Category: Costs

Tagging Calves

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Tyson Pharo made a comment in last week’s PCC Update that came very close to ruffling some feathers. Good job, Tyson! Many cow-calf producers think it is sacrilegious to not ear tag calves at birth. Most do it because they have always done it. Several years ago, the PCC Discussion Group came up with several “Kooky Notions” that the members used to have. Ear tagging calves at birth was one of those kooky notions. I’m sure many subscribers are saying, “What’s wrong with tagging calves at birth?”

To begin with, each and every one of your cows knows which calf is hers – without an ear tag. If you are a commercial rancher (not raising registered cattle), you are NOT getting paid to ear tag your calves. I am not against putting identification ear tags in every animal – but it can be done when the calves are run through a chute for vaccinations, etc. It does not have to be done within a few hours after birth.

There are at least four problems with ear tagging calves at birth. First and foremost, it is dangerous. Every year we hear about someone being seriously injured or killed while trying to tag a newborn calf. How would you feel if someone in your family got hurt while tagging a newborn calf?

Second, ear tagging calves at birth disrupts the bond between a momma cow and her newborn calf. This is a very critical time for a newborn calf. Any outside interference does more harm than good.

Third, ear tagging calves sets you up to keep records on individual animal performance which will keep you from maximizing sustainable profit per acre. For the past 40+ years, the status quo beef industry has been enamored with increasing individual animal performance. This has created high-maintenance cattle that do not fit any environment outside of a feedlot. Consequently, the result of focusing on individual animal performance is reduced profits. I still believe most ranchers can double their profit per acre once they stop focusing on the wrong things.

Fourth, ear tagging calves at birth is very time consuming. It takes a whole lot more time than 30 to 60 seconds per calf. Tagging calves requires you to ride or drive to the cows and through the cows. If you don’t go at least twice a day, you will not be able to catch the calves. You must do this every day. Even if you have a short 45-day calving season, you will have at least 90 trips to and through the cows. Because tagging calves is time consuming, it will set the limit as to how many cows you can run. The most profitable ranches are running 500 to over 1000 cows per man. It would be impossible for these ranches to tag calves at birth. They spend their time (and money) on things that increase their profits.

The time and money most producers spend on things like keeping individual animal records and ear tagging calves at birth could be used to improve grazing management via fences and water development. This could easily double or triple your profits per acre. You could be getting paid two or three times more for doing half as much work. You could create a VERY profitable and sustainable business for your children and grandchildren.

I am often drawn into discussing this “kooky notion” at my speaking engagements. Tagging calves at birth is a paradigm that most producers struggle to get away from. For every reason people have given me to justify why they tag calves at birth, I have always been able provide an alternative.

People say they need to have an easy way to pair up cows and calves when going to summer pasture. I suggest you move bred cows to summer pasture and allow them to calve in sync with nature on green grass. Bred cows are much easier to handle, haul or drive than pairs. All of the problems producers associate with calving will magically disappear when cows are calved in sync with nature. You do NOT have to be there to see every calf born! Also… any cattleman worth his salt can pair up cows and calves without ear tags.

Some might ask, “So how do we identify the cows that produce the dink calves?” That’s easy… after separating the cows and calves at weaning, sort off the dink calves. Turn those dink calves back out with the cows – and they will make a beeline to their mommas. Ride out and bring in the dink pairs to be sold.

Would you be able to calve 500+ cows by yourself if every calf had to be ear tagged at birth? No – but you could if you did not have to tag calves. Mark Bowman, a PCC customer in Western Nebraska, once told me about an encounter he had with his dad who was over 80 years old at the time. Mark was calving around 1200 cows in sync with nature. His dad said, “If I knew ranching could be this easy, I would still be doing it.”

Keep it Simple… Mankind has always been notorious for making simple things complicated. It doesn’t have to be that way. Ranching can be fun, easy and profitable! If your ranch is NOT fun, easy and profitable, then you can only blame yourself.

Did you know… that the average age of cow-calf producers is close to 60? That is nearing retirement age for most businesses. Why do you think the average age is so high? Could it be that traditional (status quo) ranching is NOT fun, easy and profitable enough for the next generation to consider it as an occupation?

The Perfect Business Model

I have a great idea for a business!  Let me give you some of the details and then tell me if you will be willing to invest! My idea is to have a grocery store with about 70% less square footage than all my competitors.  We are going to do no advertising in the community; no newspaper advertising, no radio or TV, no mailers to local households. Our selection will be limited with no nationally known brands like Campbell’s Soup or General Mills, in fact we will only have our personal brand or brands you most likely have never heard of or seen before. Oh! And by the way, we will have only 1/10th the inventory available at a full-size supermarket. Are you ready to line up and hand over your money?

I didn’t think so and neither would I, if I didn’t know “the rest of the story.”

The grocery chain I just described is Trader Joe’s. The chain was created almost by accident or fate! The original Joe was Joe Coulombe, a Stanford University graduate who went to work for Rexall Drug Store, a national chain. In the late 1950s Rexall came up with a novel idea, they would start a “convenience” type store that had small square footage and sold necessities (Yes, we are talking a 7-Eleven style convenience store). Their test market was a chain called Pronto Market and started with half a dozen stores in the Los Angeles area. Joe was over the project and firmly believed it was a great idea.

