But, then I think, I have computer programs which have helped me keep records throughout the year and all I need to do is generate the information needed by the tax man from those programs.

In years past, preparing information for the tax man consisted of about a week of digging through files, pulling out receipts, invoices, etc., trying to organize them into some orderly system, then putting all that “stuff” in a shoe box, taking it to my tax man. He was usually not smiling when I put the shoe box on his desk. He knew there was a lot of work ahead of him!

Now, I go to my computer, open my CattleMax cattle software program on which I keep my cattle records, generate a cattle inventory for the end of the year, a death report, purchase report, and sales report. Then, I open Quicken®, in which I keep my financial records, and generate a register report –taxes, and what usually was contained in the shoebox in a somewhat disorderly mess, is in a neat file folder in just a few pages.

And, all that is done before receiving the 1099s, interest paid, interest income reports from banks, etc.

I don’t say I’m an expert at gathering information for taxes, but it sure is a lot easier these days than it was a number of years ago.

In relation to taxes, many cattle raisers, like myself, are small operators who have a hard time generating profit from the enterprise. The Internal Revenue Service seems to take a dim view of those who work full time at another job or profession, then try to claim their cattle operation is a for-profit enterprise. In an interesting article from Cattle Today, February, 2007, John Alan Cohan, Attorney at Law, offers tips for livestock owners for helping meet IRS guidelines.

Spring time calving
About the same time as “tax time,” comes spring calving for many cattle raisers, in fact, on my farm, located in west central Texas, “spring calving” begins in January. I know that is not true of more northern operations, but no matter where we’re located, preparations need to be made for those new calves.

Tom Troxel, PhD, University of Arkansas, offers a number of management tips for spring-calving beef herds in an article dated January 4, 2012. Click to read the full article, Tips for Spring-Calving Herds.

Are you prepared for the tax man and spring calving?

It is essential that the buyer have a clear focus on how the ranch is to be used and a business plan to guide the selection. A good business plan includes a mission and vision for the planned enterprise, production goals, necessary ranch characteristics and production capabilities and estimated operational expenses, income and profits. The plan also contains a list of needed equipment, buildings and other facilities and required personnel.  The business plan is compared with evaluations of available ranches to determine which property has the greatest possibility of producing expected performance. Results of the comparisons are used to estimate costs of needed improvements and renovations necessary to achieve desired production and in turn determine the true value of each candidate property.

The amount of existing nutritious palatable grass is a major decision factor in selecting a ranch for cattle production. A sufficient supply of standing forage is the most economical way to feed a cow and is essential for producing a profit. Research the area in which a prospective ranch is located. Learn how many stocking units a good pasture can carry while maintaining condition. Ask the owner of the prospective ranch for his stocking rate. What is the condition of his pastures? Do they have at least six inches of grass stubble height or have the pastures been grazed to the ground? If pastures have been abused, they will need two or three years of rest before they are grazed again. Depending upon the area, fertilization and reseeding may be required for pasture restoration. Abused pastures lower a ranch’s value and restoration costs should be considered before purchasing the property.

Obtain a description of a climax community for the area in which a prospective ranch is located. Compare a plant species inventory of the prospective ranch with the climax community description. This comparison provides the range condition and use history. If pastures have between 76 and 100 percent of the original plant community present, their condition is excellent. They are in good condition if 51 to 75 percent of the vegetation is climax plants and they are in fair condition if 26 to 50 percent of the vegetation is climax. If less than 25 percent of the vegetation is climax, the pastures are in poor condition. Professional range management specialists with the United States Department of Agriculture Natural Resource Conservation Service (USDA-NRCS), state university extension services or private consultant companies can evaluate pasture conditions if you are not trained in these techniques.

In addition to vegetation quality, evaluate pastures for shade and water availability. Cattle need shade whether it is trees or sheds and there should be enough shade to accommodate the total number of cattle in the pasture. Pastures should also contain a sufficient number of clean water sources. A cow should not be required to walk more than a mile for water.

