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Ranch Calculator (RanchCalc)

Modern cow/calf operations are highly complex and the addition of a retained ownership phase after weaning further complicates analysis of the economics of multiple enterprises. With constantly changing input and commodity prices, evaluating “what if” propositions may need to be done frequently. Financial analysis to support decision-making requires information from both cash flow and profitability angles. While evaluating the economic effect that a change in even one area (marketing, feeding, stocking density, labor changes, etc.) has on the total operation could be extremely tedious and time consuming. Spreadsheet programs make analysis both simple and quick. RanchCalc is a spreadsheet designed at Oklahoma State University to assist the beef manager in planning and analysis.1 RanchCalc can be downloaded from http://agecon.okstate.edu/faculty/publications/3397.xlsm.

 

RanchCalc can be used to enter cow/calf and stocker information for an individual beef cattle operation. The program calculates net operating returns and annual cash flow for the ranch under different production-marketing alternatives. It is designed to assist in analyzing the economic dimensions of decisions and does not include “checks” on the reasonableness of production decisions such as the feed requirements. More detailed information on production, marketing and risk management in cow/calf operations is available in the Oklahoma Cooperative Extension Services’ circular E-913 Oklahoma Beef Cattle Manual (Lalman and Doye). RanchCalc example data are based on an Oklahoma spring-calving cow/calf operation with cows maintained on native range—the land base is a combination of rented and owned acres. Steer calves are retained after weaning for grazing on wheat pasture. Some heifer calves are saved for replacement heifers and others are sold at weaning. Yearling heifers use both native range and wheat pasture. This example will demonstrate the use of multiple types of pasture in a retained ownership operation.

 

Entering Data Into RanchCalc

This software is programmed in MS Excel 2007 or later versions of Excel. Substantial loss of functionality, run-time errors and calculation errors will likely occur if it is run in MS Excel 2003 or earlier version of Excel. Therefore, its use in MS Excel 2003 is not recommended. For the program to function properly, the user must allow the macro features of MS Excel. In MS Excel 2007 and later versions, the user is prompted with a warning just below the button bar that macros have been disabled. Click on the warning and enable macros.

 

The spreadsheet contains several worksheets for data entry. Worksheet tabs are: cows, heifers & bulls; calves; pastures; feed, vet & breeding cost; and overhead & interest. Data are entered by moving the cursor to a cell and entering the appropriate information. Values generated by the program are protected, so they cannot be accidentally overwritten and the equations erased. Cells for data entry will appear in yellow on the screen. Though the default data is only an example, if you want to preserve it, save a copy of the file on your computer’s hard drive before you begin customizing it for your operation. Figures are included in this article to illustrate screens in the spreadsheet.

 

Cows, Heifers & Bulls

In this worksheet, information is summarized in four tables: cow, heifer and bull inventory; breeding stock purchases; cull sales; and inventory (Figure 1). In cow, heifer, and bull inventory, the cow herd is represented by three classes: mature cows, 1st calf heifers, and yearling heifers—as these are the logical sorts to be made for optimum nutritional management. An additional column allows for the entry of raised and purchased bulls. Producers who raise replacement females or bulls enter the cost of raising females or bulls to the selected stage as its base value. For instance, a raised yearling heifer might have a base value of $850, a raised 1st calf heifer might have a base value of $1,000 and a raised cow might have a base value of $1,125. When the user enters the number of purchased head, a prompt to enter the purchase price per head and percent financed appear. Other loan terms—interest rate, loan terms, years remaining on the note, and payment frequency—are specified further down in the table.

 

Death loss is the percent of deaths expected for that class of livestock. Enter the weaning percentage expected for mature cows and 1st calf heifers separately. The number of calves weaned is calculated using the weaning percent with the number of cows and heifers in the herd (cow and heifer death losses are assumed to occur before calving). On average, a calf crop is expected to be one-half females and one-half males. The user specifies the number of steers weaned, and heifers weaned is the calculated remainder. The user enters the number of heifers retained for the breeding herd as this impacts the calf sales figures and ultimately the cash flow summary figures. A pop-up form requires the user to divide the heifers produced into three groups: heifers sold at weaning, heifers retained as stockers and heifers retained as replacements.