Unfortunately (but fortunately for Joe!) Rexall gave up on the idea in 1958 and instructed Joe to shut down all the stores.  Instead he raised money and bought all the stores (Rexall was happy to get rid of all the locations).

Joe Coulombe grew Pronto Markets to 17 stores before Dallas-based Southland Corporation (creator of the 7-Eleven brand) expanded to Southern California, Joe knew he could never compete with the marketing muscle and economies of scale of 7-Eleven locations. Legend has it that Joe took a trip to Hawaii and came up with the idea of a new kind of grocery store that was laid back and sold specialty items that were organic, quality and well-priced.  He named his stores “Trader Joe’s.” The first store opened in 1967, about the time of the “surf movement” and a new generation of laid-back Americans (especially in California) came along. His timing could not have been better and over 20 years he opened one store per year, all with Hawaiian tropical themes. Yes, his employees wore Hawaiian shirts!

In 1979 Trader Joe’s was bought out by a German grocery magnate named Theo Albrecht. He persuaded Joe to remain and did not change the successful model. So how well has the “no marketing, no advertising, limited choices, off brand” concept worked?  Well, the average Trader Joe’s is twice as profitable per square foot of store space than the large national chains. To its many loyal customers, it is almost a cult. One customer in Kansas City who traveled to California would fill up a large suitcase on each visit. He even set up a Kansas City Facebook page to try and get a location started in Kansas City. By the way, he was successful!

Trader Joe’s management and ownership refuses to give interviews or release any information to anyone and refuses to do any media interviews. They are now up to over 470 locations in 44 states and growing. Here are a few facts about Trader Joe’s:

  • In February 2008, BusinessWeek reported that the company had the highest sales per square foot of any grocer in the United States.
  • The May 2009 issue of Consumer Reports ranked Trader Joe’s the second-best supermarket chain in the United States (after Wegmans)
  • In June 2009, MSN Money released its third annual Customer Service Hall of Fame survey results. Trader Joe’s ranked second in customer service among all companies, not just grocery stores.

A former employee who had owned an advertising agency sold it and, on a whim, went to work for Trader Joe’s with the intent of writing a book. Mark Gardiner became a “crew member” as employees are called but resigned before he published his book knowing the secretive company would fire him.  His book, “Build a Brand Like Trader Joe’s” reveals what Gardiner believes to be the success factors of this remarkable and loved company. (The drum roll please!) Here they are:

  • They only hire friendly people with relationship-oriented personalities (okay, that makes sense but why doesn’t everyone do it?)
  • When you ask for help you are not pointed without emotion to aisle seven, half way down on the right. The crew member, with a smile, walks you to the product, picks it up for you and even gives you details about the product. Before the crew member leaves, he/she offers further assistance.
  • If you don’t like what you bought you can return it at any time, no questions asked for a full “cash” refund.
  • They pay above average wages and offer solid benefits to employees (Yes, that’s right, employees are treated like customers!  Crazy idea!)
  • There are no automatic checkout lines (Yes, you have to talk with friendly people! Going to Trader Joe’s is like going to meet a friend).
  • They encourage interaction with customers.  If you are stocking a shelf you stop what you are doing to assist customers.

Okay, let’s simplify all of this to one thing, “The customer is treated like the most important person in the world while in the store.” I know, too simple, there must be more to it.

Actually…not!

Ken Blanchard, the famous business writer and consultant said it best, “Just having satisfied customers isn’t good enough anymore. If you really want a booming business, you have to create raving fans.”

In today’s world, happy customers are your best source of new business, are more powerful that any advertising campaign, and will allow you to grow your business with the greatest profit margin. Happy employees make all this happen! When Circuit City decided to cut staff to save money and cut salaries, they were bankrupt in two years. One of the most powerful brands in the world, Sears, followed the same path and they are on their last breath.

The simplest truths always prevail, put your customer first and the rest falls in place. There is no magic formula, only magical people who go the extra mile and truly care about others.  Look for these people and hire them! You won’t be sorry! (by the way, give these magical people the right to make decisions on the spot to help customers) Are you ready to invest? Me too!

Cow Fixer Vs. Herd Health Veterinarian? BEEF Vet Examines Production Medicine

Production medicine is part of every-day veterinary medicine. As the veterinarian, you should always be thinking about the clients total operation. Are you a cow fixer or a herd health veterinarian. There is a big difference.” — W. Mark Hilton

Wes Ishmael | May 25, 2013

Production medicine—melding animal health and veterinary care into animal production management—is beyond infancy, but it’s far from losing all its teeth.

“The concept of cow-calf production medicine is still relatively young and still evolving,” says Terry Engelken, DVM, a professor of production medicine at Iowa State University, focusing on the cow-calf and feedlot sectors. “It requires paradigm shifts on the part of the producer and the veterinarian. The producer has to come to the realization that their veterinarian has more to offer than just being a ‘cow mechanic’ and the veterinarian has to understand how to collect and analyze economically important factors that impact profitability.”

Though Dr. Engelken sees slow, steady growth over time, it seems acceptance and use of production medicine is scattered, more client-dependent than size-dependent.

In California, for instance, John Maas, DVM, Extension Veterinarian at the University of California-Davis says it’s a mixed bag. There are progressive practitioners working with progressive cow-calf producers to improve profit potential. There are also producers who view veterinarians as folks who douse emergencies, and veterinarians content to provide only those fire-engine practice kinds of services.

