by Haley Shoemaker
These days, dropping off a discard or feedlot calf at a local auction can feel like Christmas in July. Prices have stabilized and the market is booming after years of drought and production problems decimated cattle inventories.
As cattle producers, we naturally want to keep in the back of our minds the thought, “When will these prices end?”, but we can get used to the idea of $135/cwt for slaughter cows and $300+/cwt for calves.
High price periods, like the one the industry is currently experiencing, have been known to make great farmers look expensive and mediocre farmers look expensive. Anyone who has been in the business for any length of time knows that these trends tend to even out, but the factor remains that a well-managed farm will stand the test of time and a volatile market.
One tool used by herd managers across the U.S. is FinPack, a financial analysis software service offered through Ohio’s Farm Business Analysis and Benchmarking team. Each year, farm analysis teams across the country collect data from a variety of businesses, ranging from beef, dairy and crops to specialty crops and small ruminants.
Data collected from balance sheets, profit and loss statements and company analysis not only provides valuable information for producers and their operations, but also helps create a national database called “FINBIN,” managed by the University of Minnesota.
FINBIN Financial Report
Looking at five years of financial reports for FINBIN’s beef cow-calf operations, several trends stand out: Net profit, an indicator of farm profitability, averaged $125.31 per head and only just turned positive in 2023 after ranging from $41.50 to $113.13 per head in the four years prior.
The increase in net income in 2023 was accompanied by higher direct and overhead costs, averaging $1,019.85 per head, indicating that despite rising feed and operating costs, managers who took a calculative approach to business decisions “made the most of” the favorable marketing environment, so to speak.
Producers in the top 20% of beef cattle herds in the 2023 database achieved an average net profit of $564.09 per head and an average direct and overhead cost of $812.14 per head. This represents a difference of about $438 separating the “average” and “top” herds, which could mean the difference between profit and loss in a slow market year.
So how do you know which level your farm falls into? Is your farm average, above average, or excellent? And how does your farm operation measure economic success? If the answer to any of these questions is “I don't know,” completing a farm business analysis might be the logical next step.
Beginning a financial analysis can be an eye-opening experience for agricultural businesses. In addition to gaining perspective on how they compare to similar farms in the state, producers also learn how to keep more targeted and detailed records, allowing them to identify historical data and trends throughout their participation in the program.
These trends provide insight into business decisions and how the business responds to market fluctuations, helping producers gain a clear understanding of financial strengths, potential areas of concern and opportunities for improvement.
Producers throughout Ohio can complete either a whole-farm analysis or a whole-farm and enterprise analysis. Both provide separate reports that consider beginning and ending balance sheets and income statements. However, producers who complete an enterprise analysis also receive a summary of their per-unit production cost breakdown (heads, cwt, acres, etc.). All data is handled discreetly to maintain confidentiality.
Additionally, personalized benchmarking reports serve as a helpful tool to visualize your operational percentile ranking among your peers, which is often cited as one of the most beneficial outcomes of completing a farm business analysis.
To get started, simply contact your county Agriculture and Natural Resources Educator or Program Manager Clint Schroeder at 567-242-6693 or email . [email protected].
When prices are favorable, it's tempting to focus resources and attention on putting out the next most in-demand fire, but recent history proves that consistent, diligent management is what prepares your farm for the years when financial efficiency matters most. In the long run, you can't manage what you can't measure. Don't put financial success in that category.
Shoemaker is an OSU Extension AGNR educator for Columbiana and Mahoning counties. She is also a member of the OSU Extension beef team that publishes the weekly Ohio Beef Letter. beef.osu.edu.