 

 Cow, Heifer, and bull inventory
  units Mature Cows 1st Calf  heifers
Raised hd 80 20
Base value $/hd $1,125 $1000
Purchased hd 0 0
% financed %  0.0% 0.0%
 Death Loss %  1.0% 1.0%
Borrowed $/hd $0 $0
Wean percentage  % 86.0% 82.0%
Calves weaned hd 68.8 16.4
Steers weaned hd 34.0 8.0
Heifers weaned hd 34.8 8.4
Heifers retained  hd 19.0 6.0
Initial principal $ $0 $0
Interest rate % 6.00% 6.00%
Load term years 4 5
Years remaining on loan   3 5
Payment frequency  Annually Annually
Total annual payments  $0 $0
Total principal, current year  $0 $0
Total interest, current year     $0  $0
 Cow, Heifer, and bull inventory (cont)
  units Yearling heifers Bulls Totals
Raised hd 25 0 xxx
Base value $/hd $850 $0 xxx
Purchased hd 0 3

xxx

% financed % 0.0% 50.0% xxx
 Death Loss % 1.0% 1.0% xxx
Borrowed $/hd $0 $875 xxx
Wean percentage  % xxx xxx 85% avg
Calves weaned hd xxx xxx 85.2
Steers weaned hd xxx xxx 42.0
Heifers weaned hd xxx xxx 43.2
Heifers retained  hd xxx xxx 25.0
Initial principal $ $0 $2,625 xxx
Interest rate % 6.00% 6.00% xxx
Load term years 5 3 xxx
Years remaining on loan  4 2

xxx

Payment frequency  Annually Annually xxx
Total annual payments  $0 $982 $982
Total principal, current year  $0 $874 $874
Total interest, current year    $0  $108 $108
 Breeding stock purchases
  Head $/head Total $ Percent financed
Mature cows 0 $1,200 $0 0%
1st calf heifers 0 $1,000 $0 0%
Yearling heifers 0 $950 $0 0%
Bulls 1 $2,850 $2,850 50%
 Total purchases 1   $2,850  
 Breeding stock purchases (cont)
  Interest rate Month purchased Downpayment 1st year interest
Mature cows - 1 $0 $0
1st calf heifers - 2 $0 $0
Yearling heifers - 9 $0 $0
Bulls 6.00% 4 $1,425 $64
 Total purchases     $2,850 $0
 Cull sales
  #sold Average weight (lbs) Average cost basis/base value
Cull cows and 1st calf heifers 24 1,150 $1,100
Cull yearling Heifers 5 825 $1,00
Cull bulls 1 1,750 $2,200
 Total sales 30 33,475  
 Cull sales (cont)
  Sale price ($/cwt) $/head Total
Cull cows and 1st calf heifers $75.00 $863 $20,700
Cull yearling Heifers $120.00 $990 $4,950
Cull bulls $95.00 $1,663 $1,663
 Total sales     $27,313
 Inventory
  Mature cows & 1st calf heifers Yearling heifers Bulls
Beginning inventory 100.00 25.0 3.0
Transferred in 25.0 25.0  
Transferred out   -25  
Purchased 0.0 0.0 1.0
Sales -24.0 -5.0 -1.0
Death loss -1.0 -.3 0.0
ending inventory 100.0 19.8 3.0

Figure 1. Cows, Heifers & Bulls Worksheet. 

 

Initial principal is calculated based on the purchase price and percent financed entered at the top of the table. The loan terms—interest rate, loan term, years remaining on loan, payment frequency—are used to calculate total annual payments; total principal, current year; and total interest, current year. These numbers then flow automatically to the appropriate sections on the results worksheet.

 

In the breeding stock purchases table, the number of head and purchase prices for mature cows, 1st calf heifers, yearling heifers and bulls are entered for the year being planned or analyzed.

 

In the cull sales table, the number of head sold, average weight per head in pounds, average cost basis/base value and sale price ($/cwt) are specified for three classes of cattle: cull cows and 1st calf heifers, cull yearling heifers and cull bulls. The average cost basis/base value is purchase price minus accumulated depreciation for purchased breeding stock; for raised breeding stock, it is the base value of the animal (the cost of raising the animal to that stage, e.g. mature cow).2 Average cost basis is important because it impacts the net income calculation and profitability figures (net income is sales price less the average cost basis or base value). For cash flow calculations, the dollar value of sales per head, as well as the total for each class of cattle is calculated.

 

The inventory table summarizes changes in number of head in the breeding herd by class of cattle for the analysis period—listing the beginning inventory, purchased & retained, sales, death loss, net transfers, ending inventory and the change in number of head for the time period. Death loss is the beginning inventory multiplied by the percentage death loss. Net transfers shows the number of females that mature to the next stage. For example, yearling heifer transfers is the sum of the heifers retained from mature cows and first calf heifers minus the beginning inventory of yearling heifers that age to become 1st calf heifers. The final line in the table allows the user to track the ranch’s bull inventory.