“It’s been one of those things you would think common sense and good business suggest we would have evolved to by now,” Dr. Maas says.

Figuring out the business model of providing production medicine services continues to stall some.

Russ Daly, DVM, Extension Veterinarian at South Dakota State University, believes producers recognize the value of veterinarians and the information they provide. He also knows veterinarians who want to provide production management service to clients. For the most part, though, he says, “In this state, I’m not sure that we’ve found a good way for veterinarians to capture that value, which works for the client as well.”

As for W. Mark Hilton, DVM, it’s impossible to think about production management without considering the animal health side of it and vice versa. Dr. Hilton is a clinical professor in food animal production medicine at Purdue University. He also founded and owns Midwest Beef Cattle Consultants, which many regard as a poster child for how to work with clients in partnership rather than a buyer and seller of specific services.

“Growing up, our veterinarian helped us. He fixed things, but he’d also show us something else that could help us,” Dr. Hilton says. “Production medicine is part of every-day veterinary medicine. As the veterinarian, you should always be thinking about the client’s total operation.”

Dr. Engelken concurs.

“I disagree with those who say that production medicine skills are separate from individual animal medicine, surgery, or palpation skills in a cow-calf practice,” Dr. Engelken says. “I think they are very intertwined in that unless you can exhibit a high level of competency in these areas, you probably won’t build enough trust with the producer to provide consulting services. These skills are also absolutely critical to being able to collect the baseline production numbers that you need to be able to provide consultative services to the client.”

“Are you a ‘cow fixer’ or a ‘herd health veterinarian’?” Dr. Hilton asks, “There is a big difference.”

Herd-Specific Data is the Foundation

For one, Dr. Engelken explains, “Record keeping and data analysis must come into play if you are ever going to get this type of service off the ground. You can’t benchmark performance if the appropriate numbers aren’t being recorded, and that first step can be a real challenge. You have to think about what output parameters you want to evaluate and then make sure you are getting those numbers captured. Then, it becomes a question of identifying the magnitude of losses and what areas the client needs help with. Are those losses associated with cattle disease, herd management, or a combination of both?”

“Production medicine is more of a mind-set of how you do things, and the most important thing that we can do is find the weak links in the production chain,” Dr. Hilton says. “We want to find the most important factors that are hindering a farm’s success.”

In that effort, Dr. Hilton encourages veterinarians to focus on four production goals: decrease production cost; increase the value of production sold; doing both of these with less labor; and maintain or enhance animal welfare.

“I’m a fan of individual cow records,” Dr. Hilton says. “Producers are surprised how consistent individual cow production is from year to year.” With records, clients can see that a cow weaning a calf 25 percent lighter than the herd average this year will likely produce one of similar caliber next year, and the year after. Dr. Engelken points out that the records portion of cow-calf enterprises is less standardized and more challenging to ferret out than in other sectors like feedlots, stocker operations, dairy and swine.

“Your opportunities to generate production or economic numbers are really driven by specific events that occur during the annual production cycle,” Dr. Engelken explains. “These events include calving, calf processing, going to grass, weaning, pregnancy check, etc. You aren’t typically generating input/output numbers on a daily basis like producers in other animal enterprises. These events may be separated by several months (start of breeding until preg-check) or they may occur over a relatively long period of time (the calving or breeding season), which makes data collection and interpretation more difficult. Secondly, in cow-calf practice, veterinarians are often the ones collecting the data since they will be the ones on the ranch as these production events occur. This data may take the form of reproductive information, calf performance numbers, and animal health performance.”

The next step is at least as essential.

Once this data is collected, the important thing is that it is economically relevant to the operation and that it is converted into information that the practitioner and client can use to identify problems and make corrective management decisions,” Dr. Engelken says. “I believe that’s when information has economic value to the producer. This value is improved over time as economically important management changes are continually identified, documented, and benchmarked.”

cattle feed additives

Areas Of Impact

Any area of production that drives a substantial amount of production output or input invites examination.

For Dr. Engelken, three key areas jump to mind: data based evaluation and the benchmarking of reproductive performance over time; nutritional management to control the cost of supplemental feed; herd health design and maintenance.

“Reproductive performance drives the bus on the income side of the equation and has to be closely monitored,”

Dr. Engelken says. “However, when you look at the differences in profitability between beef operations, you will find much more variation in input costs than you do in revenue generated. Since the largest component of cash costs deals with supplemental feeding, it is only natural that our profession should be involved in evaluation of the nutritional program and cattle feeding practices.”

Likewise, Dr. Hilton says, “Nutritional consulting has provided our clients with the best return on investment. Feed costs are up tremendously over the past five years and our herds that have kept feed cost from rising at the national average are doing much better financially than those that are average or above. I have heard from veterinarians who have saved clients $30,000 in feed cost versus what they would have fed. Even simple ideas like allowing cows only 4-6 hours daily access to hay can save a producer over 30 percent of his hay cost, according to Purdue research.”

