1.0 Introduction
1.1 Mission Statement
The mandate of the cow-calf-contracting corporation is to produce and distribute high
quality calves to the market. The cow-calf contracting will also provide an opportunity
for producers to enter the cattle market. Market penetration will be achieved through
strong marketing plans.
1.2 Background
This business plan outlines the establishment of an exclusive beef production venture in
rural Saskatchewan. This venture is unique in that it is a virtual cow-calf contracting
service. The cows will be owned by Triple C and operated under contract terms and
conditions by operators who will be paid contracting fees. It is intended that this business
will be profitable for investors and will increase producer returns.
This particular business will be located near Yorkton, Saskatchewan on an acreage of
11.25 acres. The company will be owned by shareholders. The shareholders will consist
of producers and feedlots. Triple C’s base plan is to start with a 2000 cow herd which
will be contracted out to local producers. The producers will then raise the calves and the
calves will then be sold to feedlots. Triple C would like to contract 100 head of cattle to
each producer. Thus, Triple C would like to have approximately 20 producers to work
with. The producers will be paid a certain contract fee per day per animal. The board of
directors from time to time will review these costs for services, to ensure that the cost
recovery is fair.
The objectives of this business are to provide primary producers with an opportunity to
horizontally integrate, pool resources, reduce risk to the producer, and create efficiency
through economies of scale. This business plan will create an exclusive opportunity for
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young farmers to specialize in beef production. It is an attractive way to diversify current
crop production. The virtual cow-calf contracting setup will have a positive effect on the
environment because there is an optimum distance between herds that would otherwise
be concentrated at one site. The long-term plan is to create a consistently high quality
product and move up the value chain to capture a premium in the market place.
1.3 Business Structure of Triple C
Triple C will be formed as a private corporation. This has been decided since
shareholders will be the owners of the company, which is in itself a legal entity. Also, by
being a corporation, Triple C will be able to have different types of shareholders. The
shareholders will share in management by participating in the annual shareholders’
meeting, where they will elect a board of directors to manage the company. The board of
directors will then manage the company by directing the general manager. As a private
corporation there will be a limit as to the number of shareholders. The advantage of
being a private corporation is that the owners will have limited liability.
1.4 Short Term Goals
Triple C’s short-term goals are as follows. It wants to excel in marketing the calves but
also in the marketing of the service; where the service is providing cattle to a farmer to
raise. Triple C has also made it one of its goals to stay on the leading edge of research
and development in the cattle industry, in order to ensure production of high quality
calves at a low cost.
Triple C wants a low rate of disease in the herd. It has set a goal of less than 3% death
rate for the cattle. It wants to produce a high quality calf at all times to ensure a positive
market for the calves. Triple C also wants to provide a high quality service to the
farmers. Another goal the company is striving for is to make sure there is efficient
transportation costs when moving the cattle. It would like to be efficient in the
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movement of cattle with regards to moving the cattle to the producer, and when they are
taken to the market; all of this is with the intention of reducing costs at all times. At all
times Triple C wants to make certain that a good market price will be attained for their
cattle. Triple C wants to take at least 92.5% of the calves to market every year. The
company also wants to implement a reward program for the farmers who maintain a high
level of standards and produce top quality cattle. At all times Triple C wants to secure an
opportunity for producers to enter into the cattle industry.
Table 1: Short Term Goals
Goals:
Short Term
Key Result
Targeted
Target Date
How to Measure
Goals
Attainable and
Realistic
Accomplishes
Company
Mission
To excel in
marketing through
education of new
marketing
opportunities
To use strong
markets when
selling the cattle
Year 1
Must have taken
at least one class
in year one on
marketing
Yes
Yes
To stay on the
leading edge of
research and
development in
the cattle industry
Stay on the
leading edge of
research and
technology
Every year
The ability to
produce a high
quality calf at a
low cost
Yes
Yes
Low death rate for
the cattle
Less than 3%
death rate for the
cattle
Less than 2%
disease rate in the
herd
Ideal weight at
weaning 540lbs
Year 2
Measurable by
death rate
Yes
Yes
Year 1
Measurable by
disease rate
Yes
Yes
Year 2
Measurable by the
weight of the calf
Yes
Yes
Provide timely,
efficient service
Year 1
Measurable by
comments from
the producer
Yes
Yes
Want a low rate of
disease in the herd
To produce a
quality calf
To provide quality
service to the
farmer
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Table 1: Short Term Goals Continued
Goals:
Short Term
Key Result
Targeted
Target Date
How to Measure
Goals
Attainable and
Realistic
Accomplishes
Company
Mission
To have efficient
cattle
transportation
costs when
moving them from
market to
producer and
producer to
market
Safely transport
cattle to their
destination
Year 1
Number of trips
and if there was
any safety
problems in the
transportation
process
Yes
Yes
To take 1850
calves to market
in the first year
To reward farmers
who maintain a
high level of
standards and
produce top
quality cattle
To take 92.5% of
the calves to the
market
- Proper nutrition
- Weight
- Herd health
- Quality of herd
Year 1
Measurable by
number of calves
taken to market
Measurable by
weight, quality,
and health of herd.
Yes
Yes
Yes
Yes
Year 2
1.5 Long Term Goals
One of Triple C’s long term goals is to expand the business throughout Saskatchewan in
the next ten to fifteen years, rather than solely concentrating on the Yorkton area. Triple
C also wants the cattle to have a conception rate of 97.5% in the years to come.
Triple C also wants to ensure it has strong investors in the company from feedlots to
ensure it will have a strong market for its calves. Also once Triple C has these companies
investing in it, it wants to then insure that they want to stay invested in the company.
Once the company grows it will give the investors a return on there investment.
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Table 2: Long Term Goals
Goals:
Long Term
Key Result
Targeted
Target Date
How to Measure
goals
Reachable and
Realistic
Expand the
business
throughout
Saskatchewan
To have feedlots,
and angel investors
invest in the
company so they
will be ensured to
get a certain
quality and
quantity of cattle
from the cow-calf
contracting
corporation every
year
To gain new
producers within
Saskatchewan
15 to 20 years
By percentage of
growth of producers
Yes
Achieves
Company
Mission
Yes
To guarantee a
steady supply of
top quality
calves
Year one
By the price
received and the
ease of finding a
market for the cattle
Yes
Yes
Want at least 1950
of the cows to be
pregnant each year
out of the 2000
head
97.5%
conception rate
Year one
Measurable by the
percentage of cows
bred
Yes
Yes
2.0 Industry Overview
2.1 Industry Background
The cattle industry has been evolving and changing for centuries. Beef production is
changing in response to consumer demands in terms of quality and consistency. Its
emergence gained significance when it was recognized that domesticating cattle would
result in a consistent supply of milk, meat, clothing and power, which came from cattle
being used as draft animals. The organizational structure of the cattle industry became
complex when agricultural production efficiency made rapid strides through increased
mechanization, thereby permitting people to pursue occupations other than producing
their own food supply. By people having released time from land, accumulation of
capital, and creative ability generated the Industrial Revolution. In turn, industrial
development has provided an abundance of goods and services.
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The beef industry includes breeding, feeding, and marketing cattle with the eventual
processing and merchandising of retail products to consumers. The process involves
many people and utilizes numerous biological and economic relationships. Most
important, however, is the time involved: 24 to 36 months are required from breeding
time until the product can be made available to consumers.
Commercial cow-calf producers maintain cowherds and raise their calves from birth to
weaning. Each cow is expected to produce one calf per year. The calves are the primary
source of revenue for the producer and they also serve as a source of heifers to replace
cows that die or are culled.
Most cows will calve in late winter and early spring, with the majority of calves being
born in February, March, and April. Some producers calve their cows in the late summer
or fall, primarily to reduce losses from calf scours and to complement their forage
production program. Calves are usually weaned at the same time of the year, with their
ages ranging from 5-10 months of age.
2.2 Local Concerns
Beef prices are a local concern. The costs to produce the animals must remain low or at
least steady since this will affect the beef prices that consumers will be seeing. There are
many substitutes for beef and having higher retail beef prices would decrease consumer
demand and consumption. Another concern involves the convenience of preparing the
meat. Consumers are leading rushed lives and need quick meal options. If the beef
industry does not keep pace with this type of demand, retail sales will suffer drastically.
An added concern is animal right’s activists. Intensive animal production is one of their
primary concerns. However, this may not affect Triple C as much, since there is only a
100 head grouping with each producer.
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2.3 Environmental Concerns
Triple C puts a relatively large number of cattle into one area. This may cause some
water and grazing problems. The bacteria from the cattle could run into the local water
sources, thereby polluting it. Many animals on the same pasture could also damage the
