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 Performance...what is it good for?

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MKeeney
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PostSubject: Performance...what is it good for?   Mon May 21, 2012 7:26 am

Absolutely about 5%...

this summary is repeated yearly where ever cow calf production is completely accounted for...this from Iowa, where corn grows cheapest, and the sky is always just ready to fall, and IL...

AMES, Iowa ? Cost factors drive returns to labor and management, more than production, reproduction or producer-controlled marketing factors, according to cutting-edge financial cow-calf records analysis performed by the University of Illinois and Iowa State University's Iowa Beef Center.

And, of these cost factors, feed costs had the largest impact, said Alan Miller, Integrated Resource Management (IRM) coordinator at the University of Illinois. "Eight cost and production factors explained 82 percent of the farm-to-farm variation in returns to labor and management," Miller continued. "Feed cost was the most critical control point; it explained over 50 percent of the variation in herd-to-herd profits."

The financial analysis was completed using Integrated Resource Management (IRM) and Standardized Production Analysis (SPA) records from Iowa and Illinois beef cow-calf producers from 1996 to 1999.

SPA is a standardized beef cattle enterprise production and financial performance analysis system that was defined at the national level by the National Cattlemen's Beef Association and Extension Service. The annual analysis for a producer is completed by using the cow herd's fiscal year production and financial data.

Second on the list of eight factors was depreciation; operating costs ranked third. "Producers should carefully analyze the payoff of housing and equipment investments, as well as be cautious about purchasing inputs that may not return added profits," Miller said.

"Calf weight ranked fourth as a profit indicator," said Daryl Strohbehn of the Iowa Beef Center, who assisted Miller with the study and analysis. "But, it only accounted for about 5 percent of the profit variation. This indicates that bigger calves don't always mean better profits; there is an optimum for each herd's production system."

The remaining four indicators are as follows:

Capital charge/interest paid. "This analysis demonstrated that for each $1 increase in interest, profits decreased $1.38, which indicates that it is correlated with other factors that increase expenses," Miller said.

Calf Price. A $1 increase in calf price was worth an additional $3.40 profit per cow, study figures showed.

Weaning percentage. "Producers need to keep in mind that there is an optimum level for calf crop percentage," Strohbehn explained. "If a producer strives for a high percentage calf crop, the costs will likely outweigh the returns from added pounds available for sale."

Herd size. Herd size accounted for less than 1 percent of the herd-to-herd profit variation, however, there was a significant correlation between herd size and many cost factors, indicating that economies of scale existed mainly in the form of reduced cost, not necessarily increased production.

"Because feed costs make such a huge difference in herd profitability, Midwestern cow-calf producers have to improve grazing resource management to be competitive with current investment levels," Strohbehn emphasized. "Well-managed rotational and stockpiled grazing systems have the potential to save producers large sums in supplemental winter feed costs."

"As producers focus their attention on improving herd profits, critical evaluation of feed resource usage is step one. Then benchmark your operating and depreciation costs before going into herd production factors." Miller concluded.

For more information about IRM/SPA, cow herd benchmarking opportunities or grazing resource management, see the Illinois BeefNet site at http://beefnet.outreach.uiuc.edu/index.cfm or the Iowa Beef Center at http://www.iowabeefcenter.org .
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Kent Powell



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PostSubject: Re: Performance...what is it good for?   Mon May 21, 2012 10:26 am

"Herd size. Herd size accounted for less than 1 percent of the herd-to-herd profit variation, however, there was a significant correlation between herd size and many cost factors, indicating that economies of scale existed mainly in the form of reduced cost, not necessarily increased production."


This doesn't sound right, does it?
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Grassfarmer



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PostSubject: Re: Performance...what is it good for?   Mon May 21, 2012 12:57 pm

For the second part to reconcile with the first it should surely read

Herd size. Herd size accounted for less than 1 percent of the herd-to-herd profit variation, however, there was a significant correlation between herd size and many cost factors, indicating that economies of scale existed mainly in the form of reduced cost, not necessarily increased production profit"

Which still doesn't make a lot of sense.
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MVCatt



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PostSubject: Re: Performance...what is it good for?   Mon May 21, 2012 4:59 pm

Kent Powell wrote:
"Herd size. Herd size accounted for less than 1 percent of the herd-to-herd profit variation, however, there was a significant correlation between herd size and many cost factors, indicating that economies of scale existed mainly in the form of reduced cost, not necessarily increased production."


This doesn't sound right, does it?

Kent,
What jumps out at me is that herd size accounted for less than 1% herd to herd profit variation, but depreciation was #2 on the list. To me equipment costs would look a lot better spread out over 200 cows rather than 25. Also, I don't think a little performance would hurt...in a Truline setting Very Happy .
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Bob H



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PostSubject: Re: Performance...what is it good for?   Mon May 21, 2012 10:57 pm

I have a couple of observations on this report.

1. A cow that is moderate and does not have a high energy metabolism seems to keep down the feed cost.

2. About depreciation if you repeat number one and she lasts an extra 3 years without any new iron to support her she seems to be a winner.

3. If you breed just enough to regenerate the cow herd back to themselves then cross-breed the rest it seems to give you more pounds to sell.

Just some thoughts on truel-line breeding Bob H
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Bob H



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PostSubject: Re: Performance...what is it good for?   Mon May 21, 2012 11:04 pm

I have one more thought on economies of scale if one man takes care of 100 cows at 2000 per month the cost is 20 dollars per month. If the operation is sustainable ie: not much trouble calving, grass based, that same man could take care of 600 cows it would bring down the cost to 3.3 dollars per month with the equipment cost prorated the same way it is a considerable savings. Yes you don't produce more but you save much more. My father always said if you did not spend a dollar you did not have to make it.
Bob H
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MKeeney
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PostSubject: Re: Performance...what is it good for?   Tue May 22, 2012 6:09 am

Bob,
somewhere I`ve read that replacing the cowherd cost is the third largest cost factor...so longevity, not "more and more performance" has a greater impact on profit...
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