 

Calves

It is anticipated that producers may retain their own calves as stockers, purchase stockers, or have a combination of retained and purchased stockers. The calves worksheet includes two tables: stocker inventory and calf and stocker sales (Figure 2). If stockers are kept, the number of head, percent financed, initial weight, initial price (purchase price for stockers, market price at weaning for retained stockers) is entered along with estimated average daily gain (ADG), death loss, and days owned. Producers retaining their own calves estimate average weight and price per hundredweight for calves at weaning and sell them to their stocker enterprise to permit economic analysis of this production activity. This can be thought of as an internal transfer between ranch enterprises. The sale price is required for the cow/calf enterprise and the purchase price is required for the stocker enterprise.

 

Two types of purchased stockers are allowed. The two types of stockers can be used to represent two qualities, two genders, two weights or two prices for stockers. Entering a zero in the initial inventory line will eliminate a stocker type in the analysis, permitting quick evaluation of strategies with and without one or more types. For example, entering a zero for stocker 1 or stocker 2 (these labels can be changed) will remove the type from all later cash flow and profitability calculations. Using the specified percent financed and interest rate, loan values are calculated assuming the loan will be repaid when calves are sold.

 

Calf and stocker sales are calculated once the weight is specified for calves sold at weaning and the sale prices are specified for all classes of calves. The number of stocker steers and heifers sold and their sale weights are calculated using the number of stockers, expected death loss, daily gain and length of ownership. Heifer calves retained as breeding replacements are not included in sales values but are included in income calculations.

 

 Stocker inventory
  units Purchased stocker 1 Purchased stocker 2 Retained stocker steers
Number hd 150 0 42
% financed % 100.0% 0.0% xxx
Initial weight lbs 500 510 525
Initial price $/cwt $150.00 $150.00 $150.00
ADG lb/day 2.00 2.20 2.40
Death Loss % 2.0% 1.0% 1.0%
Days owned days 135  135 135
Borrowed $/hd $750 $0 xxx
Initial principal $  $112,500  $0  xxx
Interest rate % 6.25% 6.25% xxx
Loan term   135 days 135 days xxx
Years remaining on note      xxx
Payment frequency  Annually Annually xxx
Total annual payment  $115,101 $0 xxx
Total principal current yr  $112,500 $0 xxx
Total interest current yr  $2,601 $0 xxx
 Stocker inventory (cont)
  units Retained stocker heifers Totals and averages
Number hd 0  192
% financed % xxx  
Initial weight lbs 500  
Initial price $/cwt $135.00  
ADG lb/day 2.20  
Death Loss % 1.0%  
Days owned days 135  
Borrowed $/hd xxx $750 avg
Initial principal $  xxx  $112,500
Interest rate % xxx 6.25 avg
Loan term   xxx  
Years remaining on note  xxx  
Payment frequency  xxx  
Total annual payment  xxx $115,101
Total principal current yr  xxx $112,500
Total interest current yr  xxx  $2,601

Figure 2-1. Calves Worksheet. (Stocker inventory)

 

 Calf and stocker sales
    Head sold Weight (lbs) Sale price ($/cwt)
Calf sales      From cows
 steer calves 0.0  525  $150.00 
heifer calves   15.8 500  $135.00 
From 1st calf heifers    
steer calves   0.0  525  $150.00 
heifer calves   15.8 500  $135.00 
 Stocker Sales      Retained calves    
stocker steers   41.6 849  $125.00 
stocker heifers   0.0   797 $122.00 
Purchased calves    
Stocker 1   147.0 770   $130.00
Stocker 2   0.0   807  $0.00
  Totals 206.8 157471 $129 avg
 Calf and stocker sales
    $/head Total
Calf sales      From cows
 steer calves $788 $0
heifer calves  $675 $10,665
From 1st calf heifers    
steer calves  $788 $0
heifer calves  $675 $10,665
 Stocker Sales      Retained calves    
stocker steers  $1,061 $44,127
stocker heifers  $972 $0
Purchased calves    
Stocker 1  $1,001 $147,147
Stocker 2  $0 $0
  Totals $984 avg $203,397

 Figure 2-2. Calves Worksheet. (Calf and stocker sales)

 

Pastures

The pastures worksheet includes six tables: owned pasture information, rented pasture information, two pasture allocation tables (optional), pasture cash expense and pasture rent and overhead allocation (Figure 3). In addition to Native, Bermuda and Wheat pasture, users can specify two additional types of owned and/or rented pasture land. For owned pasture land, enter the label (for example, Old World Bluestem or Fescue) in the top row of owned pasture information, followed by the number of acres, percent financed, purchase price and taxes per acre. The amount financed per acre and original loan principal will be calculated. Payments per year on the land loan are calculated using the interest rate, payment frequency, loan term and years remaining on loan specified by the user.