trees that are fenced in on that pastured land. Cattle tend to chew and rub on the
surrounding trees, which could injure or kill the trees. However, since there will only be
100 cow/calf pairs with each producer, the results will not be quite as detrimental as
opposed to putting all 2000 cow/calf pairs in one place.
2.4 International Concerns
Some major international concerns include Mad Cow Disease. If this disease were to
spread to Canada, Triple C would face damaging consequences. Consumers would stop
eating beef for fear of contracting the disease themselves. Another consequence that may
need to be dealt with is if the herds did contract the disease, Triple C would have a total
loss, as all of the animals would be put down.
2.5 Western Grain Transportation Act
An inquiry in 1975 showed that the cost of moving grain by rail was 2.58 times higher
than what the grain producers were paying the railways for that service. In 1983, this
prompted the government to introduce the Western Grain Transportation Act (WGTA),
which replaced the Crow Rate. It was a government subsidy that was paid to the railways
in order to take care of the projected $658.6 million loss that they had experienced during
the previous years. However, in 1995, the Canadian Government chose to end the
WGTA subsidy.
With the loss of this subsidy, it means that farmers now have to pay the total
transportation cost. This has led to the exportation of more high value, low volume
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crops, such as oilseeds. The low value, high volume feed grains that have high
transportation costs have largely increased their presence in the value-added sector.
These high transportation costs have also increased the occurrence of large feedlots
across the Prairies, as they are now able to get the feed at a cheaper price.
These changes have improved the economics of livestock production in the Prairie
Provinces. This weakening in grain revenues has producers looking toward an
assortment of diversification options to help strengthen incomes. One of the
diversification options is for producers to form community owned cow-calf operations.
This alternative allows them to expand without having to make significant changes or
capital investments in their individual operations. This also helps them to branch out and
make use of the competitive advantages that the livestock industry offers.
2.6 The Market
The cow-calf operation will be able to achieve greater economies of scale by combining
their resources, as opposed to what individual producers could achieve on their own.
The risk that is associated with the diversification project is shared with the other
investors in order to limit potential losses. This way they can only lose the amount that
they invested.
Price cycles in the livestock industry are negatively correlated with those of the grain
industry. Therefore, the cow-calf operation will help to smooth the flow of income for
grain producers. The development of a large cow-calf operation in the area will provide
farmers with alternative marketing opportunities to further broaden their operations. This
could include the sale of feed grains and forage, as well as having the ability to have the
manure spread on their land to improve the soil’s fertility and to reduce fertilizer
expenses.
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The beef industry is one of the leading agricultural industries in Canada. Ever since
1990, Canadian red meat and live animal exports have expanded from $1.9 to $4.2 billion
(Saskatchewan Agriculture and Food, 1998). From 1993-97, red meat exports have
increased 83% and livestock exports have also gone up 36%. The value of Saskatchewan
exports has grown from $37 million to $65 million over the last 4 years.
Beef is the number one meat eaten and ground beef is the largest portion of beef
purchased at both foodservice and retail sectors. This makes it the most accepted type of
meat.
In July of 2001 there were 1,175,000 beef cows in Saskatchewan. This is up from last
year at this time in 2000 there were 1,113,000 beef cows (Saskatchewan Agriculture and
Food, 1998). This is good for Triple C, as there are more cows available to purchase.
Triple C will be buying 2000 head in a short amount of time, so one of its major concerns
is, will there be enough high quality cattle available. Steers in July of 2001 were at
115,000 head in Saskatchewan. This is down from July 2000, as there were 123,000
steers in Saskatchewan. This is also beneficial for Triple C, as there will be more room
in the market to sell steers when they are weaned.
There is usually heavy demand for lightweight feeder cattle in the months of March to
June. This demand is due to the lower feeder numbers and the prospects of cheap grains
and abundant pasture.
The prices for D1 and D2 cows are somewhat high from March
to July and are quite low in November (Saskatchewan Agriculture and Food, 1998). This
is the result of supply and demand for D1 and D2 carcasses. Cows should not be culled
in November; rather they should be marketed in May in order to get a return of up to 22%
above what is normally expected.
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3.0 The Operations Plan
Triple C’s operations will create an opportunity for young producers to start up in the
cattle industry. It will also allow smaller cow-calf operators to expand without a large
capital investment. The main difference between the cow-calf operators and Triple C is
that the contracting service will be incurring the large costs that it takes to start up a cattle
operation. This project has the advantage of economies of scale and is planned in an area
of the province where cattle numbers can be expanded. Cattle production in the Yorkton
area can easily complement current crop production.
Triple C will own 2000 head of cattle. Triple C will contract out their cattle to
approximately 20 producers who will each calve out 100 cattle. The producers will be
paid for taking care of the cattle on a per day basis. Operators will receive $1.75/cow-calf
or $1.50/cow when she is without a calf to when the calf is one month old. In making a
decision about the contracting costs, Triple C based their decision on the well being of
the producers and the need to optimize returns for investors. Custom feeding costs will
vary over time depending on changes in feed costs and the demand for cattle.
The calves produced will weigh on average 550 pounds. The calves will be marketed
through Heartland Livestock Services (Nilsson Bros. Inc.) and various feedlots. Triple C
will have the following production parameters:
1. 2000 cows to calve in year 2002
2. Calves will be sold when they are 8 months of age
3.1 Site Location/Land
Triple C will purchase an acreage within the Rural Municipality of Langenburg
(#181), with a legal land location of SE-21-20-32-W1. The house is 1435 sq.ft with five
rooms on the main level. The lot size is 11.25 acres, with a detached garage, barn,
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quonset and two steel grainaries. The cost of this land and buildings will be
approximately $59,000.
3.2 Buildings and Facilities
3.2.1 Quonset
The quonset will be used for storing the two pickup trucks and two livestock trailers.
3.3 Machinery and Equipment
3.3.1 Pick-up Trucks
Two used Dodge Ram ¾ ton 4X4 diesel will be purchased for $80,000 (Dodge City,
2001). They will be used for everyday operations.
3.3.2 Livestock Trailers
Two new 21-foot long fifth wheel livestock trailers will be purchased for $12,193
(Flaman Sales, 2001). It will be necessary to purchase two trailers to transport the culled
animals to the livestock yards. The livestock trailers will transport 5-6 cows per load.
3.4 Stock Selection
3.4.1 Breeding Herd
The genetic plan includes the use of crossbred cows and Red or Black Angus and
Simmental bulls. Within the plan seven traits have been identified and form the basis of
the breeding program. These traits are:
•
Birth weight
•
Weaning weight
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•
Milking ability
•
Maternal instincts
•
Yearling weight
•
Calving ease
•
Carcass traits (carcass weight, rib eye area, backfat thickness, wean yield, and
marbling score)
3.4.2. Cow Herd
The cow herd will consist of crossbred Angus (Red and Black), Simmental and Charolais
cows. These breeds are known for their:
•
High fertility
•
Superior longevity
•
Quality feet, legs and udders
•
Milking ability
•
Strong mothering ability
•
Frame size (medium-large) and low to moderate maintenance
•
Calving ease
•
Disposition
•
Capacity to flesh easily to reduce wintering costs
The offspring of Angus, Charolais and Simmental cattle perform well in the feedlot and
have superior growth rates and carcass quality.
3.4.3 Bulls
The sires will be bulls of the Simmental and Red or Black Angus breeds. The sires are
selected for low birth weight, calving ease, milking ability, attitude and growth rates.
The bulls must have a birth weight of less than 90 pounds and must also have been born
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unassisted. The sires will be semen tested before they are brought onto the farms and
will be evaluated for good temperament and conformity.
3.4.4 Stock Purchases
Triple C can purchase the initial 2000 cattle through two primary methods; current cattle
producers and auction sales. Triple C will make an attempt to purchase their entire
inventory of cattle through auction sales. This will allow Triple C to be able to get a
large quantity of cows at lower prices.
3.5 Performance Targets
Triple C is developed around the economical animal performance factors. The decision
has been made to have all crossbred calves sold directly to feedlots at weaning time. This
will occur once it has established a good working relationship with the feedlots.
3.6 Producer Performance
All producers will be required to follow a rigid beef management program and keep
detailed records on the animals and procedures followed at all stages of production.
Producers will be encouraged to use the food production practice protocol of the
Canadian Cattlemen ‘Quality Starts Here’ program (Agriculture and Agri-Food Canada,
2000). Triple C has recognized that there may be a need to reward those producers who
have superior performance on their farms. Therefore, the records will be used to monitor
their performance. At this stage, Triple C is considering paying out a percentage of the
calf crop to proven producers. This reward system will be put into place in year three of
operation.
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3.7 Importance of Record Keeping
Triple C will keep accurate records on animal performance and overall herd health. Triple
C also requires continual records of contracting costs.
The following production records will be kept:

