Submitted by: agcomm, Thu Dec 11 09:42:28 1997 The Market Advisor: This Is The Year To Do Your Homework Before You See Your Banker Harlan Hughes, Extension Livestock Economist NDSU Extension Service Graphic accompanies this column in hard -- and is available on the World Wide Web at http://www.ext.nodak.edu/extnews/newsrelease/graphics/ The time has arrived when beef cow producers need to take a few deep breaths and say to themselves, "I am going to pull my 1997 business data together and fully analyze my ranch business before I talk to my banker and I'm also going to develop a profitable 1998 business plan." The last three years of low cattle prices, last winter's high feed bills, last winter's storm losses, and the aftermath of this fall's open cows make it imperative that beef cow producers take some extra time this winter to analyze their businesses. As a manager, you need to know how your business performed last year. The key is for you to use your 1997 business analysis to build a realistic, but aggressive, 1998 business plan that takes advantage of the projected favorable cattle prices over the next three to four years. You need this in- depth business analysis and business plan, and so does your banker. Your banker will be impressed with the fact that you conducted a thorough production analysis of your herd and built an aggressive 1998 business plan. What should your 1998 business plan contain? I suggest two components. The first, a production analysis that documents your beef cow herd's production performance in 1997 and if 1997's production was impacted by one of the year's disasters, a production analysis for the last five years will be required, for you need to prove to your banker that 1997's production was an exception. The second component needed is documentation and analysis of your ranch's financial business performance, to demonstrate how1997's financial performance deviated from your last five-year average performance. In this Market Advisor we'll look at production analysis. In the next we'll look at financial analysis. To analyze your 1997 production, you need to study three things: your actual production, how much it deviated from your five-year average and how it compared with production of North Dakota's benchmark herds. If your five-year production history is quite high, you should be able to show in your 1998 business plan how you will use the next few years of favorable calf prices and more normal production levels to recover from the 1997's disasters and from the low beef prices of 1994-1996. If your five-year production history is fairly low, you will need to do some honest soul-searching about the future of your beef cow herd. To date, most exits from farming and ranching have been voluntary. Farmers and ranchers learned in the 1980s that there is nothing wrong with exiting from ranching while you still have some equity left. Let's take a look at how one goes about conducting a comparative analysis of a herd's critical production factors. A comparative analysis is the single most powerful farm and ranch management tool available. It identifies a herd's production strengths and weaknesses by comparing its production facts with those of a set of benchmark herds. In this Market Advisor I'm using, as benchmark numbers, the five-year rolling averages of North Dakota's CHAPS herds. North Dakota's CHAPS herds make up a majority of the National Cattlemen's Beef Association production Integrated Resource Mangement herds. Production areas where the producer's herd beats the benchmark herds are areas of strength, and production areas where the producer's herd is beat by the benchmark herds are probably areas of weakness. Capitalize first on your herd's strengths in your 1998 business plan, then use the plan to correct as many weaknesses as possible. The National Integrated Resource Management Standardized Performance Analysis (IRM-SPA) guidelines suggest that production efficiency should be measured by the number of "adjusted females exposed." This national guideline allows producers to adjust actual females exposed for 1) why cows were culled, 2) purchased female animals and 3) the sale of breeding females. Space precludes my including the form published to calculate SPA adjusted females exposed. If you are interested in a form designed to help you calculate this, contact Sandy at 701-231-8642, or e-mail her at AgEcon@ndsuext.nodak.edu; or search Harlan's Web page http://www.ag.nodak.edu/cow under the "Harlan's Handout" button. Here are some of the selected critical success factors that should be part of your production analysis. * Pregnancy percentage, or the percent of the females exposed to bulls that checked pregnant at preg check time. If you did not preg check your cows, you can use the number of mature cows and exposed heifers that were held for calving. The pregnancy percentage formula is the number of females checked pregnant divided by the SPA adjusted females exposed. The benchmark herds averaged 93.8 percent pregnant, ranging from 92.5 percent in low-production herds to 94.6 percent in high-production herds. * Calving percentage, is the number of females that were exposed to bulls and that actually had a calf. Calving percentage is also based on the SPA adjusted females exposed. The formula is number of females that calved divided by the SPA adjusted females exposed. * Calf crop or weaning percentage, or the percent of the females exposed to bulls that had a live calf at weaning. This turns out to be one of the most important economic variables measured in a beef cow herd. It is calculated by dividing the number of calves weaned by the SPA adjusted females exposed. North Dakota's benchmark herds average a 90.1 percent calf crop, with the top one-third averaging 92.4 percent and the bottom one-third averaging 86.8 percent. Top producers wean more live calves. * Calf death loss, or the percent of the calves born that died. Note that this percentage is not based on females exposed it is based on calves born. Calving distribution has a primary impact on pounds of calf produced. Recommendations are that producers design a breeding program that bunches calving dates into a calving interval of 63 days or less. This 63-day interval can be broken down into three 21-day intervals. The benchmark herds produced 58.5 percent of their calves in the first 21 days of the calving interval, and 85.9 percent in the first 42 days. By the end of the first 63 days, 95.5 percent of their calves were on the ground. Producers with the benchmark herds kept their calves on their cows for an average of 202 days. Steer weaning weight averaged 572 pounds while heifer weaning weight averaged 544 pounds. The average weaning weight of all calves was 562 pounds. A critical economic production fact is the average weight weaned per female exposed. Weight weaned per female exposed was 502 pounds in the benchmark herds. Use these benchmark numbers to identify your herd's production strengths and weaknesses. In my next Market Advisor I'll discuss the critical success factors for analyzing the financial aspects of the ranch business. ### NDSU Agriculture Communication Source: Harlan Hughes (701) 231-7380 Editor: Barry Brissman (701) 231-7866