Good Habits Of Profitable Ranches

By Ellen H. Brisendine
Stan Bevers analyzes a lot of data. As a teacher of, and advocate for, Standardized Performance Analysis (SPA), the professor, Extension economist and management specialist for the Texas AgriLife Extension Service, sees the results of habits that are common to beef producers who generate more profit from their cow-calf operations.
1. A calf
"This sounds so simple," he says, but profitable producers focus on reproduction and not production. If a cow doesn't get bred nothing else matters," Bevers says.
"That is why we're in the cow-calf business." Without a calf from every cow every year, "everything that follows is an expense without any revenue to offset it. We get so focused on production methods, but I have to have a calf to implant or feed for better gains. I have to have a calf first."
When the time comes for drought-stricken Texas and Oklahoma producers to rebuild their herds, Bevers suggests paying attention to the basics of cattle production and selection.
Look for bulls that can travel, are structurally correct and have the scrotal circumference to indicate a high libido. Breed associations generally have the average information for scrotal circumference and can advise producers on that trait.
"That bull can have the greatest EPDs (expected progeny differences) for weaning, yearling and carcass traits, but if he's not a breeder, I don't need him."
2. A smaller cow
Speaking from the perspective of a cow-calf operator, Bevers proposes "now that I've destocked — some or all — this is good time to change the size of my cows. If I can reduce my cow size by 20 percent from 1,200- or 1,300-pound cows to 1,000-pound cows, I can then run that many more cows.
"It comes back to reproduction. I have more chances of getting calves on the ground. Instead of having a single 1,300-pound cow, I have a couple of 1,000-pound cows, and that many more chances to get calves."
Bevers agrees that it can be hard for producers to pick something other than what has always appealed to them, as far as female type. If a producer wants to rebuild with a more moderate-framed cow herd, he or she will have to make a conscious decision to look for something different in their new female type.
"What do we do when we get our replacement heifers? We pick the biggest ones and that tells us our mature cow size will increase if we continue to do that," he says.
3. More instead of bigger
With a herd of smaller cows, producers might get smaller calves. Is that bad? "As a cow-calf operator, they don't necessarily need the biggest calves with the heaviest weaning weights. I suggest they consider this perspective, ‘I have the greatest number of calves on the ground to start with.'
"We need to be producing good calves, but the first step is to produce a calf," he says, repeating his earlier point that reproduction of a calf ranks higher than production. Don't allow the striving toward a lofty quality production goal get in the way of your cows reproducing themselves each year.
4. Maintain the natural resource
Another habit of profit-minded ranchers is to maintain the environment in which they ranch. "I hear the statement all the time that we're grass farmers. And we are."
Bevers reminds producers of the fundamental wisdom of fitting your cattle to your environment. It is futile and expensive to try to alter the landscape to support an unsustainable type of beef animal. Know what your land will support and stock conservatively according to that information.
5. Face the numbers
"One of the first things SPA points out is the inadequacy of the information that ranchers think they are keeping." Bevers says useful agricultural accounting is a specialized area that requires an understanding of cash record keeping and allocating costs appropriately to the enterprise.
"If I'm truly a business-minded rancher, I need better information. From an IRS standpoint, raised replacement heifers have a zero tax basis. It doesn't matter whether she's purchased or raised, that female gets older every year of her life and she depreciates over her life. We try to help ranchers identify what their costs of replacement heifers are and what other costs are," Bevers says.
Bevers explains that cow-calf producers are asset managers rather than margin operators. "Margin businesses — stocker operators, feedlot operators, packers — buy the product, transform it in some way and sell it. The difference between a buy and a sell is the margin.
"Cow-calf producers are in the asset management business. We have this culmination of all our assets. The most important thing cow-calf producers can look at is their rate of return on those assets."
Bevers continues, "Drilling into that, what is your cost structure? About 45 to 50 percent of the total costs to run females are fixed costs," such as labor, taxes, depreciation of assets, interest on borrowed money for mortgage or cattle purchases. These costs exist whether a rancher has a 90 percent calf crop, or no calves.
Regardless of the profitability of a cow-calf operation, the 3 top expenses are always, "labor and management, depreciation and feed," Bevers says.
6. All expenses are subject to scrutiny
Bevers notices that the more highly profitable ranches are those that scrutinize every expense to see how it will help that operation get another calf.
"If I have the right labor out there and I'm saving one calf, then, yes, that is an important and cost-effective dollar spent.
"Feed. We traditionally think that's going to help the nutrition of the cows. But at these feed costs, we really have to scrutinize that expense. Make the cows go out there and take care of themselves in the environment."
If scrutiny of expenses saves ranchers from spending dollars on practices or equipment that won't help get a calf, then those dollars can be spent on useful practices, such as veterinary support. "Get that vet out there to help or treat a condition. Spend the dollar that will assure you a live calf." 

http://www.thecattlemanmagazine.com/archives/2012/march/Good%20Habits.html

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