Enterprise Analysis, Cattle Cycle, and Risk Protection

Question 1

What is systemic thinking?

Answer 1

Looking at managing a beef operation as web of variables.

Question 2

What is linear thinking?

Answer 2

Looking at managing a beef operation as a set of steps that ignores multiple variables.

Question 3

What are the 2 ways of looking at profit?

Answer 3

1. Loss= income-costs.
2. Loss= (pounds x price)-costs.

Question 4

True or False: Maximum production equals maximum profitability.

Answer 4

False.

Question 5

What is beef profitability a result of?

Answer 5

1. Production efficiency (cost of production).
2. Commodity w/ no shelf life.
3. Price received for the product.

Question 6

What are beef cattle producers when it comes to prices?

Answer 6

They are price takers.

Question 7

What happens if beef supply is less than demand?

Answer 7

Prices are high.

Question 8

What happens if beef supply is higher than demand?

Answer 8

Prices are low.

Question 9

Is raising beef cattle always profitable?

Answer 9

No, sometimes you need to lose a little money to stay in business.

Question 10

What weight do beef steers finish at? Heifers?

Answer 10

1. 1200
2. 1100 w/ 0.4 in backfat.

Question 11

What are producers paid on?

Answer 11

1. Live basis.
2. Carcass basis.

Question 12

What are the main costs on a feedlot?

Answer 12

1. Feed.
2. Feeder calves.
3. Labor.
4. Death loss.
5. Taxes.
6. Insurance.
7. Interest.
8. Utilities.
9. Veterinary.
10. Repairs.
11. Facilities.
    *3-11 are mostly fixed costs.

Question 13

What is the formula for breakeven price in final weight of fed cattle?

Answer 13

(Breakeven price/per cwt live) = (Cost of feeder cattle + feed cost + non-feed costs/Estimated final weight of fed cattle).

Question 14

What is the formula for breakeven price in carcass weight of fed cattle?

Answer 14

(Breakeven price/per cwt live) = (Cost of feeder cattle + feed cost + non-feed costs/Estimated carcass weight of fed cattle).

Question 15

What are most feeder calves?

Answer 15

Pre-conditioned calves (weaned, immunized, feed bunk and water tank trained).

Question 16

Why do pre-conditioned and yearling calves cost more?

Answer 16

They have a lower morbidity and mortality.

Question 17

What is critical to think about when running a cow-calf operation?

Answer 17

Profitability.

Question 18

What % of cow-calf producers nationally calculate cost of production?

Answer 18

5-10%.

Question 19

What are the ways to determine profit in a cow-calf operation?

Answer 19

1. Loss= income-costs.
2. Loss= (pounds x price) - costs.
3. Loss= [(lbs. market cows and bulls) x price] - costs.

Question 20

What is the breakeven price for annual cow crop?

Answer 20

Breakeven price = Annual cow cost/ Weaning wt. x % calf crop

Question 21

What is the breakeven price for annual cow crop with culls sold?

Answer 21

Breakeven price = Annual cow cost-value of culls sold/ Weaning wt. x % calf crop

Question 22

What is the majority of the cost from cow-calf

Answer 22

Food (Feed, Hay, Pasture).
*2/3 of costs.

Question 23

Are weaning weight and profit correlated?

Answer 23

No.

Question 24

What are standardized performance analysis models performed on cow-calf operations?

Answer 24

1. Standardized cow-calf enterprise production analysis system.
2. Financial performance analysis system.

Question 25

What is standardized performance analysis defined by?

Answer 25

The Cow-Calf Financial Analysis Subcommittee of the National Integrated Resource Management Coordinating Committee of the National Cattlemen's Beef Association (NCBA).

Question 26

What does standardized performance analysis facilitate?

Answer 26

Comparisons of an operation between years, producers, production systems, production regions.

Question 27

What are the top 5 ways high return producers reduce cost?

Answer 27

1. Reduce harvested and supplemental feed cost. 2. Use rotational grazing and better pasture management. 3. Use the right genetics. 4. Reduce labor costs. 5. Implement a strong herd health program.

Question 28

What are the smaller expenses at cow-calf operations?

Answer 28

1. Fuel. 2. Machinery. 3. Repairs. 4. Supplies. 5. Utilities. 6. Taxes.

Question 29

What does more cattle equal?

Answer 29

Less operating costs.

Question 30

How many packers harvest 85% of steers and heifers?

Answer 30

4.

Question 31

What does the economics of the beef industry look like?

Answer 31

Periodic peaks and valleys in beef cattle number and prices.

Question 32

What changes cause peaks and valleys in the beef cattle industry?

Answer 32

1. Profitability. 2. Weather.

Question 33

What are the reasons for wide price swings in the beef cattle market?

Answer 33

1. Biological time lag (reproductive). 2. Carcass weight (Cattle are kept longer when prices drop and sold earlier when prices increase). 3. Drought. 4. Lower calf crop. 5. Percentage. 6. Competitive prices. 7. Grain prices. 8. National economics. 9. Global economics.

Question 34

What % of calves are born in spring (February, March, April)?

Answer 34

56%. *Increases to 70% if January and February are included.

Question 35

What is the result of the majority of the claves being born in the spring?

Answer 35

Seasonal variations in feeder and fed cattle prices.

Question 36

What is forward pricing?

Answer 36

An agreement between buyer and seller for the purchase of cattle at a predetermined date, number of cattle, kind of cattle, delivery location, delivery date.

Question 37

What is a future contract?

Answer 37

A standardized contract that specifies the commodity, quantity, quality, delivery point, and delivery date.

Question 38

What are the size of live (fed) cattle contract?

Answer 38

40,000 lbs., 70% choice and 30% select.

Question 39

What are the size of feeder cattle contract?

Answer 39

50,000 of 700-899 lb. medium and large frame #1.

Question 40

What are the contract months for live (fed) cattle?

Answer 40

All months.

Question 41

What are the contract months for feeder cattle?

Answer 41

Jan., Mar.-May, Aug.-Nov. .

Question 42

What are the delivery points for live (fed) cattle?

Answer 42

Approved livestock yards.

Question 43

What are the delivery points for feeder cattle?

Answer 43

Cash settled to the CME with a composite weighted average price for feeder steers.

Question 44

What is the price in the futures market determined by?

Answer 44

The exchange as brokers execute, buy, and sell orders.

Question 45

What other method of buying and selling cattle is the futures market tied to?

Answer 45

Forward contracts, it is a way of exchanging them.

Question 46

How do futures and options help producers manage risk?

Answer 46

1. Allows them to lock in profits. 2. Allows for enhanced business planning. 3. Helps facilitate financing.

Question 47

What is hedging in the futures market?

Answer 47

Entering into a contract to sell cattle and either go through with the contract (if price stayed the same or decreased) or buy back the futures contract at the agreed price and relist the cattle at the current (higher) price.

Question 48

What are options on the futures market?

Answer 48

Having the right, but not the obligation to buy/sell a futures contract at a specific price on or before an expiration date.

Question 49

Who should be consulting before engaging in the futures market?

Answer 49

A professional broker.

Question 50

How does someone get into farming in general?

Answer 50

1. Inherit it. 2. Marry into it. 3. Get an "ag adjacent" job (ear to the ground and in the industry environment), start small, and grow.