As for design and maintenance of the herd health program, Dr. Engelken says, “We are constantly bombarded with new ‘miracle cures’ that come from a syringe, in the form of antibiotics, vaccines, or mineral supplements. I think the practitioner plays a key role in helping producers understand what they need, and maybe just as importantly, what they don’t need. This also requires that diagnostic information be collected from both live animals and necropsies so that disease patterns on the farm can be monitored and herd health programs changed as needed. This is still at the heart of veterinary medicine.”

“Every herd has strengths and weaknesses, but if health is one weakness, it’s nearly impossible to have any real strengths,” Dr. Hilton says. “Think of all the problems that may occur subsequently if calves get sick at a very young age—increased death loss, lower weaning weights and rates, increased sickness and decreased growth in the feedlot, less replacement heifers for the herd, etc. Health is surely a huge impact on the total herd.”

Wrap it all together and Dr. Engelken says, “In our case, we continue to be involved in nutritional management, ration analysis, electronic record keeping, and evaluating reproductive performance. We also spend a fair amount of time evaluating options for our clients and using partial budgets to play ‘what if’ games and look at alternatives.

“Providing impartial science-based information is part of our job. Just simply due to the huge impact that reproductive performance has on ranch profitability, I guess it’s inevitable that we continue to look at estrus synch options, bull selection parameters, and the potential uses of gene markers. Having said that, we still do the traditional things such as palpations and disease management.”

It’s Hard To Pigeonhole Client Interest

As mentioned at the outset, producers of a particular size or in a particular part of the world aren’t necessarily more or less likely to be interested in a production medicine relationship. But there are indicators.

Where he sees successful production medicine relationships, Dr. Maas says, “Number one, the ranchers are business people, no matter the size of the herd. They’re 110 percent vested in the cattle business for their income or they have come to ranching from another business. They understand inputs, outputs, shrink, all of the things that affect their bottom line.”

When Dr. Engelken was on faculty at Mississippi State University, he worked with folks in the agricultural economics department to survey beef producers in the state. The aim was trying to identify practices, demographics and characteristics that defined various levels of management.

“Obviously herd size made an impact. The larger the herd, the more time the producer devoted to herd management. These producers also utilized their veterinarian more often,” Dr. Engelken explains. “However, factors such as client age, education level, the number of extension meetings attended, serving as an officer for a cattlemen’s group and participation in seedstock production affected their level of herd management, as well as how they interacted with their veterinarian.

“That is a point that I try to drive into our students: If you want to come into contact with producers who would be willing to use consultation services, then you need to understand the characteristics of those producers. Our graduate veterinarians need to be involved with the local cattlemen’s groups, extension programs, as well as organized veterinary medicine. They need to be able to identify larger operations (especially seedstock) that are being operated by younger individuals who have an animal science or ag economics degree.

“Those are the producers who understand the impact that our profession can have on their bottom line. However, there are also smaller operations that want to do things the right way and will actively seek out this type of service, even though their cow herd is not their primary source of income.”

Conversely, Dr. Maas believes veterinarians willing to proactively forge new relationships and strengthen existing ones tend to have the most success providing consulting that goes beyond fixing problems.

“Clients call to ask questions. That’s the point at which veterinarians need to begin relationships,” Dr. Maas believes. “Maybe someone calls to ask about a particular vaccine. Also tell them how to handle it and how it should be administered. Ask them if they’re BQA certified.” Dr. Maas says.

“Then, figure out a way to follow up to see how they got along, at no cost to them. Maybe that leads to a chat about how they develop their heifers or what genetics they use and why,” Dr. Maas says. “Invest your time and energy into follow-up, so they understand that you’re the kind of veterinarian who is interested in their operation, not just someone who’s there when there’s an emergency or when they have a question.”

Some will grab the invitation immediately and do their part to establish the relationship. Others never will.

“Dedication to relationship is the important thing,” Dr. Maas says.

“The bottom line is that there may only be 15-20 percent of clients that will be willing to pay for a complete consultative type of program (nutritional management, record keeping, breeding season evaluation, economic analysis, etc.),” Dr. Engelken says. “But, they have been my best clients because without fail, they have all made me a better veterinarian.”

How You Go About It

“The key is to establish credibility and gain trust,” Dr. Hilton says. “The client has to trust the veterinarian to do what is right for the client’s business. That trust comes from time spent working together and having some successes along the way. If I can solve a client’s calf scours problem then I have earned some credibility. Once I have credibility I get asked more questions about the beef business. I want to be the ‘go to’ person in their beef business. Half the time they have a question, I won’t know the answer, but that’s not a deal breaker. I know the people who can help answer that question. They are already on my ‘team’ because I have asked them questions before.”

Likewise, Dr. Engelken says, “It takes time and trust. We work for a client base that tends to be very conservative and risk averse. They want to feel comfortable that you can treat a sick animal and have it get better, that you can handle a dystocia and end up with a live cow and calf, that you have accurate palpation skills, and understand the importance of reproduction to their bottom line.”

A common characteristic Dr. Maas notes in the practitioners involved in these kinds of relationships is their passion for sharing information.

“These veterinarians are educators. They love what they’re doing. They love to educate, to teach, and they don’t feel like they have to do everything themselves. They’re happy to share their knowledge and don’t feel like they have secrets to guard,” Dr. Maas says.

If you’re looking for a more specific game plan, Dr. Hilton suggests, “Go to the client who asks you the most questions. Tell him or her you want to make a deal. You want to do more production medicine and want their herd to serve as the pilot. You’ll charge less because you’re learning, too.”

