Financial and Performance Benchmarks for the Heifer Operation Normand St-Pierre, Ph.D. Department of Animal Sciences The Ohio State University (614)

Benchmarks: a PARADOX n Very useful for comparing yourself to your peers. n But can just as easily lead you in the wrong direction.

Benchmarks n Empirical u Survey of producers F Who – Representative sample F Data Validation F Definitions

The Chicken and the Egg n Are the benchmarks driving the producers? or Are the producers driving the benchmarks?

Benchmarks n Empirical n Expert-based u Assumptions u Says who? u The chicken and the egg

An Expert Benchmark – The OSU Budget

Questions n What if you feed more corn silage or haylage as opposed to hay?

Questions n Where are the dead heifers?

Questions n What year?

Financial Benchmarks: The Sweet 16 n 16 measures of profitability, solvency, liquidity, repayment capacity and financial efficiency n 3 Solvency ratios: u Debt to Asset ratio u Debt to Equity ratio u Equity to Asset ratio

The Sweet 16 n 3 Solvency ratios: u Debt to Asset ratio (D/A) u Debt to Equity ratio (D/E) u Equity to Asset ratio (E/A) n However, Asset = Debt + Equity n If D/A = 0.40 then u E/A = 0.60and u D/E = 0.66 n So why use three ratios when one captures 100% of the available information?

Cost of Raising Replacements

1 10% annual discount rate

Land

Land Price and Feed Costs

Benchmarking Nutrient Costs

Benchmarking Nutrient Costs (ADG = 0.8 kg/d 1.75 lb/d)

Benchmarking Nutrient Costs ME = $0.052/Mcal; RDP = $-0.031/kg; RUP = $0.303/kg

Benchmarking Nutrient Costs

Benchmarking Nutrient Costs 400 kg, 880 lbs ME = $0.052/Mcal; RDP = $-0.031/kg; RUP = $0.303/kg

Question the Authority n Who pays for the dead animals? n What is the value of time? n What is the relationship between the different elements of the benchmarks? n Is there a free lunch?

The End