Is your beef production operation efficiently run? These 4 numbers will tell you yes or no.

Production Record Keeping 101

By Larry Stalcup

Production records, whether they're kept in an IRM Red Book or via sophisticated cattle software, are likely just as important as financial records for beef producers eager to increase their efficiency.

Information is power when it comes to measuring the success of a cow-calf, stocker or feeding operation. From details about your beginning-of-the-year inventory to weaning rates and weights in the calf crop, production records are essential if a ranch is to maximize its profitability, says Stan Bevers, Texas AgriLife Extension beef cattle specialist in Vernon.

Bevers, among AgriLife's leaders in managing the Beef Cattle Standard Performance Analysis (SPA) program, says good data in all phases of an operation is important. "The end goal is for producers to take the data and turn it into information they can use to make decisions on their herds and land use," he says.

Bevers encourages producers to divide information between production and financial data. "One number you'd think would be common sense for producers [to always document] is their Jan. 1 inventory of all cattle," says Bevers. "But many don't. To determine what the costs are per cow, [the Jan. 1 inventory] is the ‘number' I use as the divisor.

"They may think they might have a good inventory total, but don't. They can't rely on their tax accountant and the depreciation schedule to determine inventory. Unless the cows were purchased, they traditionally don't show up as depreciations. So a true inventory is information every producer should have."

Bevers says many producers pregnancy check their herds, but don't keep close records. "Some don't write down the numbers on how many cows are bred and how many are open," he says. "You need to know how many calves hit the ground, as well as how many are weaned.

"Those 4 sets of numbers — the Jan. 1 inventory, the number open and bred, calves that hit the ground and the number of calves weaned — tell you a lot about production and efficiency. Those figures are probably the [minimum] information needed to gauge efficiency."

The Cadillac production plan
This more advanced plan involves a monthly inventory of all ins and outs of a herd. Here's a breakdown of information Bevers says producers need to record in a detailed cattle production plan:

• Record all related production information, including the size of the herd, cull rates, weaning rates, weaning weights, rates of gain, purchase price, sales prices and other information.
• Information should be recorded on a worksheet detailing inventory numbers, calf crop, sale weights, expected replacement costs and sales prices, costs of production, cattle transfers, feed requirements and historical production records. Livestock numbers are fluid throughout the year, with births, deaths and transfers into and out of the production system.
• Information on the expected calf crop, calving percentage, death loss and retain/cull inventories is also important. The expected sale weights for various classes of cattle are needed and can be estimated using production records and previous year's sales tickets.
• Expected purchase costs for replacement heifers or other cattle, including the type, caliber and location of the replacements are needed.
• Expected sale prices for classes of cattle can help provide a basis for estimating revenue.
• Expected costs for veterinarian/medicine, marketing, minerals and transportation should be recorded on a per-head basis. Costs of supplemental feed requirements, including all purchased hay, grain or protein supplements, should also be included.

Bevers says information for production plan worksheets will help producers "refine their projections for planning in future periods and insight into market price trends."

He notes that a monthly production calendar can be used to identify labor and management tasks and periods of critical business activity.

"One way to begin construction of a production calendar is to print a monthly cash flow report from a previous year," says Bevers.

"Income items typically have associated livestock and crop sales activities, or transactions that required some type of management activity. Likewise, large expense transactions typically reflect either anticipated management activities or utilization of production inputs that also document some level of activity.

"A review of these items from the monthly cash flow report can help to identify the underlying management and production activities that were associated."

Cash flow timing summary
This document can help determine monthly income and direct-expense flows and show the monthly percentages of total income and direct expenses for the year.

"This type of information is useful to examine financial resources available and demands upon those resources for a given production plan during the calendar year," says Bevers. "An examination of cash flow timing enables management to prepare for periods when expenses are expected to accrue before revenues are realized.

"It also allows management to project how alternative enterprises or changes to the production plan might affect the timing of revenues and expenses."

Of course, good financial records, such as profit and loss (P&L) statements, are imperative in helping producers gauge their actual profit. Along with production records, this will help satisfy questions ag lenders may have about the operation, and whether or not the producer qualifies for an operating loan or other lending needs.

"Financial numbers are all over the board for what people are doing," says Bevers. "If you don't have a detailed P&L statement, you'll spend more time trying to figure out production."

Financial records on cattle marketing, including risk management or hedging strategies and costs, will also help producers explain their business practices to lenders and could even help them receive a lower-interest loan, says Bevers.

Good records on risk management may also help in convincing the IRS that a particular transaction was a legitimate hedge and not speculation. Also, receipts for equipment and other purchases may be gold when it comes to business expense deduction claims made on IRS Section 179 forms.

Bevers adds that in examining their production numbers, producers should consider various factors that may have impacted production, including the weather. "If your weaning weight is 350 to 400 pounds, ask if that's from a dry year," he says. "If it was wet and you had plenty of grass, you need to be at 550 pounds. Otherwise, you're fighting against nature or you're breeding too late in the year."

Bevers suggests that producers compare their data to the SPA reports on the Internet. "SPA is a benchmark for your geographic area," he says. "Look at the SPA average and compare your numbers to the standard. That's what I hope people do with their production numbers."

For more on record keeping, SPA and other information on data needed to enhance your herd management, go to agrisk.tamu.edu. Look to the upper right of the page and click on your choice of:

• Beef Cow-calf SPA Ranch Economics and Analysis
• Stan's Charts
• Developing Business Plans for Agricultural Producers

For more information on SPA, visit thecattlemanmagazine.com, click on Archives and navigate to the 2009 SPA Series.