The Cattle Business: Records and Management
Livestock Update, January 1998
Bill R. McKinnon, Animal and Poultry Sciences, Virginia Tech
It is the beginning of a new year. It can be one of the most important times of the year in the business management of a cattle operation. Sure, the end of one year and the beginning of a new one means that tax time is just around the corner. For the true cattle business manager, the new year provides a time to reflect on the past year's business performance. It should also provide an opportunity to set goals and develop strategies for the coming business year.
Most operations will begin the new year by assembling records and information needed for tax filing. With all those records assembled, it makes sense to use them as management tools and not only to please Uncle Sam. Did our cost per pound of calf weaned go up or down this year? What was our average feed cost per cow in '97 and are we making progress in lowering that significant cost? How did other various costs per cow change and why?
The nationally recognized SPA (Standardized Performance Analysis)-EZ provides an organized approach to determining the costs of production. SPA-EZ consists of a three page worksheet. The worksheet provides a step by step pathway to help the producer calculate what it costs him to keep a cow or raise a pound of calf. No computer is needed -- just a pencil, a calculator, and some basic pieces of farm records. The effort will help the manager become more tuned in to the economic and financial condition of the farm business. It provides the opportunity to study what pieces of the operation work well and which need some attention. Several producers requested the form last year and found the exercise to be helpful in analyzing their business.
The real power in using any analysis program comes when the results are compared against the previous years' performance or with other cow/calf operations. An option for those producers who wish, is that they can become part of a Virginia SPA aggregate. Working together with the National Cattlemen's Beef Association and Cattle-Fax, the Virginia Tech Animal and Poultry Science Department will develop a Virginia aggregate of SPA-EZ analysis information. Those submitting a copy of their SPA-EZ data will be pooled with other Virginia operations to create average production and economic measures. The aggregate information will be distributed back to those farms submitting data. The process will assist managers in determining strengths and weaknesses of their cow/calf business compared to other Virginia operations. Individual farm identity and data is kept strictly confidential.
Whether the individual farm SPA-EZ data is included in a Virginia aggregate or not, the process of cost calculation will be a learning exercise for the business manager. The completion of the SPA-EZ worksheets will require some basic pieces of information to make the task relatively painless:
Current year's tax return
Beginning of the year financial balance sheet
End of the year balance sheet
Cow inventory records
Basic cow production information (average weaning weights, etc.)
A copy of the SPA-EZ form is available by contacting Bill McKinnon, 368 Litton Reaves Hall, Virginia Tech (0306), Blacksburg, VA 24061 or (540-231-9160).
Even if a complete analysis such as SPA is not completed, the material assembled for farm tax filing can become valuable management information. To lower costs, closely examine the top five overall farm expenses. Those top five expenses will usually account for over 60% of the total and hence deserve some closer scrutiny. Make sure that expenses that significantly impact cattle performance are not unwisely chopped. Lowering the cost per pound of calf produced (Total costs / pounds of calf) should be the focus.
After analyzing 1997's performance, the prudent manager will set some goals for the operation for 1998 and beyond. Begin today by targeting at least one area of costs for a significant reduction in 1998. At the same time identify one income area for improvement in the coming year whether as a result of improved animal performance or better marketing.