 

In rented pasture information, enter the number of acres and the annual rent per acre or be sure that acres = 0 for all types of pasture where no land is rented.

 

 Owned pasture information
Types units Native Bermuda Wheat
Acres   500 200 0
% financed % 0.0% 70.0% 50.0%
Purchase price $/acre $1,100 $1,500 $2,000
Financed per acre $/acre $0 $1,050 $1,000
Taxes $/acre $2.00 $2.00 $2.00
Original loan principal $ $0 $210.00 $0
Interest rate % 5.50% 5.75% 5.00%
 Payment frequency   Annually Annually Annually 
Loan term Years 20 30 15
Years remaining on loan   10 20 10
Total annual payment $/year $0 $14,850 $0
Total principal payment $/year $0 $4,854 $0
Total interest payment $/year $0 $9,996 $0
 Owned pasture information (cont)
Types units Native-purch Fescue TOTALS
Acres   500 0 1,200
% financed % 50.0% 50.0% 33% avg
Purchase price $/acre $1,100 $1,700 $1,167 avg
Financed per acre $/acre $550 $850 $3,450
Taxes $/acre $2.00 $2.00 $2 avg
Original loan principal $ $275,000 $0 $485,000
Interest rate % 5.50% 5.00%  6% avg
 Payment frequency   Annually Annually  
Loan term Years 20 15  
Years remaining on loan   5 10  
Total annual payment $/year $23,012 $0 $37,867
Total principal payment $/year $17,607 $0 $22,461
Total interest payment $/year $5,405 $0 $15,401
 Rented pasture information
Types units Native Bermuda Wheat
Acres   0 0 400
Annual rent per acre $/acre $15 $25 $40
Total rent $/year $0 $0 $16,000
 Rented pasture information (cont)
Types units Native- purch Fescue TOTALS
Acres   0 0 400
Annual rent per acre $/acre $15 $35 $40 avg
Total rent $/year $0 $0 $16,000
 Pasture allocation--acres per head (optional)
Pasture Types total acres Mature cows 1st Calf heifers Yearling heifers Purchased stocker 1 Purchased stocker 2
Native  500  9  9    
Bermuda 200      6    
 Wheat 400         2  
Native- purch  500   10  10      
Fescue           
 Pasture allocation--acres per head (optional)
Pasture Types total acres Purchased stocker 2 Retained stocker steers Retained stocker heifers Excess/deficit acres
Native  500        5
Bermuda 200        50
 Wheat 400     2    16
Native- purch  500         50
Fescue         0

 Figure 3. Pastures Worksheet. (Pasture allocation)

 

 Pasture cash expense
Cash expense units Native (500 acres) Bermuda (200 acres) Wheat owned (0 acres)
Fertilizer and lime $/acre $0 $60 $15
Tillage $/acre   $0  
Seeding $/acre   $0 $8
Spraying, burning, other $/acre $4 $4  
Total per acre $/acre $4 $64 $23
Total for farm $ $2,000 $12,800 $0
  Pasture cash expense (cont)
Cash expense Wheat rented (0 acres) Native- purch (500 acres) Fescue (0 acres) TOTALS
Fertilizer and lime $15 $0 $60 $18,000
Tillage       $0
Seeding $8     $3,200
Spraying, burning, other   $4 $4 $4,800
Total per acre $23 $4 $64 $16.25 avg
Total for farm $9,200 $2,000 $0 $26,000

Figure 3. Pastures Worksheet. (Pasture cash expense)

 

 Pasture rent and overhead allocation
Enterprise Native (500 acres) Bermuda (200 acres) Wheat-owned (0 acres) Wheat rented (400 acres) Native- purch (500 acres) Fescue (0 acres)
Cow-calf 100% 100% 0% 0% 100% 0%
Stocker 0% 0% 0% 100% 0% 0%
Crops and other 0% 0% 100% 0% 0% 100%
Total 100% 100% 100% 100% 100% 100%

Figure 3. Pastures Worksheet. (Pasture rent and overhead allocation)

 

In pasture allocation–head grazed on each pasture type, enter stocking rate information for all classes of cattle and pasture used. Cattle can use a mixture of the five pastures. The number of cattle of each class should be entered for each pasture type. Be sure all cattle are allocated to a pasture by studying the head remaining to allocate row at the bottom of this table. Note that if a specific group of cattle is rotated through several types of pastures the head remaining to allocate row may show a negative number. For example, if 100 retained stockers graze out wheat pasture and later are put on summer native pasture, you would enter 100 head in both the Native and Wheat row. Land requirements for the bulls are assumed to be included in the land provided for the cow herd.

