  BeefTalk:
Inventory Count Is Essential to Write Profit, Loss Equation
By Kris Ringwall, Extension Beef Specialist,
NDSU Extension Service
The shopping district is loaded with year-end close outs. Stores run a
variety of advertisements and specials to lure potential customers. The store
owner may have come to the realization that it may be best to clearance-price
some merchandise, sell it from the inventory and replace it with a different
product.
In today’s electronic world, inventory reduction and replacement is almost
a continuous process. The laws of supply and demand daily write the profit
equation. There are three basic principles at work for the downtown business
that need to be incorporated in to the beef producers innate thinking process.
The first principle for sales is to produce a product that has demand--a product
people desire. The second principle is to have a consistent supply--a product
that is available as advertised. Rain checks are poor substitutes. The third
principle is to account for and monitor the ever-changing relationship between
supply and demand.
Well-run businesses remove products with poor demand, even at prices below
cost, in order to replace inventory with profitable products. Beef producers
need to apply the same principles.
Historically speaking, all towns had a local drug store. The store was always
busy with the day-to-day bustle of people. In earlier days, the store had a
fountain bar, and maybe even served a light meal. With time, the stores changed
and focused more on the health needs of the customer and convenience items.
Ironically, if you walked far enough back into the store, the remnants of a
health line for beef cows could be found. Usually, an assortment of health
products and miscellaneous equipment were in the inventory.
As each year went by, the beef cow health products made up less and less of
the inventory until they finally disappeared or became out-dated and
non-saleable. If you were lucky, you caught the the final closeout when the last
dehorner or emasculator were priced with 1970 dollars.
Businesses change constantly and so does the beef business. The end of the
year is your opportunity to remind yourself not only to finish your taxes, but
complete your financial and production records for the year. You need to account
for the number and value of cattle sold. Total up the number of breeding cows,
cull cows, heifer calves, steer calves, bull calves, preconditioned calves,
backgrounded calves, fat steers, fat heifers, heiferettes and bulls sold.
Likewise, tally how many bred cows, open cows, replacement heifers and
breeding bulls were purchased. The value associated with each of these
transactions needs to be recorded. These numbers help figure your year-end
inventory and sets your new year beginning inventory. Likewise, feed and hay
inventories need to be taken. Don’t estimate, but physically do an inventory
to assure inventory change for feed and hay.
If you are downtown, and the store is closed for inventory, take note and go
home and do your own inventory. Granted, hay and grain inventories may not
always be perfect, but the biggest step is simply getting started and putting
the inventories to paper. Within the month, last year’s expenses can be
accumulated and accounted for, but accounting for expenses may not be the major
indicator of a product’s profit or loss.
You need to add any inventory changes to get true balance to the equation for
a cow-calf business enterprise. Just as your appointment for tax preparation is
important, your appointment with a good farm or ranch management specialist or
accountant is equally important because the latter will help you focus on true
profit.
The NDSU Dickinson Research Extension Center uses the North Dakota Farm/Ranch
Business Management Education program. Check with your local instructor or NDSU
extension agent and dedicate time now for analyzing last year and planning next
year.
May you find all your ear tags.
Your comments are always welcome at www.BeefTalk.com.
For more information, contact the North Dakota Beef Cattle Improvement
Association, 1133 State Avenue, Dickinson, ND 58601 or go to www.CHAPS2000.COM
on the Internet. In correspondence about this column, refer to BT0072.
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Source: Kris Ringwall, (701) 483-2427, kringwal@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu
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Cattle Sold in 2001
NDSU Dickinson Research Extension Center
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Cattle Type Number
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Steer calves 22
Heifer calves 49
Finished steers 116
Finished heifers 0
Open heifers 31
Heiferettes 24
Cull cows 70
Cull bulls 10
Total 322
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