After pasture evaluation, look at the facilities. Are the fences and corrals in good condition and in the right places for efficient herd management? Do the necessary buildings exist and are they in good condition? Are there roads that provide access to the ranch in all types of weather?

Ranch property should not be purchased until an evaluation of its production potential is completed.

Employing the correct number of people is only part of human resource management.  An operation can be more profitable if optimum production is obtained from each employee. This reduces the number of people required to operate the ranch and reduces payroll expenses. To obtain maximum manpower benefit, an employee has to possess the desire to produce and the employer has to create a job environment which encourages production.

The first step in resource management is to hire the right people. “Hire once, hire right,” recommended Bob Kilmer, manager of the Matador Ranch at Matador, Texas. Kilmer gave a presentation entitled, Considerations for Hiring New Employees and Day Workers, at the 2011School for Successful Ranching sponsored by the Texas and Southwest Cattle Raisers Association.

Kilmer suggested beginning the hiring process by writing a job description that explains the job, states what is expected of the employee and lists responsibilities in detail. Job descriptions are important for every employee including family members because they are the definition of the job. They help put employees and the employer on the same page. During interviews, the job description should be explained to a prospective employee so there is no misunderstanding of what the job entails.

“Require a job application and resume submittal before interviews are scheduled,” Kilmer said.  This information helps determine which applicants you want to interview and will provide background information on the people in which you are interested. Completed job applications and resumes provide a platform from which to conduct the interviews.

Make notes during job interviews for later use with job applications and resumes in further evaluation of applicants. Compare this information with the attributes you value in an employee.  Look at applicants in relation to SBOs – situation, behavior and outcome. How do you think each applicant will behave in certain situations? What will be the outcomes of their behavior?

“Ask multiple people to interview candidates,” stated Kilmer. Ask these people to use the same evaluation process and then meet to discuss each other’s views.  Make a job offer to the most qualified applicant based on information gathered during the meeting.

“Meet with every employee at the beginning of the year to develop a written document of the person’s role, responsibilities and expectations,” explains Kilmer. “The role is a description of the position and the functions that are to be performed by an individual. Roles will vary in number and types depending upon the person’s job. Responsibilities clearly define the products, service, assets or processes to be delivered by the employee. Expectations focus on desired outcomes and must be open-ended and challenging to expand the employee’s vision of contribution.”

Informal coaching and feedback on performance against role, responsibilities and expectations should be provided to employees throughout the year with a formal job performance review at the end of the year. Employees must always be treated with respect and given opportunity to improve. If optimum performance is expected from an employee, the person must be provided compensation and benefits competitive with other area ranches. Incentivize employees to meet expectations by offering bonuses or pay raises. Employees will help you when you help them.

In an outline suggested by Bevers, there are 6 areas to consider.

1. The first part is a general statement of overall observations during the past year which include rainfall, market situation and any other abnormal events that affected the ranch. These factors directly affect profits and should be documented in relation to occurrence frequency.

The CattleMax cattle software has two areas where overall observations can be recorded. Market situations and other abnormal events can be entered on the software calendar and there is a rainfall data entry form for recording precipitation.

2. Production resources are the second part of the outline where cow herd performance is documented. Pregnancy percentage, calving intervals, calving percentage, weaned calf percentage, weaning weights and pounds weaned per exposed female are measurements of production resources. These measurements can be obtained from records kept in CattleMax.

The Palpation Worksheet in CattleMax provides space to write in the months each cow has been bred. At one screen, you can quickly enter each cow’s pregnancy status and months/days bred. Pregnancy percentage is calculated by dividing the number of pregnant cattle by the number of bred cattle and multiplying by 100.

Calving intervals are obtained by adding “Days since Last Calf” and “Average Calving Interval” columns to the Breeding Records entry form. CattleMax calculates calving intervals if the other requested data are entered. Calving percentage is calculated by dividing the number of cows that calved by the total number of cows bred and multiplying by 100. If you bred 20 cows and only 15 calved, your calving percentage was 75 percent.

