Denise SchwabDenise Schwab

ISU Extension Beef Program SpecialistISU Extension Beef Program Specialist

2013 Beef Production2013 Beef Production

SPA LabSPA Lab

www.iowabeefcenter.org

All whole

farm!

What about

the cow herd

or the forage

base???

Enterprise Analysis

What is SPA?

• Standardized Performance Analysis

• Developed by National Cattleman’s Association in cooperation with USDA Extension Service.

• To assist producers with analyzing herd economic and production records.

So we all calculate records the same waySo we all calculate records the same wayWhy??

What Can Standardized Performance Analysis (SPA) Do?

SPA can SPA can keep you in businesskeep you in business!!!!

• Know your OWN economic & reproductive productivity

• Analyze your operation by enterprise

• Compare to benchmarks!

The Value of InformationThe Value of InformationProducers on the program for 5 years have reduced annual production costs by nearly

$175 per cow.

Total Cost per Cow

Illinois

What Records are Needed?• Balance Sheet• Net Worth Statement• Tax Forms (Schedule F)• Cattle Inventories (Jan. 1)• Feed Records• Pasture In/Out Dates

• Pasture/Hay acreage and rental values

• Breeding stock deaths, sales, and purchases

• Calf weaning or sales weights and prices

• Hay Produced (Bale number & average wt.)

Financial AnalysisEvaluate assets at their cost or depreciated value (book value)

Dunn, BIF 2002

Preg Test

Bull Purchase

Cross FenceWater

WellIncreased Herd 30%

Land Inheritance

Tractor Purchase

Land Purchase

Baler Purchase

Bull Turnout

2010

Built New Silo

Silage Harvest Equip

Fiscal year being evaluated

Cumulative affect of management decisions on current fiscal year.

Economic Analysis

Evaluate assets at their current market value.

Dunn, BIF 2002

Investment in the Business on a per Cow Basis – ISU SPA

FinancialEconomic

Breeding Stock $604 $668Equipment & Structures $152 $287Real Estate $677 $969Current Assets $133 $182

TOTAL $1566 $2106

Capital Intensive Business!!!Assets valued at

cost or depreciated value

Assets valued at market value or what they could be sold for

Management efficiency

Exit strategy

Financial vs. Economic Cost Example

Pasture Land – Example 1– 40 acres being purchased with an $800/acre debt at 8% contract,

land taxes of $12/acre, fertilized at $10/acre, depreciation on improvements at $3/acre and a current rental value of $35/acre

Financial

Land cost $64

Taxes $12

Operating $10

Deprec. $ 3

Total $89

Economic

Land cost $35

Taxes $ 0

Operating $10

Deprec. $ 0

Total $45

DeprInsRepairsTaxInt

Financial vs. Economic Cost Example

Pasture Land – Example 2– 40 acres purchased 20 years ago with no debt, land taxes of

$12/acre, fertilized at $10/acre, all improvements are depreciated out and a current rental value of $35/acre

Financial

Land cost $ 0

Taxes $12

Operating $10

Deprec. $ 0

Total $22

Economic

Land cost $35

Taxes $ 0

Operating $10

Deprec. $ 0

Total $45

You need to understand BOTH!!

IRM/SPA Production Cost Areas• Feed

– Stored (purchased or raised)– Grazed (owned or leased)

• Operating • Depreciation

– Cattle– Equipment

• Labor– Hired– Family (Only in Economic costs)

• Interest (allocated to cattle)

Iowa BCBR Data Correlation to RLMHerd Size .04

Calf weaning weight .28% Calf crop weaned .10Calf weight sold/cow .23Weight produced/cow .18

Cull breeding weight sold/cow -.06Cattle value sold/cow .14Calf price .01Cull breeding stock price.04

Strohbehn, 1995 ISU Beef Research Report

Ability to

predict return

to labor and

management

Production and price are lowly correlated to profit

What Drives Profit?