Then, Dr. Hilton says, “Let’s look at the goals for your herd, identify something I can help you with in the next year, a problem I can solve or help prevent, something that will make your life easier.”

For example, maybe the client says winter feed costs have gotten out of control. Even if you don’t feel like you have the nutritional expertise to solve the problem, Dr. Hilton stresses you know folks who can.

At the same time, don’t sell yourself short.

“Some of our veterinarians have tremendous expertise in nutrition. Others are very savvy on added value marketing programs,” Dr. Daly says. “They might not realize they have enough expertise to provide advice to clients, but they probably do.”

Incidentally, Dr. Daly sees genomics as an area where there is currently a void of understanding that veterinarians could help clients bridge.

Getting Paid For What You Know

None of this works, of course, unless veterinarians are paid enough to make production medicine worth their while. As alluded to earlier, some folks feel uncomfortable charging for information they’ve likely given away in the past.

Plus, it can be difficult for producers to assign value to information when it seems to be everywhere for free.

“You can get information from your neighbor, from the Internet, from university extensions,” Daly says. “I try to impart to producers that local, farm-specific information is more valuable than information they can get anywhere else.”

One step Dr. Daly sees some veterinarians making in such a transition is charging clients by the hour rather than for providing a particular service.

That’s how Dr. Hilton has long charged clients.

Rather than be tempted to try selling a client another product or service, by charging hourly, Dr. Hilton says you can try to talk them out of buying things to save money and add value.

“You do not have to sell something to someone to make a living,” Dr. Hilton says. “You do not have to do a procedure on an animal. Our most valuable asset is our brain. You have to charge for your knowledge.”

“We could argue about the definition of consulting as it applies to a cow-calf practice,” Dr. Engelken says. “I guess maybe the simplest definition is getting paid for what you know. That payment could take several forms such as a per head fee, a retainer, an hourly consulting fee, or even enjoying a high degree of client loyalty because you offer a higher level of service than other veterinarians in the area.”

Of course, there are few buyers for anything that dampens rather than grows the bottom line.

Veterinarians Must Bring Value

“In consulting, the goal is to always give the client value for the money they spend. If I charge someone $1,000 for consulting and it saves him $5,000, that is a win-win. If I charge $6,000 for that same result it is win-lose and the client will never spend money with me on consulting again,” Dr. Hilton says.

“The way that we marketed our program is that we explained to the owners that, really, this program was free,” Dr. Hilton says. “If, for example, the program was going to cost $8 per cow, per year, to be on the records and consultation part of our program, we would show them how they could make at least $8 more per cow in increased income. Then we would also show them how we would be able to save them at least $8 per cow in reduced expenses. We guaranteed the program would be cost effective to the owners IF they gave us their short and long term goals AND they implemented the changes we suggested.”

The program Dr. Hilton is referring to is the Total Beef Herd Health Program (TBHHP). He began it in 1988 when he started Midwest Beef Cattle Consultants. The program cornerstones are herd health, records, fertility, environment, marketing, genetics and nutrition.

“We examine the herd from a total herd view and make recommendations based on financial return,” Dr. Hilton explains. “Common concerns of herds I have visited in the past include: inadequate herd fertility, cows that do not fit their environment, lack of hybrid vigor, pasture conditions that are not optimum for production, excessive calf morbidity, etc. Although we see recurring trends in herds, each herd is quite unique in its strengths and weaknesses.”

Back to the beginning of the program.

“After looking at financial figures, many times the first year on the program produced significantly more than twice the client’s investment. We had herds that increased revenue up to eight times what they paid us for one year of the program, so that was very exciting,” Dr. Hilton says. “If you want to be a hero with your clients, in addition to helping them decrease their cost of production and increase the value of their product, have them do both with less hours of work devoted to the enterprise. Tell me who else has these goals for the producer? The answer is no one.”

Dr. Hilton cites other examples of veterinarians bringing added value to clients:

  •  Vets host an annual calving clinic to remind clients about when to call for assistance(progress every hour), what supplies they should have on hand, and provide a review of techniques on how to assist in delivery.
  •  Clinics help clients precondition calves with a uniform health program, then sort them into uniform load lots so client calves command higher prices.
  •  Vets assist cow-calf owners in formulating rations, utilizing corn and soybean coproducts to stretch winter feed resources and save significant money on winter cow feeding.

One vet organized some of his very best client herds to sell bred replacement females. After pregnancy check, the secretary at the clinic records all data in a spreadsheet and provides this to producers looking for heifers. The spreadsheet gets updated throughout the fall and winter as heifers are sold and others are added to the for sale list.

“Recently, a beef producer had some calves for sale. Last year he received a horrible price, given the quality of the calves. He asked another producer where he sold his calves. That producer told him, ‘My vet lined up a couple of potential buyers for me and I got top dollar.’”

The producer who received the lousy price contacted the veterinarian. The veterinarian stopped by to see the calves and called two buyers. The producer received a price he felt his calves merited.

“The producer then called the veterinarian about his calf scours problem. Long story, short, the veterinarian proposed a very good solution to the scours problem, started asking about nutrition and will be formulating all of that producer’s rations now,” Dr. Hilton explains. “The same producer also wants to enroll his herd in the veterinarian’s records program. The veterinarian has become the ‘go to’ person for that producer’s beef herd.”