Cattle inventory with animal description, identification, purchase date, date sold and
reason for culling

Calving records (births)

Drug inventory record

Individual treatment records

Mass treatment record

Processing record

Breeding performance

Location of all cattle

Death loss

General matters
The following contracting records will be kept:

Payment for services provided

Accounts payable
In support of investor interests, a report will be prepared concerning the physical
inspection of the cattle and records. These reports will be presented quarterly at the
board of directors meetings.
3.8 Operation Description - Daily, Weekly, Monthly, Yearly
The operation description for Triple C will be described on a daily, weekly, monthly and
yearly basis.
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3.8.1 Average Business Day
The manager will be responsible for the direction and completion of all projects
undertaken by Triple C. Daily activities will include keeping close contact with all
producers about herd health and animal performance. A strong continuous channel of
communication must be demonstrated between management and the primary producers.
3.8.2 Average Business Week
The manager will oversee all activities undertaken. The manager will generate a weekly
report on the past week’s operational activities. The manager will also include the plan
for the next week’s activities. During an average business week, the manager would be
in contact with all twenty producers. As shown in the table below, all employees will
have a steady workload.
Table 3: Weekly Activities in Spring Calving Breeding Season (April)
Monday



Tuesday
Wednesday
Thursday
Friday
Office hours are from 8:00a.m. – 5:00pm.
The Secretary and Accountant will unlock and open the doors everyday and close the office at 5:00pm
The General Manager or Vet Assistant will have an emergency number (cell phone) they can always be reached at if any problems
arise in the office when they are on the road.
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Table 3: Weekly Activities in Spring Calving Breeding Season (April) Continued
Monday
Tuesday
Wednesday
Thursday
Friday








Manager is in
contact with all
producers to
discuss the
breeding season.
Manager must
remind the
operators that the
cows should be
fed a high level
of nutrition to
ensure excellent
reproductive
performance.
Secretary
answers all
phone calls.
Accountant will
be submitting the
G.S.T receipts
for rebate.



