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241: 3 Financial Metrics Every Producer Should Track Monthly · CattleUSA Daily

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  Welcome to the cattle. USA Daily Podcast your go to
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  source for the latest. Livestock markets, industry
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  insights, and the update shaping agriculture today.
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  I'm your host, Lauren Moylan, a passionate advocate for
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  agriculture here. To keep you informed.
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  And connected. Now let's dive into today's
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  episode. Most ranchers know how many cows
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  they have, how much rain they got, and how much hay is left in
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  the barn. But the reason some operations
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  stay tight year after year, even in good markets, is because
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  they're not watching the right financial numbers often enough.
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  Today I want to talk about three financial metrics that every
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  single producer should be tracking monthly.
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  Not once a year, Not at tax time.
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  Monthly because these three numbers tell you early, before
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  the damage is done, whether your ranch is healthy or if it's
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  quietly bleeding, actual numbers are history.
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  Now let's talk about why this matters.
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  Annual numbers are history. Monthly numbers, on the other
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  hand, can be a warning sign. If you wait until the end of the
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  year to see how you did, you are too late to fix a single thing.
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  Monthly tracking, on the other hand, lets you catch cost creep,
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  adjust stalking or feeding decisions, protect your cash
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  flow, and avoid panic selling or panic buying.
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  You do not need a monthly CPA bill.
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  You need dedicated consistency. Now let's talk about metric #1
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  cost per cow. This is the backbone metric of a
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  cow calf operation Cost per cow tells you how much it costs to
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  keep one cow on your place and whether your operation makes
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  sense before calves ever sell. Now what goes into this?
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  This is a long list. The buckle up feed and
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  supplements. Hay production or purchases.
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  Pasture rent or ownership costs. Labor, including unpaid family
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  labor, vet medicine, breeding bills, bowls, fuel, repairs,
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  depreciation, interest, insurance overhead, and
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  honestly, let's just put a blanket thing in there that any
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  other cost that you have that goes into your operation needs
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  to be accounted for in this. So how do you track it monthly?
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  Each month you need to be logging your total ranch
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  expenses and your number of cows.
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  You don't need a perfect monthly Cal cost, you just need a
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  running total. And by December you should know
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  your real cost per cow for the entire year.
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  And why does this matter? Because most producers
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  underestimate this number by about 20 to 40%.
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  And if you don't know your cost per cow, you have no idea how
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  aggressive you can be on replacements, how many cows your
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  ranch can actually afford, and whether diversification or
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  expansion actually pencils out. If this number creeps up quietly
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  all year, it will wreck your profit without you even noticing
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  until it is too late. Now metric #2 break even per
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  calf. This is where financial reality
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  really starts to show up fast. Break even per calf tells you
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  what your calves must bring just to pay the bills.
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  It's a really simple formula. As long as you did metric number
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  one, you take your cost per cow divided by your weaning rate and
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  that equals your break even per calf.
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  For example, you have an $800 cost per cow, you have a 92%
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  weaning rate, you take 800 / .92 and you get $870 for a break
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  even per calf. That means anything above $870
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  is profit, anything below it is loss.
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  Now why should this be something that you check monthly?
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  Your break even changes all year long.
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  Feed prices are going to change, interest rates change, that cost
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  may spike in certain months and open cows will creep in.
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  Watching this monthly forces discipline in areas like maybe
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  you need to tighten your nutrition, maybe you need to be
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  doing earlier preg checking, maybe you need to make smarter
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  calling decisions or just fewer emotional decisions.
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  Here's the hard truth about this.
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  Most ranches do not have a marketing problem, they have a
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  reproduction and a cost control problem and break even exposes
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  both of those things. Now let's go into metric #3
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  operating profit margin. This one is going to separate a
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  business from a very expensive lifestyle.
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  Operating margin tells you how much of every dollar you keep,
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  not how much throat. Operating margin tells you how
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  much of every dollar you actually keep, not how much
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  flows through your checking account.
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  Here's the formula you need to take your net ranch income
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  divided by your total ranch revenue multiplied by 100.
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  For example, if you have $400,000 in revenue and $36,000
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  in net income, that is a 9% margin.
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  Now, what's healthy? Most solid cow calf operations
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  run at about 8 to 15%. In good years, many run 2 to 6%
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  without even realizing it. So why do we need to track this
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  monthly? The reality of it as guys is
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  margins don't collapse overnight.
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  They erode quietly over time. Three months of margin decline
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  in a row means that something is off in your operation.
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  Maybe it's something like feed efficiency, labor drag, interest
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  pressure, or frankly, just making poor cooling discipline
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  decisions. If you wait until December, the
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  damage is already done, and it takes three times as long to
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  reverse the damage then it does to catch it right in the middle
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  and bite it in the butt. So how do you track all three in
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  30 minutes a month? You do not need a fancy
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  software, you need a habit. Once a month, sit down, log your
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  total expenses, log your total revenue, update your cow numbers
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  and calculate the three things we just talked about.
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  Running cost per cow, current break even and month to date
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  margin. That is it, 30 minutes.
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  Guys 12. Times a year and suddenly you're
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  going to be running a ranch with visibility instead of just
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  seeing what feels right this month.
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  Because those numbers we talked about earlier, $400,000 coming
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  in feels really great until you realize that you have $390,000
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  worth of expenses if you only track 3 numbers this year.
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  Track these cost per cow, break even per calf and operating
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  margin. These numbers do not care about
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  tradition or legacy. They don't care about excuses.
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  They just tell the cold hard truth.
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  And the ranches who win long term are the ones willing to
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  actually look at it and then do something about it.
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  This is the Cattle USA daily podcast.
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  I'm your host Lauren Moylan. Thank you for listening to
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  another podcast. I hope today's episode resonated
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  with you. I know it was a lot of hard
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  truths, but I'm sure they were a lot of things that many of our
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  listeners needed to hear. It resonated with you.
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  Let us know, make a comment down in the comments.
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  Go rate and review the show and leave us a comment there.
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  We really appreciate it here at the team and we'll see y'all
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  next time. Have a good one y'all.