Dr. Hilton asks students the most effective way to have success with clients in the future. He tells them it’s having success with clients today.

“You have to provide value,” Dr. Hilton says. “It’s got to make money for them. I want to be an asset to the client, not a liability.”

Moreover, Dr. Hilton emphasizes clients must drive.

“Clients have to tell you what they want. You can’t tell them what to do,” Dr. Hilton says. He learned that lesson the hard way early in his career. “I give them recommendations, the owner makes the decision. If they want to keep a late-calving cow, for instance, that’s their business.”

“You really have to pick and choose your opportunities to start production medicine programming,” Dr. Engelken says. “Rarely do you institute this massive consulting type relationship at one time; at least that has not been my experience. It seems like I have been more successful in starting with an obvious weak point such as heifer development or an animal health issue and then working in the rest of the program over a number of years. Some herds are more willing to adopt this type of relationship faster than others, but it takes time to build that trust account with the client.”

Though none of this is necessarily quick or easy, Dr. Hilton emphasizes that’s it’s not complicated.

“Let people know what you can do. Do it. Follow up. Keep asking clients what their goals are and then help them reach them,” Dr. Hilton says. “Veterinarians need to be more proactive in asking clients what they need from them. Clients need to demand more from their veterinarians than fixing problems.”

BeefTalk: Let the Cow Save You Money and the Bull Make You Money

By : Kris Ringwall, Beef Specialist

NDSU Extension

A recent conversation regarding economic drivers in the cow-calf enterprise left me with a lot to think about.

Let me summarize: The thoroughfare to consumers begins with the conception and birth of a calf that slowly morphs into beef. The beef industry is huge, so reflecting is good as the calf moves from the cow-calf producer to other beef enterprises throughout the beef chain.

Much like the source of a mighty river, at some point, only melting snow or raindrops were present. Mighty rivers do not become majestic if the snow does not melt or the rain does not fall. Everything starts somewhere, albeit small, and needs to grow. The cow-calf industry is no different.

Let us consider some thoughts regarding the cow-calf enterprise. Generally, the cow-calf producer has had some cushion between total expenses and market price (positive cash flow). Expenses, however, loom on the horizon as historically high, and given the relative low rates of return on investment, along with the challenges of finding adequate labor, some cattle producers are giving up the reins.

What steps can producers take to improve probability and, ultimately, return on investment? Almost anybody can buy a cow and bull, and produce a calf, but that is not the definition of a cow-calf enterprise. The operation needs to have some scale, and I usually review data that involve operations of 50 or more cows. But today, even 100 cows probably are below the threshold of “economy of scale.”

I will be the first to state loudly that the cow-calf business has many economic drivers, and “economy of scale” does not have to be one of them. Why? Cow producers like cows and enjoy the lifestyle of raising beef. But a positive cash flow will put more smiles on the producers’ faces.

That being said, how do we do that? Here are some thoughts.

First, recognize the environment one is in and quit fighting it. Building to beat Mother Nature is futile; feed the cows, breed the cows and calve the cows when the weather is right.

The weather is right when cool-season grasses are growing actively. As a consequence of calving when the grass grows, a shift occurs when the third trimester of pregnancy starts, creating the opportunity for alternative winter forage programs.

At the Dickinson Research Extension Center, we turn bulls out on Aug. 1. The third trimester starts Feb. 12, and calving starts May 7. Winter feeds costs, which are 70-plus percent of the total cow-calf costs, have the potential to decline significantly, depending on the extent that “extensive winter forage” is utilized.

Second, recognize the importance of monitoring cow size. The maintenance of excessively large cows has proven difficult to offset with increased weaning weights. The center has targeted mature cow size at 1,100 to 1,300 pounds. Although individual calf weights will be lighter, total calf weight based on calves produced per acre will be greater, resulting in more total pounds of calf.

Third, recognize the importance of good bull selection using technological advancements that improve accuracy. Generally, keep expected progeny differences (EPDs) above the 50th percentile within the desired traits and breed. As matter of practicality, become comfortable with bulls that are above the 50th percentile but may not exceed the upper 30th percentile for commercial production.

Fourth, recognize the value of breeding systems, maximizing the traits of interest in the terminal sire program while balancing appropriate traits on the maternal side. Let the cow save you money and the bull make you money.

At the center, 1,100- to 1,300-pound cows bred to bulls above the 50th percentile for growth and marbling and in the upper 10th percentile for rib-eye area have an advantage of $26 per acre of ranchland over traditional cows. The calves are summered on forage, and after a short feedlot stay, they are harvested at an average weight of 1,450 pounds, with 94 percent at the “choice” grade at an average yield grade of 2.9.

The search for the next generation of cow-calf producers has a tremendous opportunity for success, provided some simple targeted goals based on real numbers are put in place. Efficient beef production starts when the bull mates with a cow and biological efficiency mates with economic efficiency.

And just like the majestic river that starts with a few raindrops and a small stream, beef production needs to start with the cow-calf producer. Fishing in the big river may catch some big fish, but do not let fishing tales run the operation.

For new cow-calf producers, the single biggest mistake made is the tendency to work hard physically and set aside the homework. Each cow-calf enterprise is a unique business, and businesses need records. Focus, listen and learn.

