Calculating Your Own UCOP
Introduction 3
TI E pDl
by
Harlan Hughes
Cattle Economics by Harlan Hughes Professor Emeritus North Dakota State University Calculating Your Beef ICow Herd's Unit Cost Of Producing A Hundredweight Of Calf UCOP A statistical analysis of my Northern Plains 1 990s beef cow Cost & Return Database suggests weaning weight only explained 20% of the herd to herd variation in beef cow profits. This, in turn, suggests that 80 percent of the herd to herd variation in profits has to be attributed to something other than weaning weights. This same statistical analysis suggested that unit cost of producing a hundredweight of calf UCOP goes a long way towards explaining the remaining herd to herd variation in profits. The problem, as I see it, is that most ranchers do not even measure their UCOP. A rancher can not manage what he does not measure. The goal of this
A Jati. I Nuniber of Beef Cows Jan. 1 Number of Replacement Heifer Calves SPA Adjusted Females Espoaed to Bull Last Year seo Shoa r for oorkoh005 Live Calves Born Live Calves Weaned Steers 84 Heifers 72 Bulls 0 Number of Cows Replaced Number of Cows that Died Calves that Died Percent Calf Crop Replacement Rate Cow Death Loss Calf Death Loss Herd Growth Rate 188 31 Unit Costs of Producing a Hundred Weight of Calf
SECTION 1: Production Profile
Cattle Economics article is to introduce a series of articles on how ranchers might go about measuring their herd's UCOP. I will focus on
B
C D E
173 168 156
F G H I K L
25 2
8
90.2% 15.1% 1.2% 7.1% 2%
Figure 1: Example Production Profile Input Data. Page -1-
my introductory system entitled the IRM-FARJ'1S System. For more details on the availability
of this system to ranchers, see www.WesternEdgeConsulting.blogseot.com. 1. Production Profile The data used here is from my 2005 Demo Herd producing 2005 calves. I have the producer's pennission to present this data to my readers but the name has been withheld. All UCOP numbers should be based of the Jan 1 beef cow inventory numbers held for calving that year item A along with the number of Jan 1 virgin replacement heifer calves item
B being held for ftiture replacement heifers. Reproductive performance, based on the National
IRM Standards, should be based off of the females exposed in the previous bull turnout date item C. Item D is the number of live calves born and Item E is the number of steer and heifer calves weaned. Item F is the number of cows culled that year. Items G and H are the number of cows
Unit Costs of Producing a Hundred Weight of Calf
SECTION 2: Gross Income
Herd Number
1 2 3 4 5
Steer Calves Heifer Calves Cull Cows Cull Replacement Heifers Cull Bull
TOTAL NUMBER IN HERD
Avg Wt 557 526 1100
Amount 86 46 21
Units/Lbs
lbs lbs lbs
Price/Lbs
$1.23 $1.17 $0.48
Total
$58,919 $28,309 $11,088
1000 1800
Beciinninci
4 1
158 Ending $166,140
lbs lbs
$0.80 $0.56
$3,200 $1,008
6
Inventory Change
`Sheet 2" for worksheet
see
$162,145
$3,995 $106,520 $642 5.22
7 8 9
Total Gross Income see sheet2 worksheet Gross Income/Cow Total Income/Cow equal to # of Cwt of Steer Income Price Received per Hundred Weight of Steer Calf Sold
$123.00
Figure 2: Gross Income Calculations Page -2-
and calves that died respectively during the year. This herd profile requires a rancher to count females 2 times per year
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at bull turnout date and again on January 1 of each year. Items I, J, K,
L, and M are calculated numbers. 2. Gross Income The yellow boxes are the herd's input numbers needed to calculate the gross income for the herd. Eighty-six steer calves averaging 557 lbs after shrink were sold for $1.23 per lb. after selling commissions were taken out. Twenty-six heifer calves were held back for future heifer replacements leaving 46 heifer calves that were sold averaging 526 lbs. and selling for $1. 17 per lb. Twenty-one 1100 lb cull cows were sold for $0.48 per lb. Four 1000 lb. open replacement heifers were sold for $0.80 per lb. One 1800 lb. cull bull was sold for $0.56 per lb. A true economic profitability analysis takes both cash sales and inventory adjustments into account. In this example, the herd's beginning inventory was valued at $162,145 and ending inventory was valued at $166,140 giving an inventory adjustment of a positive $3,995 This
.