Vet assistant travels
to producers’ farms
to ensure the
breeding season is a
success.
Accountant will
continue to record
receipts for G.S.T.
Secretary will
answer any phone
calls that the
producers may have
about nutrition
during breeding
season.
Manager will travel
to various
producers’ farms to
inspect calves and
make decisions
about marketing.




Secretary contacts the
producers to remind
them to keep fertility
records.
Vet assistant will
help producers sort
their cattle into
selected breeding
groups.
Manager will spend a
day in the office,
monitoring market
values.
Manager should plan
some marketing
alternatives.
The accountant will
be preparing the
monthly financial
statements to
determine where the
company is for cash
flow.





Manager travels to
producer farms to
spot check cows for
breeding activity. He
will make sure the
bulls are not injured.
Vet assistant
continues to deliver
bulls to the
producers.
Secretary will enter
the birth records from
the spring calving
season
Accountant will be
preparing the tax
returns for Triple C
Manager should
market all cows that
lost their calves
during calving
season.
Manager must
determine if creep
feeding is an
economically viable
alternative.




Manager will inspect
the calves at various
producers’ farms.
Vet assistant will
travel to producers to
check out the spring
calves.
Secretary continues to
enter the birth records
from the spring
calving season.
Accountant will
continue to prepare tax
returns.
Manager will make
sure the mineral-salt
mixture is available
for the cattle and that
the mixture has
adequate levels of
special mineral in
order to prevent
problems.
3.8.3 Average Business Month
Each month all accounting records will be updated and internal financial statements will
be made available to the manager. From these financial statements, financial decisions
will be made.
3.8.4 Average Business Year
All board of directors will meet quarterly in the months of March, June, September and
December. The table below shows the management calendar for our average business
year. This time series process diagram illustrates the activities Triple C will be involved
with throughout the production year.
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Table 4: Management Calendar for Cow-Calf Operation with Spring Calving
Major Activities
Jan Feb
Mar
April
May June July Aug Sept Oct Nov Dec
Planning, assessing goals, record
XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX
analysis
Calving
XX XXXX XX
Breeding preparation (equipment, bulls)
XXXX
Vaccinate cows
X
Breed cows
XX XXX XX
Brand, castrate, dehorn calves
X
Vaccinate calves (Blackleg)
X
Pregnancy test
X
Control pinkeye
XXX XXX XXX
Fly control tags
X
Wean calves
X
Process weaning weights
X
Vaccinate at weaning (IBR)
X
Retag cows
X
X
Cull cows (sell or feed)
X
Increase pre-calving level of feed
X
Keep facilities and equipment repaired
X
X
X
X
X
X
X
X
X
X
X
X
Income tax preparation and filing
X
Income tax evaluation and adjustment
X
Cash flow update and evaluation
X
X
X
X
X
X
X
X
X
X
X
X
Check salt and mineral supply
X
X
X
X
X
X
X
X
X
X
X
X
Evaluate target weights for calves
X
X
Evaluate management plan
X
X
X
X
X
X
X
X
X
X
X
X
Spend time planning, both short/long
X
X
X
X
X
X
X
X
X
X
X
X
term
Check water supply
XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX
Attend seminar or workshop
X
X
X
X
Plan next year's budget/cash flow
X
statement
X= spring calving herd. Placement of letter within the month shows the week designation. Type of activities and timing
of activities may be different for other operations.
Source: Saskatchewan Agriculture and Food, 1995
3.9 Quality Control Program
Small independent producers raise the majority of Triple C’s beef so there are many
production practices that will be in use. This encourages Triple C to implement a quality
control program. For an effective quality control program, the producer must be willing
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to use safe production practices. There are many beef quality assurance guidelines that
producers must follow.
Triple C’s policy emphasizes appropriate animal husbandry and hygiene practices,
routine health examinations on the animals, and administration of appropriate
vaccinations. When using antibiotics, the producers would consult with the veterinarian
assistant on the selection and use. Triple C will have minimum standard guidelines for its
cattle producers. These guidelines will provide Triple C the opportunity to generate high
quality cattle. This course of action includes:

Providing appropriate nutritional feedstuffs.

Handling and transporting cattle to minimize stress and bruising.

Individually identify any animals treated to ensure proper withdrawal time.

Make records available to the manager of Triple C.

Adequate quality control programs should be in place for incoming feedstuffs.
These programs must be designed to eliminate contamination from molds or
chemicals of incoming feed ingredients.