 

In pasture allocation–acres per head, the total of all rented and owned land by pasture type is shown at the left side of the table. In the body of the table, stocking rates (acres per head) are specified for the different types of cattle on alternative forages. If the excess/deficit acres at the right side of this table are high, cattle numbers, stocking rates or acreage may need to be adjusted. Be sure to delete any stocking rate numbers remaining from previous analysis for classes of animal or pasture that are no longer relevant.

 

Applicable cash costs per acre for fertilizer and lime, tillage, seeding, weed control, and other are entered in the pasture cash expense table under each pasture type. Total cash cost per acre and cost per farm are calculated.

 

Feed, Vet and Breeding Costs

Two tables are included in this worksheet: hay and feed costs per head and veterinary and miscellaneous expenses (Figure 4). In hay and feed costs per head, the user can enter up to eight feeds or hays. In the example, cubes and hay are included along with salt/minerals. The labels for types of feed can be changed, as can the cost per unit, feeding rate in pounds per head per day and the total number of days fed. The total cost of each feed type for each class of cattle is calculated. If hay is purchased, the delivered price should be entered; if hay is raised, enter the estimated total cost of the home-grown hay. (Don’t double count expenses if hay is taken off pasture where pasture expenses are included in the earlier table.)

 

Cash costs per head for pest control, vet costs, hired hauling, marketing, ad valorem taxes and other expenses are entered in veterinary and miscellaneous expense. Note: costs such as hauling and marketing are affected by retention plans. Total cash cost per head and for the operation are calculated.

 

 Hay  and feed costs per head (part 1)
      Mature cows (80) Mature 1st Calf heifers (20) 1st Calf
Source Units $/unit  lb/day/hd days fed    lb/day/hd  days fed 
 Cubes 38%  tons  390.00  2 60  60 
Cubes 20% tons 266.00 4 60 4 60
Prairie Hay tons 65.00 12 120 12 120
Bermuda Hay tons 75.00 0 40 0 120
OWB tons 70.00        
             
             
 salt/minerals  lbs  0.05  0.25 365  0.25  365 
Total feed cost per head $107.05 $107.05
Total herd feed cost $8,563.80 $2,140
Feed cost for: Cows and heifers: $12,600.94
 Hay  and feed costs per head (part 2)
    Yearling heifers  (replacements) (25) Purchased  stocker 1 (150)
 Source $/units    lb/day/hd  days fed    lb/day/hd  days fed 
  Cubes 38% 390.00  0
Cubes 20% 266.00 4 60    
Prairie Hay 65.00 12 120 0 135
Bermuda Hay 75.00 0 120    
OWB 70.00     2 135
           
           
  salt/minerals 0.05  0.25 365     
Total feed cost per head $75.85 $9.60
Total herd feed cost $1,896.19 $1,439.37
Feed cost for: Cows and heifers: $12,600.94 Purchased stockers: $1,439.37
 Hay  and feed costs per head (part 3)
    Purchased  stocker 2 (0) Retained stocker steers (42)
 Source $/units    lb/day/hd  days fed    lb/day/hd  days fed 
  Cubes 38% 390.00  0  0  0  0
Cubes 20% 266.00        
Prairie Hay 65.00 0 135 0 135
Bermuda Hay 75.00        
OWB 70.00 2 135 2 135
           
           
  salt/minerals 0.05  0.02 135  0.02  135 
Total feed cost per head $9.60 $9.60
Total herd feed cost $0.00 $403.02
Feed cost for: Purchased stockers: $1,439.37 Retained stockers: $403.02
 Hay  and feed costs per head (part 4)
    Retained stocker  heifers (- Bulls  (3)
 Source $/units    lb/day/hd  days fed    lb/day/hd  days fed 
  Cubes 38% 390.00  0  0  2  60
Cubes 20% 266.00        
Prairie Hay 65.00 0 135 18 120
Bermuda Hay 75.00        
OWB 70.00        
           
