Friday, July 2, 2010

Economics of the Weaning Percentage Measurement

As I glance across a couple of studies pertaining to cow-calf economics, there is one factor that receives continuous attention and that is the measure of weaning percentage. There are numerous studies that have reported that weaning percentage is one of the primary factors in the profitability of cow calf outfits.

That in and of its self is not that surprising. What is surprising is how much weaning percentage affects profitability in cow-calf outfits. Both in terms of cash cost and value cost.

First, let's make sure we are all talking about the same thing. Weaning percentage, as defined by NCBA 1992 and used by the Standardized Performance Analysis tool, is simply a ratio of live calves weaned to the total adjusted number of females exposed during the breeding season.

Weaning percentage is calculated as follows:

Weaning % = Number of live calves weaned
Adjusted number of females exposed breeding season

Average weaning percentage in South Dakota according to the 2008 SDSU Cow Calf Business Report was 86%. Of course it varies up and down a little each year depending on what the weather was like in March and April, but for the most part, it hangs right around that average.

So, what is the true cost of weaning percentage? Let's take a look:

Our example outfit has an 89% weaning percentage and a total unadjusted annual cow cost of $423/cow.

Of course what weaning percentage really represents is the fact that in this scenario, 11% of the herd used up resources, but never weaned a calf. Therefore, the cost associated with the 11% that didn't produce anything needs to be spread across the remaing 89% of the herd that weaned a calf to figure the true cost of production.

So if we look at our example: we will take the unadjusted annual cow cost and multiply it by 1-(weaning percentage/100). So the calculation looks like this:

1) Cow cost adjustment = $423 x (1-(weaning %/100))

2) Cow Cost adjustment = $423 x (1-(89/100))

3) Cow cost adjustment = $423 x (1-.89)

4) Cow cost adjustment = $423 x .11 = $46.53

So each of the 89% of cows that weaned a calf must carry an additional $46.53/cow to cover for the 11% that didn't wean a calf.

Now the total adjusted annual cow cost = $469.53

If you put that in terms of calf breakeven on a 525 lb. average weaning weight:

A) $423/525 = $0.81/lb.
B) $469.53/525 = $0.89/lb.

That's how weaning percentage affects an outfit on a cash basis. Now let's look at a value basis.

If you figure that the 525 lb. average weaning weight brought $120.00 this fall, you would gross $630.00/head. Subtract the total adjusted annual cow cost of $469.53 and you would net $160.47/head.

However, 11% of you calves never made it to the weaning pen, so we lost out on 11% of $160.47/head.

$160.47 x .11 = $17.65/head

So now on a value adjusted basis, the total adjusted cow cost is:

$423 + $46.53 + $17.65 = $487.18/cow

On a breakeven basis: $487.18/525 = $0.92/lb.

Now, as a business manager, you are primarily concerned with the cash basis adjustments. Looking at value is important to understand the true depth of this issue, but we aren't going to use value basis for determining profitability.

So the point here is that although pharma products, precon programs, feed supplements, etc. may or may not have their place in your management program, some good old fashioned animal husbandry can pay big dividends by getting more calves to the sale barn in the fall.

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