Keep records of all products administered including: product used, serial
number, amount administered, location of administration on the animal and
withdrawal time.
3.10 Supply Analysis
In the year 1999, there were a total of 2,719,000 cows and calves in Saskatchewan. As
seen in this graph below, the total number of cattle on farms has been steadily increasing
since 1993. Thus, there should not be a problem in purchasing 2000 quality cows. The
suppliers of our cattle will be Nilsson Bros. Inc.
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3500
3000
2500
2000
1500
1000
500
0
99
98
19
97
19
96
19
95
19
94
19
93
19
19
92
19
91
19
19
19
90
Bulls
Beef Cows
Beef Heifers
Steers
Calves
Total
89
Thousands of cattle
Cattle on Farms July 1, 1989-1999
Year
Figure 1: Cattle on Farms July 1, 1989-1999
Source: Saskatchewan Agriculture and Food, 2001
3.11 Service Providers
Triple C will make the initial purchase of cattle through Nilsson Bros. Inc. As well,
Nilsson Brothers Inc will market the calves produced by Triple C. Therefore, Nilsson
Brothers Inc. will be the channel of distribution for the cattle. The veterinarian will
supply another service to Triple C. Triple C will use the veterinarian to implement herd
health and increase animal performance.
3.12 Capacity Limits
Triple C is starting with a base number of 2000 cattle. This is not a capacity limit
because each producer may be able to take on more than 100 cattle. Also, in the future
Triple C may expand the number of producers.
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3.13 Operation Costs
The operation costs for Triple C include start-up costs, variable and fixed costs, which are
included in the cost of goods manufactured, cost of goods sold, working capital and
capital budget summary. Detailed operating costs are presented in appendix A.
3.13.1 Start-up Costs
Triple C will officially begin operations in January of 2003 which will be considered year
one, with the purchase of 2000 bred cows and 80 bulls. Triple C’s start-up costs will
include the purchase of the animals, the buildings and facilities, along with commercial
and office equipment. The cattle purchase will cost $2,200,000 and the bull purchase
will cost $160,000, plus $1,371,553 in remaining costs, which brings a total direct
material purchase of $3,731,553. There will also be an initial shipping cost for the cattle
and bulls, which is approximately $10,480. The start-up costs for the office supplies are
approximately $11,353. Refer to table 5 below for details.
Table 5: Start up Costs
Start-up Costs
Purchase of cattle
Purchase of bulls
Buildings and facilities
Commercial equipment
Initial shipping costs
$2,521,673
2,200,000
160,000
59,000
92,193
10,480
3.13.2 Contracting Costs
Producers will be paid $1.75 per cow calf pair for 245 days. For 120 days the producer
will be paid $1.50 per day for the cow without the calf. The producer will also be paid
$1.75 per day for 365 days for the bull. In total in a year per cow a producer would be
paid $608.75 in contracting costs. While for the bull the producer would be paid $638.75
for the year.
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Table 6: Contracting Costs
Price/cow/day
Days
Number of Cows
Total
Total Cost per Cow
Total Contracting Costs per year
March to October November to February
1.75
1.50
245
120
2000
2000
$
857,500.00 $
360,000.00
608.75
$
1,217,500.00
Price/Bull/Day
Days
Number of Bulls
Total
$
Total Contracting Costs (cows/bulls) $
1.75
365
80
51,100.00
1,268,600.00
3.13.3 Cost of Goods Sold
The variable costs included in the cost of goods sold are feed, veterinarian expenses, fuel,
maintenance, repairs, death loss, transportation, office supplies and contracting costs.
Table 7: Cost of Goods Sold
Year
2002
2007
2011
Beg Finished Cow/Bull Inventory
Beg Finished Calf Inventory
Cost of Calves Produced
Cattle Available For Sale
End Finished Cow/Bull Inventory
End Finished Calf Inventory
$
$
$
$
$
$
3,953,407
3,953,407
2,360,000
-
$
$
$
$
$
$
2,554,540
2,232,381
4,786,921
2,605,631
-
$
$
$
$
$
$
2,765,116
2,297,303
5,062,419
2,820,418
-
Cost of Goods Sold
$
1,593,407
$
2,181,290
$
2,242,001
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In 2003 Triple C begins with no cow, calf or bull inventory. This is because the
operation is starting up in this year which means that it will not have any inventory until
the animals are actually bought. The values for cost of calves produced comes from the
summation of the values for direct materials used, direct labor used and fixed/variable
overhead costs.
3.13.4 Cost of Goods Manufactured
The largest part of our direct production costs is the contracting cost, which makes up
approximately 96% of the total.
Table 8: Direct Production Costs
Year
Vet on retainer
Lawyer on retainer
Medicine costs (cows)
Medicine costs (calves)
Medicine costs (bulls)
Medicine costs (per cow)
Medicine costs (per calf)
Medicine costs (per bull)
Contracting cost (cows & bulls)
Processing fee ($2.00/animal)
Total
2002
12,000
2,000
24,400
2,220
64
12.20
1.20
0.80
1,268,600
7,780
$1,317,064
2007
13,249
2,208
26,940
2,451
71
13.47
1.32
0.88
1,294,490
7,780
$1,347,188
2011
14,341
2,390
29,160
2,653
76
14.58
1.43
0.96
1,294,490
7,780
$1,350,891
3.13.5 Overhead Costs
The direct materials costs are derived from variable and fixed overhead. The variable
overhead cost is the larger of the two. This means that it could fluctuate from year to
year, either increasing or decreasing the total direct materials costs. The death loss value
included has great potential of being higher or lower. It simply depends on the general
health of the herd. The diesel fuel value may also change drastically depending on where
Triple C can locate the producers. Also, depending on the condition of the trucks and
trailers, the maintenance they require could waiver significantly.
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Table 9: Overhead Costs
2002
2007
2011
Variable Overhead
Maintenance (trucks)
Maintenance (stocktrailers)
Misc. (office supplies and admin.)
Death loss (cows)
Death loss (bulls)
Diesel fuel
Total Variable Overhead
$
$
$
$
$
$
$
4,700
350
1,500
44,000
1,600
67,116
119,266
$
$
$
$
$
$
$
5,189
386
1,656
44,000
1,600
74,101
126,933
$
$
$
$
$
$
$
5,617
418
1,793
44,000
1,600
80,210
133,638
Fixed Overhead
Natural gas
Property taxes
Capital cost allowance
Electricity
Total Fixed Overhead
$
$
$
$
$
503
275
16,299
1,080
18,157
$
$
$
$
$
555
304
13,250
1,192
15,302
$
$
$
$
$
601
329
6,352
1,291
8,573
Total Overhead Costs
$137,423.30
$142,234.85
$142,210.30
3.13.6 Operating Expenses
In the first year Triple C will have a considerably higher operating expense as opposed to
the following years. This is due to the large start-up costs that will be incurred in 2002.
This cost comes from having to buy all of the animals at one time.
Table 10: Operating Expenses
Year
Telephone
Salaries
Benefits
Marketing (cattle)
Marketing (service)
Administration
Start-up costs
Interest LT. Debt
Total Operating Expense
2002
$
$
$
$
$
$
$
$
6,000
140,000
15,430
42,156
6,977
2,000
2,368,553
$
2,581,116
2007
$
$
$
$
$
$
$
$
$
6,624
154,571
17,036
42,999
7,703
2,760
231,694
2011
$
$
$
$
$
$
$
$
$
7,030
167,313
18,440
42,999
8,338
2,988
247,108
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3.13.7 Capital Expenses
The capital costs for Triple C are given in table 12. Triple C has inventories valued at
$2,360,000 or 96% of the total net working capital. The net working capital is the largest
of the capital budget summary, at $2,469,837 or 94% of the total capital costs. This price
includes 2000 cattle and 80 bulls. The large quantity of cattle needed in 2002 may pose a
problem for Triple C. To lower start-up costs, Triple C has opted to purchase the cattle
from the auction mart. This may cause a decrease in the quality of the animals due to the
large purchase order required.
3.13.7.1 Working Capital
Triple C’s net working capital includes its inventories. These inventories stem from all
of the cows, calves and bulls. There is a problem with cash as it is negative. This is
because all of the cash is tied up in inventories and because the base case projection is not
profitable.
Table 11: Working Capital
Year
2002
Cash
Inventories
Accounts receivable
Accounts payable
$
$
Total Net Working Capital
2007
$
$
$
(192,387)
2,360,000
0
302,224
$
2,469,838
$
$
2011
(2,542,082) $
2,605,631 $
0
159,186
$
222,735
$
(4,013,395)
2,820,418
0
163,485
(1,029,491)
3.13.7.2 Capital Budget Summary
In 2002 the capital required is much higher than the years that follow. This is on account
of Triple C having to buy the buildings/land, office equipment and commercial
equipment all in the first year. In the first year it bought everything that was required, so
in the next years there is no more need to purchase additional capital items, which in turn
significantly lowers the capital budget.
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Table 12: Capital Budget Summary
Year
Buildings/Land
Office equipment
Commercial equipment
Net working capital
$
$
$
$
2002
59,000.00
8,353.00
92,193.00
2,469,837.73
Total Capital Required
$
2,629,383.73
4.0 Marketing Plan
4.1 The Need for Triple C’s Contracting Service
4.1.1 Diversification
Many operators are diversifying their operations in order to spread out their fixed costs
over a larger number of assets. However, diversifying is a costly venture. Triple C
provides producers with the opportunity to diversify their operations without having the
large capital investment of buying the cows themselves, while receiving income.
4.1.2 Entrance for Young Producers
Increasing costs have deterred many young producers from entering the cattle industry.
One of the largest start up costs is that of purchasing the cattle. These producers cannot
join their previous generation’s operations because it will not be able to support both
families. Triple C provides young operators the opportunity to enter the cattle industry
and begin their own operations. Triple C also provides guidance for those operators who
are newcomers to the cattle industry. Operators will earn incomes, which may allow
them to expand their own cattle herd.
4.2 SWOT Analysis
The SWOT analysis considers all elements internal and external to Triple C that could
result in changes to the condition of the beef industry. Table 13 below shows the internal
strengths and weaknesses that exist for Triple C. However, there are external
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opportunities and threats beyond its control. This analysis will allow Triple C to foresee
weaknesses and threats to its operation, as well as strengths to build on and opportunities
to consider.
Table 13: SWOT Analysis.
Strengths