           
  salt/minerals 0.05  0.02 135  0.25  365 
Total feed cost per head   $0.15 $98.53
Total herd feed cost   $0.00 $295.58
Feed cost for:   Retained stockers: $403.02 Bulls: $295.58
Total Feed:
$14,738.91
 Veterinary and miscellaneous expenses (part 1)
 Cost units  Mature cows  1st Calf heifers   Yearling heifers Purchased Stocker 1 
 Deworm, fly control  $/hd  $4.00   $4.00  $3.50 $2.75 
Vaccines, vet, drugs  $/hd  $4.00  $4.00  $4.00 $4.25
Transport  $/hd $8.00 $5.00 $5.00  $4.00
Marketing  $/hd $6.00 $6.00 $6.00 $6.00
Property tax  $/hd        
Other  $/hd        
Total per head    $/hd  $22.00  $19.00 $18.50 $17.00
Total herd cost    $/hd $1,760.00  $380.00  $462.50  $2,550.00 
 Veterinary and miscellaneous expenses (part 2)
 Cost  units Purchased stocker 2 Retained stocker steers Retained stocker heifers Bulls
  Deworm, fly control  $/hd    $2.75    $8.00
Vaccines, vet, drugs $/hd   $4.25   $3.00
Transport $/hd    $4.00    $8.00
Marketing $/hd   $6.00   $6.00
Property tax $/hd        
Other $/hd        
 Total per head  $/hd  $0.00  $17.00   $0.00  $25.00
 Total herd cost  $/hd   $0.00 $714.00    $0.00 $75.00 
           

Figure 4. Feed, Vet and Breeding Cost Worksheets.

 

 

Other Revenue

Other sources of revenue from the ranching operation may be specified in this worksheet as shown in the table in Figure 5. Several examples are shown in the table. Since a proportion cannot be allocated to the cow herd or stocker enterprise, the total revenue represents an amount devoted to the entire ranch.

 

 Other sources of revenue
Description units number price Revenue
Hunting lease acres 500 $6 $3,000
Semen sales straw 0 $20 $ -
Breeding certificates certs 0 $25 $ -
Custom baling bales 0 $20 $ -
Other--type over       $ -
Other--type over       $ -
Other--type over       $ -
Other--type over       $ -
Total other revenue       $3,000

Figure 5. Other Revenue Worksheet.

 

Overhead and Interest

Four tables are included in this worksheet for data entry: machinery, equipment and facilities; labor and overhead allocation; operating note information; and other overhead costs (Figure 6). The terms of financing plus annual ownership and maintenance costs for vehicles, equipment, facilities, fences and buildings are entered in the first table. A total value for machinery and equipment plus a total value for working facilities, fences, buildings can be specified. Annual payments on outstanding loans are calculated using the interest rates and loan terms specified. Depreciation costs are calculated based on the difference between purchase price and salvage value, divided by years of useful life. The opportunity cost of capital (the cost of having money invested in these assets as opposed to investing it elsewhere) is the interest rate times average investment, where average investment is calculated using the average of purchase price and salvage value.

 