The remaining two measurements are obtained from the “Calf Weaning Worksheet.” Write in the weaning dates and weaning weights of the calves, or easily import them through a spreadsheet or weigh scale. Weaned calf percentage is the total head of calves weaned divided by the number of exposed cows and multiplied by 100. Pounds weaned per exposed female is derived by dividing the total weaning weights by the number of exposed females.

3. Bevers titled the third section of the situation analysis as nutritional resources that include stocking rate, amount of feed and/or hay fed during the year and the salt and mineral program.

4. Human resources, the fourth part, are an assessment of the number of people needed to make the operation successful and whether they are in place. In addition to the number of available people, their capabilities and commitment are evaluated as well.

5. Part 5 is an assessment of machinery and equipment resources presenting an inventory of each unit and its condition. Repairs and maintenance costs during the past year are included and are often tracked on a spreadsheet. Most operator manuals contain a maintenance log, and these preprinted forms can be used in lieu of making your own.

6. Building and improvement resources, Part 6, is an evaluation of fence conditions, number of pastures, livestock watering devices, weed and brush control programs and necessary pasture seeding. The last part of the situation analysis is the financial health and performance analysis that includes total expenses of the operation, net income from the operation, total cost per breeding female, rate of return on the operation’s assets and a breakdown of expenses by major categories.

(This article is by Robert Fears).

What resources do you use for making decisions and plans? Let us know by entering your comments below!

In today’s economy, a management plan is an essential tool for a cow-calf producer to use in maintaining profit. As most other business people have known for a considerable period, a plan is needed to guide management decisions. You wouldn’t drive to an unknown location without consulting a map. The same principle applies to ranching.

Every business plan needs mission and vision statements to set the overall direction in which you want the ranch to go. The mission explains the primary purpose of the ranch. Texas AgriLife Extension economist Stan Bevers lists four possible reasons to be in the cattle business.

1. Pay property taxes. The ranch operation exists for the sole purpose of maintaining an agricultural land appraisal where property taxes are assessed on production capability rather than market value.
2. Break even. The ranch is a hobby and profit is not important as long as it doesn’t lose money.
3. Be profitable. If the ranch doesn’t make money, I will have to find something else to do for income.
4. Develop genetic progression. The mission is to raise the best performing cattle in the state.

According to Bevers, a vision statement is a vivid idealized description of a desired outcome that creates a mental picture of your target. The best vision statements describe how you want your ranch business to look in five years, 10 years or longer. Here are a couple of examples:

1. To have a ranch business that is growing, financially profitable and environmentally sound while maintaining a comfortable life style, enjoying time with children and friends and continuing involvement in community and church.
2. To grow the ranch business by profitably marketing quality products to ensure future generations will have a viable ranching business.

Review drafts of the mission and vision statements with all stakeholders such as family members, partners, bankers and other parties who have an influence on management of the ranch. For the plan to succeed, it must be accepted by the stakeholders so their suggested changes need to be considered.

After all stakeholders have agreed on the desired overall direction of the ranch, then write objectives that support the mission and move the operation toward the vision. Objectives must be accomplished to complete the management plan. Objectives can be considered primary goals and should be few in number in order for the management plan to be achievable. Also, objectives must be realistic and measurable; otherwise, there is no way to know if and when they are accomplished. To be measurable, target numbers should be assigned to each objective. A few examples are:

• Reduce annual cow maintenance costs by ten dollars per animal.
• Lower annual calf break-even prices by three dollars per animal.
• Increase weaning weights by 20 pounds.
• Increase calving percentages by 10 percent.