Adequate financial resources
Cost advantages
Positive reputation for quality in the beef
industry
Offer unique services
Ability to serve the needs of different
customers
Trained, experienced employees
Low cost of production due to low grain prices
Weaknesses






Opportunities









Increase number of producers and cattle herd
Entry to new markets
Diversify into related products
More marketing leverage for calves
Bulk orders to reduce costs
Low risk investment of increasing herd size
A way for young producers to enter the cattle
industry with a low level of debt
Opportunity for producers to diversify into the
cattle industry
Lower cattle production costs in comparison to
grain production costs due to the loss of WGTA
Narrow product line
Difficulty differentiating products from
competitors
Environmental issues
Farmers may have poor facilities
Triple C is a price takers; prices are determined
by the market
Long cash conversion and inventory cycles
Threats







Entry of new competitors
Rising costs to produce cattle
International issues affecting the beef industry
such as BSE and foot-and-mouth
Increasing demand in poultry and pork
industries
Increased transportation costs
Fluctuating markets
Weather
4.3 Product and Service Description
A strong marketing strategy is essential to the success of Triple C. Excellent marketing
will make potential customers aware of the unique services that Triple C provides. This
portion of the business plan will look at the processes required to distribute, price and
promote Triple C’s products and services in order to satisfy its customer’s needs.
The final product produced will be calves. Triple C will enter into an agreement with
producers where they are responsible for the production of calves in exchange for
income. Triple C offers a unique service to its customers. It provides producers with the
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opportunity to diversify their farms, as well as enter into the cattle industry. By
becoming involved with Triple C they are able to reduce their costs of expansion.
4.4 Target Market
Triple C plans to target feedlots and local auction markets, as well as play the futures
market. These markets will allow it to contract the calves for a better price. The target
market for its service is divided geographically and demographically. Geographically it
plans to target eastern Saskatchewan. This area is central to the office location and will
result in reduced costs, which include transportation. However, in the future, Triple C
plans to expand this area to broaden its customer base. Demographically it plans to target
producers in the age range of 20 to 55. This allows it to focus on those producers just
entering the cattle industry as well as those that are considering diversifying their
operations.
4.5 Customers
Feedlots and Heartland auction marts (Nilsson Bros. Inc.) will be the main customers for
the calves. Triple C plans to form a relationship with Heartland in which it will buy
Triple C’s cattle, in exchange Triple C will provide Heartland with a constant supply of
calves. This relationship will allow Triple C to get better prices on the cattle it buys and
for the calves it sells. The main customers for Triple C’s service are those operators
wanting to either enter the cattle industry or those who want to diversify or expand.
4.6 Selling and Advertising
Promoting the product and the unique services that Triple C provides is vital for the
company’s success. The purpose of advertising is to inform producers of the services
that Triple C offers and to persuade them to join with Triple C.
Most of the producers
will be located through word of mouth by talking to people in the agricultural industry
who work in the Yorkton area, as they may already know who would be interested in
such a venture. Another source of advertising is based on producer meetings. At these
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meetings the manager will inform potential clients of the services that Triple C offers.
These meetings will also allow Triple C to form personal relationships with their clients.
A second form of advertising that will be used is through newspaper ads. Triple C plans
to place monthly ads in the Western Producer. This newspaper is read by the target
markets and will inform them of the service that Triple C provides. Table 14 shows
Triple C’s total marketing expenses per year.
Table 14: Marketing Expenses
Meeting Expense:
Advertising for Meeting
Hall Rental
Food
Hand Book
Stationary
Memo Pad
Pens
Bags
Key Chains
Manager Expense for Meeting:
Travel for Manager
Meal for Manager
$50.00
$500.00
$750.00
$500.00
5 meetings @ $100 per meeting
$1.50 per person
$1.00 per handbook
$322.00
$154.00
$125.00
$166.00
Quantity of 500
Quantity of 500
Quantity of 500
Quantity of 500
$247.50
$150.00
0.33/km @ 150km
Selling and Advertising:
Newspaper
$4,410.00
Total Expense
$7374.50
5x5 ad in the Western Producer $73.5 per column width
4.7 Sales and Profit Objectives
Triple C’s objective is to produce a 25 percent return on sales by distributing 2000 cows
throughout the Yorkton area. However, this is a future objective due to the initial start up
costs of the business venture. Triple C also plans to provide high quality calves through
partnerships with Heartland auction marts (Nilsson Bros. Inc.) and through feedlots.
Triple C’s objectives regarding service is to achieve a leadership position in the cattle
industry, which is based on the unique services that it provides in comparison to its
competitors.
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4.8 Pricing Policy
The prices paid to producers are based per cow per day. Producers will receive $1.50 per
cow per day when without a calf and $1.75 per cow-calf pair per day. The bulls will be
contracted out for $1.75 per bull per day.
4.9 Channels of Distribution
Triple C will distribute the calves through Heartland auction marts (Nilsson Bros. Inc.),
and various feedlots in Alberta and Saskatchewan. It will haul the calves to the nearest
Heartland auction mart from the producer in order to be cost effective. By selling its
calves through auction marts it will be able to reach independent producers who want to
buy the calves. Triple C hopes to have the calves contracted in order to receive a better
price for them and to also start working with the futures market. These are likely markets
for Triple C since this is what its competitors use.
For the distribution of Triple C service it will distribute the cattle to producers by way of
a trucking company. Its competitors may have producers pick up or arrange for their own
transportation in order to get the cattle to their farms. It would be most cost effective if
Triple C could haul the 100 cows to the producer from one location.
4.10 Competitor Analysis
Triple C’s final product is the weaned calves off of the cows. Its direct competitors are
all other cow-calf producers who also produce weaned calves. However, Triple C plans
to overcome the competition by providing better quality animals and unique services to
its clients. Triple C also has competition regarding the services it offers. With reference