positive inventory change was added to the annual gross income figure item 6 giving the herd's total gross income at $106,520 item 7. This calculates out to $642 gross income per cow in the Jan 1 inventory item 8. The beef cow profit center produced six different products
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steer calve, heifer calves, cull
cows, cull bulls, cull open heifers, and inventory adjustments. The key to calculating UCOP is to express the income from these six different products with a single composite number. We generate this composite number by dividing the total gross income per cow $642 by the market price of a cwt of steer calf $123 and express the total gross income in terms of hundredweights of steer equivalents 5.22, item 9. This 5.22 number is used throughout this system to calculate Page -3-
__________ ____________
the unit costs of producing a hundredweight of calf UCOP for this herd. Item 10 is just the steer sale price of a cwt of steer calf 3. Feed Costs In the economic analysis, we use the local going pasture rent to calculate the opportunity cost of your cows grazing the pastures. Deeded pasture rent can either be $/AUIM times AIJIMs/cow or $Rent/Acre times Acres/Cow. Public land costs are the total dollar value of all fees paid for public lands item 12b.
Unit Costs of Producing a Hundred Weight of Calf
SECTION 3: Feed Cost
Total per Cow $100.00
AUM/Cow Pasture -- Going Rent + Opperating Costs 10.00 $/Herd 12a Public Lands
$/AUM $10.00 #HEAD
Total $16,600 Total*
$0.00
1
Total Tons 12b Protein 1.00
$/Ton 828
Total $828.00 $4.99
Pasture maintenance
1200.00 AMT 398 399 11
1 $/UNIT $78.09 $1.90 $266.00
$1,200.00 Total $31,080 $758.10 $2,926.00 $53,391.92
$7.23
Grain/Hay Grain Salt & Mineral 0.19 LBS/Day TOTAL FEED COSTS TOTAL FEED COSTS/ CV
$187.23 $4.57 $17.63 $322
Figure 3: Feed Costs For The Demo Herd.
There are 4 flexible feed cost fields that can be used to input the winter feeding program Page -4-
items 12b through 15. Farm-raised feed cost should be based on the local market price of feeds fed
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not your costs of producing the feeds. Item 16 is used to input the tons of salt and mineral
fed plus the cost per ton. Items 1 6A and 1 6B summarize the annual feed bill for this herd. The demo cow herd had a $322 feed cost per cow or $62 feed costs per hundredweight of calf produced. 4. Livestock Costs Many of the livestock cost can be obtained from your Income Tax Form 1040F. Be sure to pick up only the beef cow portion of these costs. Item 17, Figure 4, is the total beef cow herd's share of the vet and medicine bill. Breeding
+
Al item 18 is your total annual bull depreciation costs with any Al costs added in. Marketing
Unit Costs of Producing a Hundred Weight of Calf
SECTION 4: Livestock Cost
$IHD $21.00 $14.06 $8.58 _%/Cow 14% Total xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx $/HD $250.00 $3,486.00 $2,334.00
Per Cow $1,424.00
$21.00 $14.06 $8.58 xxxxx $35.00 $0.00 $0.00 $13.30 $6.60 0.00 $9.49 $31.63 $133.05
17 18
Vet& Medicine Breeding + Al
I
19
Marketing/Trucking
20 Growing Co.st.s of RpI Heifer 21 a b Yardage & Paid Labor 22 Supplies & Utilities Fuel $1,096.00 23 !nteret on Oper. Capital 24 Interest on Borrowed Cap 25 Interest on Pasture Land Bor 26 Total Livestock Costs $/Cow 26 a 26b Returns Above Feed and Livestock Costs Break-even price per CWT to cover Direct Costs
xooox $5,810.00
$0.00 $0.00 $438.00
$/Herd $0.00 $22,500 $75,000 $0.00
$0.07 $0.00 $674.00
[
I
$0.00 $0.00 $2,208.00
xxxxxxxxxxxx
@% 8.25% 7.00% 7.00%
$0.00
$0.00 $1,575.00
$5,250.00 $22,087.00
Figure 4: Livestock Costs For Demo Herd. Page -5-
item 19 includes all marketing costs plus trucking costs. The growing costs of replacement heifers is always difficult to estimate so I generally fall back on some published North Dakota research that suggested that it cost around $250 to take a replacement heifer calf from weaning through preg-check next fall. I suggest that you use $250 to $300 for your heifer development costs. Preg-checked heifers are then transferred into the regular breeding herd. Item 21 is open for you to use as you see fit. Item 22 has two blanks
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one for livestock
supplies and the other for the beef cow share of the utilities. Fuel costs are for feeding the cow herd and checking the pastures in the summer has its own blank. Do not include fuel used to harvest farm raised feeds. Input blanks are available for annual interest on operating capital item 23, annual interest on borrowed capital for breeding herd, beef cow equipment, and etc. item 24, annual interest on money borrowed to purchase pasture land item 25, and two extra blank for miscellaneous costs item 26. This demo herd had $133 livestock costs per cow or $25.50 per hundredweight of calf produced. The herd generated $61.19 return above direct feed costs feed plus livestock costs. The breakeven market price to cover all direct production costs was $87.16 per hundredweight of calf produced.
