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Denise Schwab ISU Extension Beef Program Specialist

2013 Beef Production SPA Lab. Denise Schwab ISU Extension Beef Program Specialist. www.iowabeefcenter.org. All whole farm! What about the cow herd or the forage base???. Enterprise Analysis. What is SPA?. S tandardized P erformance A nalysis

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Denise Schwab ISU Extension Beef Program Specialist

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  1. 2013 Beef Production SPA Lab Denise Schwab ISU Extension Beef Program Specialist www.iowabeefcenter.org

  2. All whole farm! What about the cow herd or the forage base??? Enterprise Analysis

  3. 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. Why?? So we all calculate records the same way

  4. What Can Standardized Performance Analysis (SPA) Do? SPA can keep you in business!! • Know your OWN economic & reproductive productivity • Analyze your operation by enterprise • Compare to benchmarks!

  5. The Value of Information Total Cost per Cow Producers on the program for 5 years have reduced annual production costs by nearly $175 per cow. Illinois

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

  7. Financial Analysis Evaluate assets at their cost or depreciated value (book value) Dunn, BIF 2002

  8. Economic Analysis Evaluate assets at their current market value. Dunn, BIF 2002

  9. Capital Intensive Business!!! Assets valued at cost or depreciated value Assets valued at market value or what they could be sold for FinancialEconomic Breeding Stock $604 $668 Equipment & Structures $152 $287 Real Estate $677 $969 Current Assets $133 $182 TOTAL $1566 $2106 Management efficiency Exit strategy Investment in the Business on a per Cow Basis – ISU SPA

  10. 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 Depr Ins Repairs Tax Int

  11. 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 You need to understand BOTH!! Financial Land cost $ 0 Taxes $12 Operating $10 Deprec. $ 0 Total $22 Economic Land cost $35 Taxes $ 0 Operating $10 Deprec. $ 0 Total $45

  12. 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)

  13. What Drives Profit? Ability to predict return to labor and management Iowa BCBR Data Correlation to RLM Herd Size .04 Calf weaning weight .28 % Calf crop weaned .10 Calf weight sold/cow .23 Weight produced/cow .18 Cull breeding weight sold/cow -.06 Cattle value sold/cow .14 Calf price .01 Cull breeding stock price .04 Strohbehn, 1995 ISU Beef Research Report Production and price are lowly correlated to profit

  14. What Drives Profit? Correlation to RLM Feed cost / cow -.41 Operating cost / cow -.25 Depr, tax & insur / cow -.30 Total capital charge / cow -.27 Total cost / cow -.47 Feed cost / cwt -.49 Operating cost / cwt -.42 Depr, tax & insur / cwt -.40 Total capital charge / cwt -.41 Total cost / cwt -.61 Best predictors of profits Strohbehn, 1995 ISU Beef Research Report

  15. Variation in Return to Labor & Management Dependent VariableR2 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 .823 • 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 most important factor in determining profit! 1996-99: 225 herd observations Iowa and Illinois SPA records

  16. Biggest Value of SPA

  17. Biggest Value of SPA

  18. Three Producers • Son/Father • Young Producer • Established Producer

  19. Today’s Task: Consultant • Strengths • Weaknesses • Oreos • Recommendations

  20. Assignment • Paper comparing the strengths and weaknesses of the three operations • Include recommendations for them to improve their operation

  21. Thank You Are there any questions? www.iowabeefcenter.org Denise Schwab Benton County Extension Office 501 First Ave Vinton, IA 52349 Phone 319-472-4739 email: dschwab@iastate.edu

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