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PEPing Up Profit

A unique partnership between a handful of producers, their veterinarians, Extension, land-grant university and an animal health company proves that hard numbers, rather than guesses, are worth lots of money to a cow-calf operation.

“Your costs are there whether you're raising one head or 1,000; and if you're not making money on one, it doesn't matter if you have 1,000,” says Loretta Brown of the Rising Creek Ranch near Port Lavaca, TX.

She and husband James understand a thing or two about cattle returns. They increased their net profit per cow a staggering $90/head — up to almost $110/head in 2001, compared to $20 in 1999. That's even as they increased their cow herd by 83% from 300 head to 550.

They did it with basically the same cows on the same land, just adding to it. All it took was an open mind, a willingness to change and an intensive self-discovery process via Texas A&M University's (TAMU) innovative Beef Partnership in Extension Program (PEP) the Browns report.

“The idea behind Beef PEP was to better support beef cow-calf producers in this state by helping the two main advisers to most Texas cow herds — the veterinarian and the Extension agent,” says Steve Wikse, associate professor of large animal medicine at TAMU's College of Veterinary Medicine. He conceived the idea and led the charge.

When the study herd phase of Beef PEP began in 2000 the notion was that producers could reduce the cost of producing 100 lbs. of weaned calf and increase profit potential by using the Extension agent and veterinarian supported by land-grant university specialists to implement proven animal husbandry practices. That is, once herd performance and cost was established with Standardized Performance Analysis (SPA).

PEP has proven the merit of that idea in spades. So far, there are six commercial herds (average of 329 head) in the study with SPA data for three years, beginning with the baseline year of 1999. On average, these PEP producers increased net income over 1999 per breeding cow by $67.90 in 2001 and $32.30/cow gained in 2000.

According to James McGrann, TAMU Extension economists, the increased profit came two ways: by increasing production — average weaning weights per cow exposed increased 108 lbs. — and decreasing costs an average of $33.40/cwt. compared to 1999.

None of it was magic.

Measure, Then Manage

“None of these producers were measuring what they were doing. When they started measuring, they proved to themselves there was a basis for change,” McGrann says.

Certainly, all these producers thought they had some idea of their herd production and costs. Folks like the Browns had always been conscientious bookkeepers, but none had forced themselves to face the realities uncovered by SPA.

“SPA really lets you know what it costs to do business,” James says. “We had a roundabout figure, but when you account for everything, it's incredible what you spend on an animal unit.”

Plus, McGrann points out with SPA as the financial foundation in Beef PEP, the consultants involved are also held to a higher degree of accountability.

“The added dimension with this model is that you're not only monitoring the producers' performance, but you're measuring your own performance as an adviser. The level of accountability is completely different,” McGrann says.

“As institutions, we've always been information providers, but we've never been held accountable for the information. And, we all feel part of the accomplishment when we're held accountable. I think that's one reason we made such tremendous progress with these herds,” he adds.

Indeed. Dennis Herd, TAMU Extension specialist for beef cattle nutrition, says, “What made it [net profit] change was documenting the performance and seeing where the opportunity was. I have to say, after this you wonder how you ever gave nutritional advice without knowing the financial situation. Once you know that, it really adds to the accuracy level of what you recommend.”

The team approach carried over into the study herd phase and was key to the success, adds Pat Holland, DVM, another TAMU large animal veterinarian who served as project leader. “We all learned from each other,” she adds.

How They Did It

Primarily, Holland says that once baseline performance and costs were established, the PEP team looked for opportunities in herd health, reproduction, nutrition, marketing and financial records and analysis.

In general terms, Herd explains, “If the pounds weaned per cow exposed was high, the focus was on reducing cost. If the pounds weaned per cow exposed was low, the focus was on increasing production.” Or any combination thereof.

For example, when the Browns began Beef PEP in 1999, SPA analysis pegged their production per cow exposed at 323 lbs., including the fact that 20% of their cows weren't weaning a calf. By 2001, they had increased production to 480 lbs. weaned per cow exposed.

The changes leading to such dramatic increases for the Browns included growing and utilizing more forage on the ground they had by implementing rotational grazing, de-worming nursing calves, implementing a complete health program and using expected progeny differences (EPDs) to select bulls with higher performance.

Plus, James says they dramatically increased their calves' market value by moving toward a 120-day, fall calving season from the year-round season they had.

Across all the study herds, the Beef PEP team says common key changes revolved around improved nutrition and health.

“Just because you spend money on feed or animal health products doesn't mean you have an effective nutrition or animal health program,” says Glenn Rogers, DVM, senior veterinarian for veterinary cattle services at Pfizer Animal Health. Pfizer and Signature Program Funds from TAMU's Veterinary School have financed PEP since the program's inception.

For instance, Holland says only one herd was de-worming calves when PEP started, and that herd was de-worming at a time during production when it did little good. Now, all the herds are de-worming calves.

Likewise, most of the herds got serious about health and spent more overall than before but lowered the total unit cost per cwt. by increasing production.

“A complete health program costs $15-$25 per head, which is five to seven percent of the total cost. You'll never effectively reduce your cost by saving on that side of it,” McGrann says.

James Brown is a believer now. “We used to just vaccinate for Blackleg, and we never wormed calves,” he says. “Now, we wonder why not? It's so easy to do and not that expensive.”

While changes in each herd were customized to the unique needs of individual operations, Herd points out, “We are pleased to see continued improvement. There was some improvement the first year, and even more the second.”

In fact, producers like the Browns are betting they can continue to make substantial gains now that they know how to milk knowledge from information. Economic performance in their herd in 2001 represented a net return on assets of over 7%. But, Loretta says, “We're shooting for over 15 percent return for every cow-calf pair. We can do it by running enough cows and keeping our costs down.”

James adds that “The reality is that these are little things that anyone can do; it's nothing new. We have the same cattle on the same land, and we're producing better calves.” And, they've retained independence.

“They didn't take away our independence with the data. Everything was our choice to make,” says Loretta. “But we weren't just trying something and hoping it would work. We felt they had proven solutions for us to choose between that would work.”

A New Extension Model?

Where to go from here?

“When you hear producers in the coffee shop brag about their unit cost of production rather than their weaning weights, then the job will be complete,” says Rogers, himself a rancher.

Until then, the PEP team hopes to expand the program to more herds in other areas of the state. Perhaps there will be a chance to help other states launch similar programs, too.

“The economic change made in these herds is impressive, but I emphasize that this is an educational model the industry ought to follow,” Herd says. “This is one of the best models I've ever seen — training the Extension agent and veterinarian in the process first, and getting them the resources they need.”

Given the nationwide demise of Extension funding, though, McGrann believes the likely audience for the program is veterinarians.

“A producer can't afford to have four or five people come in to consult, but he could hire someone (a veterinarian) with a broader education and a network of specialists behind him that he could count on,” he says.

That's how it's worked for the Browns.

“We started using our veterinarian (Kenneth Motl) to manage our herd,” Loretta says. “He really started helping us with nutrition, and we started having him palpate cows so we could get rid of the open cows in a timely manner. We thought using him more would cost us, but it has made us money.”

Of course, making such monumental gains does demand commitment.

“You can't push a rope. You can only help those who want to help themselves,” McGrann says.

James puts it this way: “If you're not willing to be open-minded, I wouldn't recommend a program like this. You must have an open mind, a willingness to change, and you can't think that you know everything.”