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5. Overhead Costs In order to keep the capital asset data requirements at a manageable level, all overhead costs are calculated as a percent of the capital invested in each category see Figure 5.
Unit Costs of Producing a Hundred Weight of Calf
SECTION 5: Overhead Costs
27 28 29 30 Avg Breeding Herd Investment Buildings Beef Cows Only Equipment Beef Cows Only TOTAL OVERHEAD COSTS s/Herd $164143 $20,000 $15000 I
@_%
,
1.00% 7.00% 10.00%
Total $1,641 $1,400 $1,500
Per Cow $9.89 $8.43 $9.04 $27.36
Figure 5: Overhead Costs For Demo Herd.
Figure 6 presents the farm management profession's suggested DIRTI-Five thumb rules
Depreciation Interest Repairs Taxes ab Insurance DIRT! Factor Excluding Interest
a b
Buildings Ours Yours 5% 5.5% 1% % 1% 12% 7% % %
Equipment Ours Yours 10% 5% 2% % 1% 18%
13%
Cows Ours
--
Yours
10%
--
% 1% 11% 1%
-
%
% %
Land taxes are changed to the croplpasture profit centers and not to the cow herd. Property taxes vary from state to state so this number is left blank for users of this form to enter in their own property tax numbers.
Figure 6: Farm Management Thumb Rules For Annual Costs Of Capital Assets. Page -7-
that can be used to rapidly calculate overhead costs. DIRTI-Five stands for depreciation, interest, repairs, taxes, and insurance. Buildings, for this study, have a suggested DIRTI-Five factor of 7%, beef cow equipment at 13% and a raised breeding herd at 1%. If no raised replacement heifers are added into the herd, depreciation on the cow herd needs to be taken into account and the suggested annual DIRTI Five factor is 11%.
6. Calculated Profit & UCOP Figure 7 presents the Unit Cost Of Production Summary for this Demo Herd. Item 31 presents the total income on a per cow and per cwt of calf produced basis. Item 32 presents the total production costs on a per cow and per cwt of calf produced basis.
SECTION 6: Unit Cost of Production SUMMARY
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31 32
Total Income Total Costs Returns to Unpaid Operator Labor, Management, & Equity Capital Unit Cost To Produce A Hundredweight Of Calf
Per Cow $642 $482
Per Cwt $123 $92
160
$92
Figure 7: Cost & Return and UCOP Summary For Demo Herd.
Item 33 presents the $160 per cow earned net returns to this ranch family's unpaid labor, management, and equity capital on a per cow and per cwt of calf produced. Item 34 presents this herd's $93 unit cost of producing a hundredweight of calf UCOP. This $93 UCOP is Page -8-
calculated such that it can be compared directly to the market price for steer calves weighing 557 lb. A manual version of the IRM-FARIV1S System in available on the web at http :1/ag. arizona. edu/arec/wemc/cattlemarket/Deterrnining Econ Unit Cost. pdf
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