May you find all your ear tags.

You Might Be Cell Grazing If…

by Dave Pratt

A lot of ranchers use some kind of grazing rotation. Very few do it in a way that has even a 50/50 chance of improving the health of the land, the performance of their cattle and the profitability of their businesses.  There are so many names attached to various rotations, it is hard to know from the name what people are doing. Cell grazing is not a grazing system, it is a management method based on 5 fundamental principles.

You might be cell grazing if…

  • You are using at least 10 paddocks per herd.  It takes a minimum of 10 paddocks just to stop the overgrazing.  14-16 are required to support decent animal performance and it’ll take 25 or more if you want to see rapid range improvement.   Ranchers using fewer than 8 paddocks are not rotationally grazing. They are rotationally overgrazing.
  • You have combined several herds into one.  The fastest, cheapest way to create more paddocks per herd is to combine multiple herds into one.
  • You have reduced your workload. It takes a lot more time to check 4 herds of 200 cows than it does to check one herd of 800.
  • Productivity per acre has improved without sacrificing individual animal performance.  Many people using grazing rotations increase output per acre but find that individual performance suffers.  Cell graziers keep graze periods short and animals moving frequently to fresh forage. This tends to keep performance high.
  • You’ve dramatically increased the productivity of your pastures and the carrying capacity of your ranch without seeding or fertilizing pastures. Many Ranching for Profit School alumni have doubled the carrying capacity of their ranches while reducing labor and input costs.

 

You aren’t cell grazing if…

  • Someone asks you how long your recovery periods are and you tell them how often you move the cows. I’m continually surprised by the number of people who describe their grazing practices by explaining the length of their graze period when it’s the rest period that is most important.  The single biggest mistake most people make in grazing management is providing too short a rest period.
  • You use the same recovery period year round.  In cell grazing the recovery period is matched to the growth rate of the pasture.  Since growth rates change, the length of recovery periods needs to change too. Slow growth, long recovery.  Fast growth, shorter recovery.
  • Animals are moved from one pasture to the next in lock-step fashion.  In cell grazing, if a paddock isn’t ready for grazing, the animals should not be moved there.  The animals ought to be moved where the resource dictates they go.
  • You have increased your use of herbicides, fertilizer, seeding or fire.  These tools aren’t bad per-se, but they can have more negative consequences than positive ones.  Cell graziers usually don’t find herbicides, fertilizers or seeding necessary and many have dramatically reduced the need to burn.

Responding to a survey we included in last week’s ProfitTips, reader’s answers revealed several important trends. For example, people reporting that carrying capacity increased “A lot”  used an average of more than 30 paddocks/herd. Readers reporting “A little” increase used an average of 20 paddocks/herd, and those reporting no increase used an average of 10 paddocks per herd. The same trend held true for improvements in pasture quality, animal performance and profit.

 

Your responses also revealed several differences in the grazing practices used by Ranching For Profit School alumni v. non-alumni.  The key differences are:

While more than 60% of RFP alumni completing the survey use at least 14 paddocks per herd, only 40% of non-alumni use that many.

 

RFP alumni reported that the average recovery they gave paddocks during fast growth was two to four weeks longer than the rest periods used by people who have not attended the RFP school.  The difference was even greater during slow growth. The average recovery period used by RFP alumni averaged one to two months longer than the recovery periods used by non-alumni.

 

Most interesting to me is the difference between RFP alumni and non-alumni in the change in workload.  RFP Alumni using 30 paddocks or more were four times more likely than non-alumni to report that cell grazing dramatically reduced their workload. Non-alumni using an equal number of paddocks were twice as likely to report a dramatic increase in their workload.

 

The most dramatic decrease in workload was reported by RFP alumni using more than 50 paddocks per herd. Why would the workload decrease for alumni using that many paddocks?  The majority had also timed the breeding season of their livestock to match the breeding season of wildlife, thereby drastically reducing or eliminating the need for hay. Fewer non-alumni had the breeding season of their herds in sync with the forage cycle.

Depreciation – Take a close look…

Quoted from Pharro Cattle Company…

I’m not a depreciation expert either.  However, I AM a recovering ag banker and have dealt with depreciation in one form or another for 20 years.

Steve, you are correct when it comes to “tax” depreciation, which is what most farmers think of when they hear the word depreciation.  You need to have purchased a depreciable asset in order to claim the depreciation.  A raised heifer that peaked in value as a second-calf cow at, say, $3,000 and is now worth only $1200 as a butcher cow has generated no depreciation for income tax purposes.

That’s not to say she didn’t cost you that money.  As Charlie correctly points out, selling animals at or near their peak value is a great way to avoid “real world” depreciation, which is the loss of value as an asset ages or is used up.  And as he says, that number is not given a great deal of thought by many producers today.

Accrual accounting is a wonderful tool for cutting through the mess that is often caused by accountants and producers looking to limit tax liability.  It can be complicated and requires that a producer be honest with himself, which is not always the easiest thing to do.  But it can also create some good surprises.

I used accrual accounting exclusively when I was a banker.  While I learned this method at Farm Credit training school, I was surprised that very few bankers did this in the real world, because it takes digging pretty deep in a balance sheet as well as a tax return.  I soon discovered that even bank examiners didn’t have a firm grasp on the concept, which pretty much allowed me to BS my way through many exams!

