By John Yost
As a beef producer, you put a lot of effort into managing your production risk. Think of all the time you spend researching which bulls to use, developing and implementing your nutrition and herd health programs, shopping around for minerals, the time spent making hay or growing crops to feed in the winter. When you add all this up, it is probably a big number. All of this was done to produce the best product possible, at the lowest cost. After putting in all that work, the next question is how much time do you put into marketing your product and managing your financial risk? I can imagine that seed stock producers would say that it takes a lot of time to organize and advertise their sale. But how much time do you put into selling the animals that aren’t listed in the sale catalogue?
The cattle market has seen a lot of variability in the last 12 months. While profitable opportunities have been easier to find, it has also dramatically increased your financial risk. You probably have a consistent system that has served you well over the years. Are you confident that this system can protect you against this new level of risk? Furthermore, have you put in the effort to identify how to maximize the income potential from each individual animal? Sorting through all of your marketing options takes a well thought out plan and it is best if that plan put on paper. A written marketing plan isn’t a stringent set of rules that you are forced to follow set by step. Instead, it becomes a living document where you begin with a well thought out path to follow, where you document what you have done and why you did it that way.
The first step in any marketing plan is to know your numbers. This is your production estimates and cost of that production plus other expenses. Your production numbers should be easy to estimate from your historic averages. You know the number of calves you typically produce and what their average weaning weights should be. You expect to cull a certain number of cows and how many replacements will be retained to take their place.
Next is knowing your cost of production and other expenses that need to be included in your budget. I don’t want to put everyone in the same basket. I assume that most producers have a good understanding of their feed and other variable production costs, but do you have a handle on your fixed costs. Have you factored in a labor, machinery, and building charges? Have you allocated dollars to pay yourself, or pay for a family expense like college or a wedding? Are there facility improvements that you keep putting off that should be included. You can utilize the OSU Enterprise Budgets, FinPack software, or one of the numerous on-line calculators specific for your production practices to help you come up with your numbers.
Source : osu.edu