The next step in writing a ranch management plan is to establish annual goals for each objective. As with objectives, goals need to be realistic and measurable. Here are some goals that might support an objective to reduce annual cow maintenance costs by ten dollars per animal:

• Lower feed cost by 200 dollars.
• Develop a preventive herd health program that reduces death loss to one percent or less.
• Maintain high-quality pastures that produce 3,000 pounds of forage per acre.

A list of key tasks is needed to outline how the goals will be accomplished. Key tasks for accomplishing the goal to lower feed costs could be the following:

• Reduce stocking rates.
• Develop a rotational grazing system.
• Overseed certain pastures with annual winter forage.

Every attempt should be made to execute the management plan, yet it should be flexible enough to allow changes for dealing with unexpected changes or problems.

Working with finances doesn’t come easy for everyone, so the The Texas AgriLife Extension Service has gathered many of their free decision aids and helpful links to help you make the most of your ranching efforts. Decision aids such as whether retained ownership is right for you, the financial costs of raising cattle, using Quicken or QuickBooks for farm records and much, much more can help ensure you have a more solid 2011, or at least know what you can do to prepare for uncertainties.

These resources were written by several Extension faculty, including Dr James McGrann, Professor Emeritus at Texas A&M University. Though Dr McGrann is retired, he continues to give his time and experience to us and others in the cattle industry.

We give a big THANK YOU to everyone who puts so much effort into the industry and helps producers to be better managers.

Check out the TSCRA and AgriLife’s list of decision aids and cattle industry links

“Over the next few years, I think agricultural projects are going to be one of the best investments and agriculture is going to be one of the best industries in the world. Anybody who’s got potentially good agriculture land and good weather” stands to be a winner,” he says.

Read about his reasoning in the Western Farm Press article “Advice from a billionaire: invest in ag”

As the end of the year is fast approaching, this can be a good time to evaluate your ranch’s progress and begin setting goals for the new year. As conditions continue to remain tight in the cattle industry (but on the improving side), the focus of managing your ranch as a business and considering the economics of production is even more important.

According to Harlan Hughes, Market Advisor, benchmarking can help you identify your herd’s strengths and weaknesses. By doing this, you will be able to take actions that build on the positives of your operation and minimize what is causing weakness. In the article, he includes specific details about his study of benchmarking a cowherd.

“How to Make Your Ranch More Profitable” is an interesting read and the ideas could be applied to producers looking to improve the economic aspect of their operation.

What’s your take on Dr Hughes’ points? What have you found about your production costs? Share your thoughts below by clicking the Comments link, or post on the CattleMax page of Facebook.

In a recent article, 2 researchers at the US Department of Agriculture’s Economic Research Service discussed the considerations for producing grass-fed beef.

“Grass-fed beef appeals to a diverse and growing array of consumers and offers producers an attractive, commercially viable alternative to conventional production. However, at some point, decisions to pursue grass-fed production will necessitate some trade-offs, and the direction that these trade-offs suggest is toward even higher costs of production and reduced beef production.”

Read the full article “Issues Surround Grass-Fed Beef”

Interested in the health benefits of grass-fed vs grain-fed beef? Check out this recent article and comments.

Do you produce grass-fed beef? What’s been your experience?

Recently, an ag lender in Montana calculated the economic impact of following BQA practices, such as:
- 5 lbs. of extra gain/calf because calves were handled quietly at $1.10/lb. market price is $5.50/head for a total of $1,650
- 15¢/lb. improvement in price on a couple of 1,200-lb. cull cows that were sound at time of sale rather than crippled from rough handling is another $360

In addition, a Montana Department of Livestock veterinarian reminds us of good vaccination handling practices, including:
- Keep all vaccines cool and out of the sunlight – this includes filled syringes.
Vaccinate only healthy animals and do not treat cattle with antibiotics at the same time as vaccinating.
- Keep accurate group or individual vaccination records. (The CattleMax software enables you to quickly record the same medical details for a group of cattle.)

Read the full article details and tips “The Bottom Line in BQA”

What influence has a good herd health program had on your production?