If you do a good job filling out a financial statement on the same day each year (January 1st works great for those of use who are on the typical year tax cycle) and you are honest with yourself about the value of all your assets, including hay on hand, prepaid expenses, stockpiled forages, and capital assets, you can identify good and bad trends in your business long before your neighbors, no matter what the Schedule F says.

Consider this example:

Rancher A has a five year average Schedule F profit of $100,000, with tax depreciation of $50,000 a year.  He has a herd of 200 cows that he bought five years ago and annually bought enough bred heifers to replace his open cows.  He has a full line of newer machinery that he spends $50,000 a year on between payments and updates.

His “real world” depreciation is probably somewhere around $70,000 to $90,000 a year.  $50,000 of that is due to equipment depreciation, and his cow herd is dropping at a rate of $100-$200/cow/year due to aging.  To handle that depreciation, he has $150,000 in profits (Schedule F plus the depreciation), so he’s left with something in the neighborhood of $60,000 to $80,000 to feed his family and grow his business.

Rancher B has a five year average Schedule F profit of $150,000, with tax depreciation of $0 a year.  His herd of 200 cows was raised, and he has a full pipeline of heifers each year.  Rather than selling steers and heifers, he sells steers, a handful of open cows, and a large number of 4 and 5 year old bred cows.  His equipment line is smaller, older, and depreciated out.  He doesn’t even use most of it.

On an accrual basis, we can see that rancher B has no real depreciation, and actually has APPRECIATION.  His cow herd maintains its value year after year because it is not aging, and as cattle prices have increased over the last five years his average animal is worth $500/head more than it was 5 years ago.  This averages out to an gain of $100/head/year, or $20,000 for him.  This, added to his income, gives him $170,000 to feed his family and grow his business.

Driving by these two operations, one would be fairly certain Rancher A is better off.  He has nice equipment, after all.  Digging deeper, you can see that he is barely feeding his family, while Rancher B is poised to grow his business.  Granted, this is a pretty simplistic example, but I can assure you that accrual adjustments make a world of difference for many operations.

What Does Size Matter?

Cow and calf sizes: A lesson in basic cow economics….

A big question for many cattle producers is how to make their operation more profitable.

“Cow-calf producers tend to operate on a fixed land/feed base associated with a substantial overhead cost in annual rents and finance payments,” says John Dhuyvetter, North Dakota State University (NDSU) Extension livestock systems specialist at the North Central Research Extension Center near Minot.

Key profitability drivers are the production of as many pounds of calf as possible to sell off the resource (land/feed) and capturing favorable market prices, he notes. Factors that contribute to the pounds produced are the calf crop percentage (low calf losses equate to more calves to sell), cow longevity (lower heifer retention equals more producing cows), calf weights (which are a function of genetics, age, and nutrition), and stocking rate.

For the operation to be sustainable, the forage resource is limited in pounds and the animals it can support. Opportunities are available to enhance production through grazing systems and management that improves soil and moisture retention.

However, while simply overstocking and overutilization may improve output in the short term, they likely will diminish output through time. On a fully utilized land/feed resource, even selecting cows for added calf growth and weaning weights likely will not improve profitability.

“From a feed equivalency standpoint, differing numbers of cows of varied sizes weaning calves of different sizes generate the same market weight,” Dhuyvetter says.

For example, 88 frame score 4 cows each weighing 1,200 pounds and weaning 550-pound steer calves at seven months have roughly the same feed need and generate the same market weight as 75 frame score 7 cows each weighing 1,500 pounds and weaning 650-pound steer calves. The feed needs are similar for 83 frame score 5 cows each weighing 1,300 pounds and weaning 585-pound steer calves, and 79 frame score 6 cows each weighing 1,400 pounds and weaning 620-pound steer calves. With selection for higher milk production, which may increase weaning weight, stocking rates will be reduced further.

“If reproduction, calving loss, culling rate, and market price are the same, there is no advantage to any size group,” Dhuyvetter says.

“If, however, there is some adaption advantage, as seen in maintaining body condition, leading to better breed-back and calf survival, by some type or size group, an economic efficiency exists. Similarly, if the market discounts prices for some weight/size combination, that group will be economically disadvantaged.”

The market generally slides prices, paying more per pound for lighter calves; however, this may not reflect true value differences for some heavier calves capable of greater feeding efficiency and carcass value, he notes. That being the case, somewhat smaller calves appear to be favored until calf prices become discounted.

Along with the consideration of cow and feeder calf size is the potential value of the terminal crossing of larger sires with moderately smaller cows to maintain high cow numbers capable of producing greater weaning weight of greater market preference. An example is mating bulls with acceptable calving ease scores and a frame score of 6 to frame score 4 cows and providing supplemental feed (creep) if necessary to add growth.

“Decades of selection for greater growth and size have been associated with improved efficiencies in the feedlot and packing sectors,” Dhuyvetter says.

“It also has resulted in larger, more productive cow types on the ranch, which may or may not be more efficient.

“Cow requirements need to be matched to and met by ranch resources to avoid costly excessive inputs,” he adds.

“It’s about achieving lots of weight to sell at favorable prices from a herd of cows of moderate size that are capable of producing a high calf crop percentage with minimal culling.” — NDSU Extension