 Machinery, equipment and facilities
  Units Machinery and equipment Working facilities, fences, buildings
Purchase price $ $17,500 $21,500
% financed % 50% 25%
Useful life years 10 20
Salvage value $ $5,000 $5,000
Annual cost    
  repairs & maintenance $/yr $1,575 $900
  Taxes $/yr $110 $215
  Insurance $/yr $60 $90
  fuel, lube, utilities $/yr $2,300 $0
  Depreciation $/yer $1,250 $825
Original load principal $ $8,750 $5,375
Interest rate % 6.00% 6.00%
Loan term years 5 5
Years remaining on loan  3 3
 Payment frequency  Quarterly Annually
Total Payment $ $2,039 $1,276
Total Principal $ $1,744 $1,071
Total Interest $ $295 $205
Opportunity cost on investment:   $338  $398
  Interest on average investment 3.00%
 Labor and overhead allocation
  Units Cow herd Stocker total
Hired labor $/yr $0 $0 $0
Value of family and own labor $/yr $13,800 $6,900 $20,700
Miscellaneous expense $/yr $0 $0 $0
Machinery & equipment % 50% 50% 100%
Facilities, fences, buildings % 80% 20% 100%
 Operating note information
  Units Cow herd Stockers
Percent financed % 75% 100%
Months borrowed months 9.0 4.0
Interest rate % 6.25% 6.25%
 Other  Overhead Costs
 Noncurrent asset  Origination # of units  Salvage Value ($/head)  Investment ($/unit) 
 Mature cows  Raised  80 head  $865  $1,125
 Mature cows Purchased 0 head  $865 $1,500
1st calf heifers Raised 20 head  $865 $1,000
1st calf heifers Purchased 0 head  $865 $1,500
Yearling heifers Raised 25 head $990 $850
Yearling heifers Purchased 0 head $990 $800
Retained heifers Mature cows 19 head xxx $800
Retained heifers 1st calf heifers 6 head xxx $1,750
Raised bulls Raised 0 head $1665 $1,750
Purchased bulls Purchased 3 head $1665 $3,000
Native pasture   500 acres xxx $1,100
Bermuda pasture   200 acres xxx $1,500
Wheat pasture   0 acres xxx $2,000
Native- purch pasture   500 acres xxx $1,100
Fescue pasture     0 acres  xxx  $1,700
TOTAL         
 Other  Overhead Costs (Part 2)
 Noncurrent asset Origination  Expected useful life (years) Depreciation ($) Insurance ($) 
  Mature cows  Raised xxx xxx  $720
 Mature cows Purchased 8 $0 $0
1st calf heifers  Raised xxx xxx $200
1st calf heifers Purchased xxx xxx $0
Yearling heifers  Raised xxx xxx $250
Yearling heifers Purchased xxx xxx $0
Retained heifers Mature cows xxx xxx $130
Retained heifers 1st calf heifers xxx xxx $40
Raised bulls  Raised xxx xxx $0
Purchased bulls Purchased 4 $1,001 $60
Native pasture   xxx xxx xxx
Bermuda pasture   xxx xxx xxx
Wheat pasture   xxx xxx xxx
Native- purch pasture   xxx xxx xxx
 Fescue pasture    xxx xxx  xxx
 TOTAL      $1,001  $680
 Other  Overhead Costs (Part 3)
  Noncurrent asset  Origination  Taxes ($) Interest on average investment  Opportunity cost on investment
  Mature cows  Raised $880 3.00%  $2,388
 Mature cows Purchased $0 3.00% $0
1st calf heifers Raised $220 3.00% $560
1st calf heifers Purchased $0 3.00% $0
Yearling heifers Raised $275 3.00% $690
Yearling heifers Purchased $0 3.00% $0
Retained heifers Mature cows $170 3.00% $494
Retained heifers 1st calf heifers $55 3.00% $341
Raised bulls Raised $0 3.00% $0
Purchased bulls Purchased $90 3.00% $270
Native pasture   $1,000 3.00% $16,500
Bermuda pasture   $400 3.00% $9,000
Wheat pasture   $0 3.00% $0
Native- purch pasture   $1,000 3.00% $16,500
 Fescue pasture    $0 3.00%  $0
 TOTAL    $4,090    $0

 Figure 6. Overhead and Interest Worksheet. 

 

The cost of hired labor and value of family and own labor along with any remaining miscellaneous expenses for the entire ranch for the year are entered in the labor and overhead allocation table. Costs could include legal fees, insurance, consulting, business-related travel, seminars, computer software, etc. Also, enter the percent of time that machinery and equipment and working facilities, fences, buildings are used by the cow herd. Note: the total percent may be less than 100 percent if there are other enterprises (for instance, crops or other livestock) to which a portion of the expenses should be allocated.

 

Operating note information is partitioned between the cow herd and stockers by entering the percent of operating capital borrowed for each class of cattle and the average number of months the capital is borrowed. Interest rates for each category of loan may be entered.

 

The other overhead cost table facilitates calculation of fixed costs for other capital assets, namely breeding livestock and land. Depreciation costs for purchased mature cows are calculated using the difference between purchase price and salvage value, divided by years of useful life. No depreciation is calculated for raised livestock as their ownership costs are reflected in operating costs and, for the same reason, depreciation is not calculated for younger livestock purchased.

 

Opportunity cost on investment is the dollar amount of foregone returns from not investing elsewhere and is calculated by averaging investment over time and multiplying it by an interest rate. The average investment over time is equal to the purchase price plus salvage value divided by two. Interest on average investment is entered as a percent and represents the rate of return the producer might have received if the funds had been invested elsewhere.

 

Results

Results are summarized in three tables: cow herd cash flow and profitability analysis, stocker cash flow and profitability analysis and whole farm cashflow and profitability analysis (Figure 7). The cash flow column highlights cash sources and uses, including principal and interest payments on any loans included in the analysis.

 

In the profitability column, cash and non-cash income and expenses are included, while principal payments are excluded. Noncash income includes the value of raised heifers retained for the breeding herd, plus the increase in value of females retained as they mature to the cow stage. Noncash costs include depreciation, death losses and the opportunity cost associated with funds invested in fixed assets including breeding livestock, machinery, equipment, vehicles, buildings, facilities and land. The total of cash and noncash expenses are subtracted from total receipts to estimate annual returns to owned capital, management and risk. Note: interest on term debt (borrowed money) is included in opportunity cost on investment.