What Drives Profit? Correlation to RLM

Feed cost / cow -.41Operating cost / cow -.25Depr, tax & insur / cow -.30Total capital charge / cow -.27Total cost / cow -.47

Feed cost / cwt -.49Operating cost / cwt -.42Depr, tax & insur / cwt -.40Total capital charge / cwt -.41Total cost / cwt -.61

Best

predictors

of profits

Strohbehn, 1995 ISU Beef Research Report

Variation in Return to Labor & Management

-8 financial measures explain over 82% of farm-to-farm variation

-Cost factors were far more influential than production or marketing factors.

Bottom line: Feed cost is the Bottom line: Feed cost is the most important factor in most important factor in

determining profit!determining profit!

Dependent Variable R2

Feed Cost .567

Depreciation Cost .086

Operating Cost .049

Calf weight .046

Capital charge .024

Calf price .027

Weaning percentage.017

Herd size .007

Total .8231996-99: 225 herd observations Iowa and Illinois SPA records

Biggest Value of SPAReturn and Cost Summary for Cow Herd

2003 2004 2005 2006 2007Financial Financial Financial Financial Financial

Costs for Cow-Calf EnterprisesJanuary 1 Number of Cows in Herd 249 266 263 261 250a. Pasture Cost per Cow $48.83 $53.43 $57.33 $43.97 $42.85 b. Crop Residues per Cow $1.81 $1.69 $1.52 $1.23 $2.20 c. Harvested Forages per Cow $150.72 $44.21 $70.00 $55.52 $32.34 d. Non-Purchased Raised Feed Fed per Cow $41.18 $67.86 $82.43 $42.18 $81.86 e. Purchased Feed per Cow $21.17 $32.49 $10.34 $21.01 $18.51 f. Total Feed Cost per Cow $263.70 $199.68 $221.62 $163.91 $177.76 a. Operating Cost per Cow $76.78 $61.96 $94.84 $128.02 $101.74 b. Vet Med Cost per Cow $16.77 $14.04 $11.69 $17.61 $8.88 Depreciation Cost per Cow $52.29 $27.82 $20.67 $22.33 $14.26 Capital Charge per Cow $0.00 $0.00 $0.00 $0.00 $7.72 Hired Labor Cost per Cow $59.38 $22.26 $20.85 $24.92 $17.88 Family & Operator Labor Charge per Cow xxxxxxx xxxxxxx xxxxxxx xxxxxxx xxxxxxxTotal Cost per Cow in Herd, January 1 $452.16 $311.72 $357.98 $339.18 $319.35

Biggest Value of SPA2003 2004 2005 2006 2007

Reproduction & Production MeasuresPregnancy Percentage 91.6% 94.1% 92.9% 93.8% 92.9%Pregnancy Loss Percentage 4.1% 3.0% 8.5% 10.7% 9.4%Calving Percentage 87.5% 91.1% 84.5% 83.1% 83.5%Calf Death Loss 0.0% 0.0% 0.0% 0.0% 0.0%Calf Crop or Weaning Percentage 87.5% 91.1% 84.5% 83.1% 83.5%Female Replacement Rate 19.6% 15.3% 15.3% 16.1% 18.5%

Calving Distribution:Beginning Calving Date: 03/06/03 03/12/04 03/14/05 03/03/06 03/20/07 Calves Born During 1st 21 Days 48.7% 44.3% 46.0% 21.2% 43.0% Calves Born During 1st 42 Days 82.4% 76.5% 75.7% 57.6% 78.3% Calves Born During 1st 63 Days 93.3% 91.4% 99.2% 84.0% 97.1% Calves Born After 1st 63 Days 6.7% 8.6% 0.8% 16.0% 2.9%

Three Producers

• Son/Father

• Young Producer

• Established Producer

Today’s Task: Consultant

• Strengths

• Weaknesses

• Oreos

• Recommendations

Assignment

• Paper comparing the strengths and weaknesses of the three operations

• Include recommendations for them to improve their operation

Thank YouAre there any

questions?www.iowabeefcenter.org

Denise SchwabBenton County Extension Office

501 First AveVinton, IA 52349

Phone 319-472-4739email: dschwab@iastate.edu