Market Advisor

NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

May 13, 1999

The Market Advisor: Increasing the Management Power of Mid-Sized Family Beef Cow Operators (Part I)

Harlan Hughes, Extension Livestock Economist
NDSU Extension Service

It is my general assessment that management power needs to be enhanced in North Dakota's agriculture because the status quo is not working very well for the typical mid-sized family farm or ranch. In my last two market advisors I emphasized the importance of management power in enhancing the financial viability of today's mid-sized family farmers and ranchers. The typical mid-sized producers needs to focus on getting better before they focus on getting bigger.

I ended my two-article series by suggesting three alternatives for enhancing management power in North Dakota's agriculture. I said that I favored the alternative where mid-sized farmers and ranches enhance their business management skills and pocket the financial returns gained from the increased management power. Two other, less-desirable, alternatives also were presented: mega operations could come in with their professional managers and capture the financial returns to management power; or input suppliers could come in and offer contract farming where they maintain ownership of the commodities and the input supplier captures the royalties to management power. In all three cases, the financial rewards go to who has the management power.

So, what is management power? I define it as paying attention to details. It is my observation, that the higher the management power, the more details that a manager monitors. Top managers seem to monitor so many details that they have to rely on production and financial records to keep track of all the details. The financial rewards from management power comes from the improved production and economic efficiencies. Those who produce more at a lower cost gets the financial royalties from management power.

This column suggests how a mid-sized family farmer or rancher raising beef cows might start to capture some of the financial royalties from their own management power. Two management power tools that North Dakota State University has been promoting with beef cow producers is Cow Herd Analysis Performance System (CHAPS) and Integrated Resource Management Financial And Reproductive Management System (IRM-FARMS). CHAPS measures key reproduction and production parameters of the beef cow herd and IRM-FARMS ties an economic cost-and-returns analysis into the production and reproductive analysis of that herd. Each of these management information systems is designed to enhance the financial performance of the participating managers through enhanced management power.

Benchmark values are generated by both management tools and are published for all cattlemen to use as guides for analyzing their own beef cow herds. Management power results when a beef cow operator compares his herd's numbers to the benchmark values. His herd's strengths are in the areas where his herd's numbers beat the benchmark values. His herd's weaknesses are in the areas where the benchmark values beat his herd's numbers. Benchmarking is a powerful, powerful management tool that identifies your management strengths and weaknesses and suggests where you should focus your limited management energies.

A CHAPS summary report can be broken down into two management categories—reproduction and production. The reproduction category reports such management measures as pregnancy percentage, calving percentage and weaning percentage. According to the National Standardized Performance (SPA) Guidelines, all three of these measures should be based on the number of females exposed to the bulls; however, some adjustment to the number of females exposed is made based on females purchased, sold and why cows are culled. To be technically correct, all three measures are based on "adjusted females exposed." North Dakota's benchmark values, based on adjusted females exposed and five-year averages, are 93.2 percent pregnancy rate, 92.6 percent calving rate, and 89.1 percent weaning rate. Average calf loss based on calves born is 4.6 percent.

The CHAPS production category reports such management measures as average age at weaning, and average weaning weights by herd averages, steer calves, heifer calves and bull calves. The five-year North Dakota benchmark values for average weaning age is 200 days and average actual weaning weight is 557 pounds. Benchmark values for average weaning weights are 566 pounds for steers, 539 for heifers and 606 for bulls.

"Pounds weaned per female exposed" is a key management measure that combines reproduction and production to summarize the overall physical production performance of the herd. The North Dakota CHAPS benchmark value is 490 pounds weaned per female exposed.

Management power comes from calculating your herd's pounds weaned per female exposed and comparing it to the benchmark value. If your number beats the benchmark value, then pat your self on the back and look for the reason for your high pounds weaned per female exposed. Is it due to your high reproduction, high production or both? Find out why you are high and then capitalize on that strength. Management power comes from knowing your herd's production strengths.

If your pounds weaned are below the benchmark values, then try to figure out why. Is it your reproduction, production or both? Once you are able to explain why your number is below the benchmark value, try and focus some management attention on how you might increase your herd's number. Management power also comes from knowing your herd's production weaknesses.

It is quite evident that the U.S. beef industry has made a shift in its emphasis on size. It is a subtle change, but the industry no longer favors the large and super large animals as it now favors "medium to large framed animals." It appears that North Dakota producers (and I might add U.S. producers in general) spent the 1980s focusing on heavier weaning weights. North Dakota's CHAPS data certainly confirms the progress made. In the decade of the 1980s, CHAPS average weaning weights went up 100 pounds—that's 10 pounds per calf per year. This, however, has changed in the 1990s—corresponding with the national shift to slightly smaller-framed cattle. Since 1993, average weaning weights in North Dakota have been decreasing.

So, with calf weaning weights trending downward, what do you think is happening to costs of production? Are costs of production going up or down? Stay tuned.

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Source: Harlan Hughes (701) 231-7380 hhughes@ndsuext.nodak.edu

Editor: Tom Jirik (701) 231-9629

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