 

 Cow herd cash flow and profitability analysis
   Cash flow Profitability 
Revenue  
Calf production $12,123  $70,898
Cull sales  $27,313 $23,013 
Increase in replacement heifer value xxx  $3,750 
Total cow herd revenue $39,436 $97,661
Expenses  
Pasture rent  $16,000   $16,000
Pasture operating  $16,800   $16,800
Hay and feed  $12,897   $12,897
Veterinary etc. $2,678   $2,678 
Cash mach, equip, & facilities $2,987   $2,987 
Hired labor  $0   $0 
Miscellaneous   $0   $0 
Interest on:    
Operating  $1,806   $1,806
Pasture mortgage $15,401   xxx 
Breeding stock notes $108   xxx 
Mach, equip and facilities notes $311  xxx 
Taxes $1,690   $1,690 
Insurance $1,400   $1,400 
Depreciation and death loss xxx   $3,579
Opportunity cost on investment  xxx  $47,258
Value of unpaid labor  xxx   $13,800
Total Expenses  $54,270 $120,893 
Other cash flows  
Breeding livestock purchase  $2,850   xxx 
Principal payments--breeding stock $874    xxx 
Principal payments--real estate $22,461    xxx 
Principal payments--mach, facilities, etc. $1,729    xxx 
Net cash flow from cow herd  -$42,749   xxx 
Net Income   xxx   -$23,233
 Cow herd cash flow and profitability analysis
   Cash flow Profitability 
Revenue  
Purchased stockers  $147,147   $147,147
Retained stockers $44,127   $44,127 
Total cow herd revenue  $191,274   $191,274
Expenses  
Purchased and retained calves $112,500 $145,575
Pasture rent  $16,000   $16,000
Pasture operating  $9,200   $9,200
Hay and feed  $1,842   $1,842
Veterinary etc. $3,264   $3,264 
Cash mach, equip, & facilities $2,625   $2,625 
Hired labor    $0   $0
Miscellaneous    $0   $0
Interest on:    
Operating  $3,030   $3,030
Pasture mortgage   $0   xxx
Calf notes $2,601   xxx
Mach, equip and facilities notes $188  xxx
Taxes   $0   $0
Depreciation   xxx  $790
Opportunity cost on investment   xxx $248 
Value of unpaid labor   xxx $6,900 
Total Expenses  $151,250 $189,474 
Other cash flows  
Principal payments--real estate  $0   xxx
Principal payments--mach, facilities, etc.  $1,086   xxx
Net cash flow from cow herd $38,937    xxx
Net Income  xxx  $1,799
 Whole farm cash flow and profitability analysis
  Cash flow Profitability
Net cash flow from cow herd -$42,749 xxx
Net cash flow from stockers $38,937 xxx
Total other revenue $3,000 xxx
Net cash flow--whole farm -$812 xxx
Net income from cow herd xxx  -$23,233
Net income from stockers xxx $1,799
Total other revenue xxx $3,000
Net income--whole farm xxx -$18,434

Figure 7. Results Worksheet 

 

Summary

Spreadsheets offer tremendous flexibility for users, allowing quick analysis of complex management options. RanchCalc can be used to evaluate economic aspects of the cow/calf enterprise, stocker enterprise or a combination of both. The spreadsheet is designed to capture and summarize key information impacting both cash flow and profitability. Once the base case is defined, a number of alternative scenarios can be easily assessed. Users may explore alternative production assumptions, price assumptions, lending conditions, etc. and see how results change for each ranch enterprise.

 

Selected References

Lalman, D. and D. Doye “Oklahoma Beef Cattle Manual.” 7th edition. Oklahoma State University. September 2015.

 

OSU Enterprise Budget software. agecon.okstate.edu/budgets.

 

1 Software and fact sheet originally developed by Keith Lusby, former OSU Beef Cattle Specialist, and Odell Walker, OSU Agricultural Economics professor emeritus. Enterprise budget software may also be of interest to users (see agecon.okstate.edu/budgets). The enterprise budgets provide more in-depth analysis of individual components of production: cow-calf, stocker, perennial forage, hay, etc.

 

2 For more information, see AGEC-323, Valuation of Raised Breeding Livestock, http://factsheets.okstate.edu/documents/agec-323-valuation-of-raised-breeding-livestock/

 

 

Damona Doye

Extension Farm Management Specialist

 

Eric A. DeVuyst

Extension Farm Management Specialist

 

David Lalman

Extension Beef Cattle Specialist

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