to its services, its direct competitors are those that also contract cattle to producers.
However, Triple C plans to offer better customer service and pricing alternatives.
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4.11 Future Markets
Triple C would like to eventually expand into the finishing business. It finds that it
would also be favorable in the future to skip the middleman and have contracts with the
processors themselves. This should not be too difficult as Triple C plans to consistently
produce high quality animals. Triple C feels that the processors would be pleased to have
a constant supply of good cattle to rely on.
5.0 Human Resources Plan
5.1 Job Descriptions
Human Resources
Organizational Structure
Board of Directors
5 Directors
Lawyer, Manager, Investor,
Veterinarian, Producer
Manager
Vet Assistant
Accountant
Secretary
Figure 2: Organizational Structure
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5.1.1 Board of Directors
The board of directors will consist of 5 people. In addition to their membership
responsibilities, they are responsible for setting the directives regarding day to day
operations. The members will be elected for a one-year term, however the same board
member can be elected in consecutive years. The directors will consist of a lawyer,
manager, an investor, the veterinarian and a producer. The board of directors are paid
$50 every meeting plus some expenses. The board of directors will meet quarterly.
5.1.2 Secretary
The applicant must have taken a Certified Professional Secretary (CPS) course. The
applicant requires knowledge of software applications, such as word processing,
spreadsheets, Internet, and database management. The applicant should be proficient in
keyboarding and have good interpersonal skills. Organizational ability and initiative are
especially important for this job. The applicant should be a self-starter and self
motivated. The applicant would be reporting to the manager. It would be an asset for the
applicant to have knowledge about the cattle industry.
Salary $20,000-$25,000 depending on experience
5.1.3 Accountant
The applicant must have an accounting diploma. The applicant must be able to provide
sound financial information and advice regarding business decisions. The applicant must
be able to complete timely financial reports and analysis. He/She must also be able to
carry out payment services as needed and the applicant must have the ability to adapt to
changing situations. The applicant must have organizational skills with the ability to
work with minimum supervision. He/She must possess sound knowledge of general
accounting principles. The applicant will be required to meet deadlines and should have
good problem solving, decision making, written and oral communication skills. The
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applicant requires knowledge of software applications. The applicant would be reporting
to the manager. Having experience in the cattle industry would be a great asset.
Salary $45,000
5.1.4 Manager
The applicant should have a high energy level, and be willing to take responsibility and
treat the business like it is their own. The applicant will need to be able to supervise, and
oversee the operations of a 2000 head cow-calf herd, which will be distributed throughout
the east central area of Saskatchewan. The applicant will need exceptional people skills,
be a self-starter with outstanding organizational skills. The applicant needs to possess a
valid driver’s license and be able to haul cattle around the province throughout the year.
The applicant will be in charge of approximately 20 farms distributed throughout the east
central area with about 100 head of cattle on each farm. The applicant will be in charge
of marketing and overseeing that the health of the herd is maintained. The candidate will
develop marketing plans. This person will also be in charge of market development,
sales activities, supervising staff and they will ensure the successful completion of the
Triple C marketing goals. In addition, a minimum of 5 years experience is required in the
cattle industry. Candidates should already have demonstrated the ability to develop and
implement marketing plans.
Salary $55,000
5.1.5 Vet Assistant
The vet assistant is responsible for ensuring that the 2000 head of cattle receives high
quality, humane care. The applicant will need to present a positive and professional
image when working with the producers. The vet assistant will oversee vaccinations of
herds and check herds for individual animal health. This person will deal with any health
problems the animals have or call in a veterinarian to deal with the health problem. The
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vet assistant will also be responsible to check all deceased animals for cause of death.
They will also assist in the training of new staff and volunteers. He/She will perform
other duties as assigned to ensure a positive public image and to enhance the operation of
the organization. The applicant will need to possess a diploma in animal health
technology or equivalent. The applicant will need accumulated knowledge of the cattle
industry. He/She will have the ability to lift and carry at least 50 pounds. Basic
knowledge of Microsoft Office and computer keyboarding skills (data entry) will be
required. Minimum of two years experience working with cattle, either personal or
professional is needed. The applicant will need good oral and written communication
skills. He/She will need to possess a valid driver’s license and have a good driving
record. Some transportation of the cattle may be required at certain periods throughout
the year. The applicant must be available to work irregular hours, weekends and holidays.
The candidate will have the ability to manage multiple tasks in a fast paced environment.
The applicant will need to be capable of working both independently and as a member of
a team as a vet assistant. The applicant would be reporting to the manager.
Salary $42,000
5.1.6 Lawyer (on retainer)
Triple C will consult with a lawyer on retainer regarding business decisions and legal
issues regarding business contracts.
Compensation $3,000
5.1.7 Veterinarian (on retainer)
Triple C will also have a vet on retainer to deal with the health of the herd.
Compensation $13,000
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5.2 Human Resource Strategy: Employee Benefits
As a small business starting up, Triple C’s success will rely on the close co-operation
between all of Triple C employees. As revenue streams increase Triple C will consider
bonuses, further compensations and increase hiring.
The Triple C Benefits Plan is designed to offer every employee a level of benefit
coverage that will act as a safety net in situations such as death, disability or serious
injury. The benefits plan is available to all full time employees and part time employees
whose standard hours per week are 15 hours or more. Employee’s spouses and children
are also eligible for coverage under the benefits plan. The employee has the option of
which plan he/she prefers.
5.2.1 Medical Options Plan
