Analyzing Financial and Production Performance

1. Analyzing Financial and Production Performance

2. Why Evaluate Business Performance? • Make informed decisions

3. Kinds of Analysis • Production • Whole farm • Individual enterprises • Specific herds, pens, fields • Financial • Whole farm • Individual enterprises • Specific herds, pens, fields

4. The Basis for Sound Analysis • Accurate records • Calculation of standard measures • Regular performance analysis • Multiple years to verify progress

5. Production/Reproduction Data • Cattle inventory • Breeding • Pregnancy testing • Calving • Weaning (steers, heifers, bulls) • Number of females exposed • Adjustments for transfers • Death loss • Replacement rate • Date of production cycle • Entire production cycle

6. Spring – Calving Herd Inventory Beginning Inventory Ending Inventory Bulls Cows 2-Year Old Heifers Yearling Heifers Calves Cow/calf Timeline

7. Performance Production/Reproduction Measures • Pregnancy percentage • Calving percentage • Calf death loss • Calf crop or weaning percentage • Actual weaning weights • Pounds weaned per exposed female • Breeding season length

8. Why Is Standardization Needed? Calving percent? 81 calves / 96 cows = 84.4%

9. Financial Data • Tax reports • Financial statements • Balance sheet (cost and market) • Cash flow • Income statement (accrual) • Other financial records

10. Financial Performance Measures • Financial cost of production per cow and per cwt • Economic cost of production per cow and per cwt • Net income • Investment per breeding cow • Return on assets • Return on equity

11. Standardized Performance Analyses Financial Records Cash records: tax reports, financial statements, Quicken Accrual Adjustments Cow-calf SPA Production Records

12. Production Performance Percent NM-TX-OK, 2009-2013

13. Production Performance NM-TX-OK, 2009-2013

14. Differences between the most and least profitable herds?

15. Weaning Percent Profitability Groups NM-TX-OK, 2009-2013

16. Average Weaning Weight Profitability Groups NM-TX-OK, 2009-2013

17. Pounds Weaned Per Exposed Female Pounds Profitability Group NM-TX-OK, 2009-2013

18. Capital Investment Per Cow(Cost Basis) Profitability Group NM-TX-OK, 2009-2013

19. Cost of Production ($/Cow) Profitability Group NM-TX-OK, 2009-2013

20. Production Cost Dollars 764 750 Profitability Group Excludes depreciation, operator labor, interest on investment. Kansas Farm Management Association, 2014

21. Cost of Production ($/LbWeaned Per Exposed Female) Dollars Profitability Group NM-TX-OK, 2009-2013

22. Return on Assets (%), Market Value Profitability Group NM-TX-OK, 2009-2013

23. Differences in production and financial statistics for small vs. large herds?

24. Pounds Weaned Per Exposed Cow Pounds Number of Head NM-TX-OK, 2008-2012 *Series discontinued after 2012

25. Production Cost Dollars Number of Head NM-TX-OK, 2008-2012 *Series discontinued after 2012

26. Net Income ($/Cow) Dollars Number of Head NM-TX-OK, 2008-2012 *Series discontinued after 2012

27. Moral of the Story…. • Production is important… • Marketing is important… • Controlling costs is critical!

37. So What?

38. Ten Pieces of the Puzzle • Minimize investment in depreciable assets • Monitor and control feed expenses • Don’t overstock grazing land • Adopt production practices that maximize potential for high market prices • Separate business and personal expenses

39. Ten Pieces of the Puzzle • Have a controlled breeding system • Use sound herd health practices • Don’t spend money to save a dollar in taxes • Evaluate land purchases carefully • Develop an integrated system approach

40. Management Is an Ongoing Process Planning Control Implementation

41. Value of Performance Measures Measure, then manage… • Determine profitability of the operation • Identify areas where the business has excelled • Identify opportunities for improvement

42. Keys to Successfully Using Financial Measures • Develop measures annually • Be consistent in how the measures are developed • Note reasons for “unusual” measures • Use information to identify areas for improvement

43. Ten Commandments for Farmers/Ranchers • Focus on financial management as much as production performance. • Count your cows (and other assets) at least annually. • Keep your lender happy. • Code your checks, sort your expenses for enterprise accounting. • Develop a record-keeping and information system that supports your decisions.

44. Ten Commandments for Farmers/Ranchers • Pay taxes as often as possible. • Don’t expect too much from your cows. • Never stop learning. • Go slowly when attempting new things. • Match the livestock and crop enterprises to the land resource.

45. Other Farm Management Resources • Budget templates • agecon.okstate.edu/budgets/ • Livestock lease agreement spreadsheet • Aglease101.org or beefextension.com • Publications • Osufacts.okstate.edu

46. Options for Additional Business Planning Credit

47. Earning Additional MC Business Planning and Management Credit • Take quiz (and pass) • Quicken workshop • Whole-farm plan and enterprise analysis with IFMAPS assistance • SPA workshop • More slide shows and exercises

48. Quicken Workshop • Personal financial record-keeping software adaptable for ag use • “Hands on” computer workshop • 3 hours • Step-by-step instruction manual • www.agecon.okstate.edu/quicken

49. Intensive Financial Management and Planning Support (IFMAPS) • Free, confidential one-on-one assistance in developing a customized farm/ranch plan • You gather records; we enter in software and help analyze • 1-800-522-3755 • http://agecon.okstate.edu/ifmaps/

50. Cow/Calf Standardized Performance Analysis Workshop • Bring financial and production data to workshop • Production cycle • Begins when all breeding age females are exposed to bulls • Ends when calves are weaned • Work privately with individual assistance to enter data in TAMU SPA software • Print out preliminary reports • Individual consultations • Discuss data follow-up needed