remember to keep it simple. No matter how different you think your operation is, the basic principles of solar capture, forage production and reproduction will hold true.

The post Looking at key ranch profit drivers appeared first on Grainews.

To develop our system, we first dug a 16-foot hole with a track hoe. We then stacked large mining tires in the hole and sealed between them with a can of expanding spray foam. It doesn’t take a lot of foam to seal between the tires. They were stacked with the track hoe, as it was a bit of a reach — each tire weighs around 4,500 pounds. Then we filled the bottom of the column with cement to seal it. Our ground is very hard clay so we could have probably gotten away without the cement. With lighter ground, the tires may shift, so a culvert might be preferred.

We cut a hole through the tires about eight feet underground so the existing well-fed waterline could come into the pit and fill it. The same concept applies to a wet well off a dugout, but in our case we had a pressure-fed line.

On the end of the waterline, we installed a brass backflow prevention valve to prevent contamination of the well supplying water to the pit and then attached a Watson float valve to the end of the line. The length of the chain on the float valve produces about a 12-foot column of water in the bottom of the tires. This creates storage of roughly 10,000 gallons. The top of the water column is about eight feet below the top of the tire column, protecting the water from freezing.

Into the tire well, we dropped a ¾ horsepower cast iron septic pump ($250) with quick couplers tied to a 1 ¼” water line. The pump delivers around 5,800 gallons per hour. The water line runs overhead in a large arc to a rubber tire trough where the cattle drink. This pump is tied into a “reverse float” or “pump up” switch that sits in the trough.

It is important that the water line does not have any sags or dips so that the water drains back into the trough and the pit when it stops pumping. We have put a piece of sucker rod on the rise and taped the hose to it to prevent sagging. If you have dips in the line, water will sit there and freeze (learned this the first year) instead of draining back properly. We stacked the tires in the pit so they came about two feet above ground. We have put a secure cover on top of the tires. We will also install a steel safety fence around it, now that the backfill has settled.

Backup components

We keep a spare switch and a spare pump with quick couplers attached. If a pump quits we can change it in about five minutes. If there is an extended power outage, we can attach a small generator and pump the trough full in about five minutes. The trough does not freeze, even with few animals using it, and can quickly deliver enough for several hundred head.

The worst-case scenario is the reverse float in the trough might freeze, allowing the cows to drink the trough dry. Previously, with the underground line direct to the trough, the water inlet was exposed and could freeze solid, so we had to thaw things out. Now we just knock the float loose from the ice and the trough is full in about five minutes.

The tire reservoir has the potential to feed our solar pumping systems and we may replace the 120V pump with an existing solar setup and insulated trough. In the summer we will look at using a jet pump to feed a pasture pipeline system from the tire reservoir.

Total cost included the track hoe work, the float, backflow preventer, pump, hose, pump-up switch, some bags of Quickcrete and two cans of spray foam. The tires were free. The system has been a massive improvement and we plan to convert some other troughs to the same setup.

If you have interesting water setups, please feel free to contact me and share them with other producers.

The post Used mining tires serve as water reservoir appeared first on Grainews.