The Medical Options Plan provides a safety net above that of the employee’s provincial
medical plans. There are three coverage options available for an employee and their
family to choose from. The first option available occurs when a high deductible is paid,
where all eligible expenses are covered. The second option is where no deductible is
paid. However, this option includes a Pay Direct drug card. This card can be presented
at the time of purchase of a prescribed drug in order to receive a discount. This option
provides for on-going medical needs as well as unexpected expenses. Employees have a
final option to decline coverage. However, they may only decline medical coverage if
they have equivalent coverage under another medical plan. The cost is based on the
option the employee chooses and whether they prefer employee only or entire family
coverage.
5.2.2 Cost to Employee for Each Option of Coverage.
As shown in the table below, the options available to the employees would cost $55,
$295, $0 respectively.
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Table 15: Cost to Employee for Each Option of Coverage
Annual Cost
Medical Options Employee Only Family
Option 1
$55
$115
Option 2
$295
$630
Option 3
$0
$0
5.2.3 Health Dental Account
The Dental Plan assists employees with expenses from basic services to major restorative
dental work. There are three dental options available for employees to choose from.
Employee’s spouses and children are also eligible for coverage. Option 1 provides a
standard level of dental coverage. This option provides partial coverage for diagnostic
services, preventative care and basic work. It does not cover major dental work. Dental
option two provides the same range of dental services as dental option one, but at a
higher level of reimbursement. The final dental option provides complete coverage of
basic dental services, as well as partial coverage for major repair work.
5.2.4 Employee Life Insurance
Employee Life Insurance can help provide financial security for an employee’s family in
the event of their death during their career at Triple C. An employee’s life insurance will
be paid out to a designated beneficiary. Every employee will have a minimum level of
life insurance. Employees will have the option to increase their life insurance level. The
pricing for optional life insurance is based on the employee’s age, gender and smoking
status. Employees may also purchase optional coverage for children and spouses.
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Table 16: Employee Life Insurance (per thousand)
Age
Less than 35 $
35-39
40-44
45-49
50-54
55-59
60-64
Non Smoker
Smoker
Male
Female
Male
Female
0.54 $ 0.43
$ 0.86 $ 0.65
0.54
0.54
1.19
0.86
0.86
0.65
1.73
1.19
1.40
0.97
2.92
1.84
2.48
1.62
4.75
2.81
4.10
2.59
7.02
4.32
6.16
4.10
9.72
6.48
5.3 Training Programs
At the commencement of operations, all Triple C employees will meet all of the Triple C
producers. Employees will be sent to courses that will upgrade their knowledge of the
cattle industry. The manager will be expected to take a marketing course. The vet
assistant will also be expected to attend veterinary procedure courses to keep their
knowledge current.
6.0 Financial Plan
Assumptions and formulas have been set out in detail in Appendix C. The following
tables provide a fast reference.
6.1 Sources of Funding
Triple C will have one primary source of financing. The initial corporate investors,
producer investors, and community investors will provide equity financing. The owners
or initial shareholders are those holding class ‘A’ shares. Each class ‘A’ share contains
voting rights and has been valued at $1.00 Canadian. A share offering will be conducted
to raise the capital that is needed to start Triple C. It is the intent of Triple C to sell a
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36
minimum of $1,950,000 class ‘A’ shares. The number of shares may have to increase
and the price per share decrease, in order to obtain the financing requirements.
$1,000,000 of the equity required will be raised through sale of shares to the connecting
corporate investors. Nilsson Bros. Inc. will be the majority shareholder. The success of
Triple C will be the result of good calf prices. Other investors supplying equity may be
people seeking an opportunity within the community. They may want to put money back
into the community to help it remain viable.
$950,000 of the equity required will be raised from producer investors. Producer
investors will want to invest in the company because it will be a tax write-off in its first
years. Also, by investing in the company, producers will have more say in what occurs in
the company and how things are being run.
In summary, financing for Triple C operations will be provided by selling shares in the
company. Class ‘A’ shares will be sold to the corporate, producer, and community
investors.
6.2 Company Revenue
Revenue estimates are based on the sale of culled cows and bulls and weaned calves. The
selling weight of the calves is assumed to be 550 lbs. The long-term average of $1.26 per
pound is used. In the first year, the 2000 cows will produce a weaning rate of 92.5%,
which means there will be 1850 calves taken to market in October. There will be 80 bulls
used to breed the 2000 cows. This is a ratio of one bull for every 25 cows, which is
considered industry average. The bulls will be culled at a rate of 25% with an average
culling price of $0.69 per lb. Every year 20% of the cows will be culled at an average
culling price of $0.59 per lb.
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Table 17: Total Revenue for the Company
For the year ended Dec. 31
2002
Sales Revenue:
Calves
Culled Bulls
Culled Cows
Total Revenue
1,282,050
26,250
385,440
1,693,740
$
6.3 Income Statement
Cost of Goods Sold takes into account vet and medicine costs, lawyer, and vet on
retainer, contracting costs to the producer, salaries and benefits for the employees,
cow/bull replacement costs, processing fee, death loss, maintenance and fuel expenses on
the trucks and trailers.
Table 18: Income Statement for 2002 and 2003
For the year ended Dec. 31
2002
2003
Sales Revenue:
Calves
Culled Bulls
Culled Cows
1,282,050
25,875
311,520
1,307,691
26,393
317,750
Total Revenue
Cost of Goods Sold
1,619,445
1,593,407
1,651,834
2,134,670
Gross Margin
26,038
(482,836)
Expenses:
Telephone
Electricity
Benefits
Marketing (cattle)
Marketing (service)
Administration
Transportation
Licence (trucks)
Licence (trailer)
Insurance (trucks)
Interest- LT Debt
Total Expenses
6,000
1,080
15,430
42,156
6,977
2,000
4,630
1,974
282
338
0
80,867
6,120
1,102
15,739
42,999
7,117
2,550
5,653
2,013
288
345
0
83,924
Income Before Taxes
Income Taxes
(63,382)
0
(566,761)
0
Net Income(Loss)
(63,382)
(566,761)
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6.4 Cattle Cycle
The ‘cattle cycle’ is a term used to describe the rise and fall of supply, demand and price
in Canada and the world. There are changes that occur in any economic beef model. The
main change that occurs with a cow/calf operation is the feeder prices. The graph below
illustrates the changes in the Heifer and Steer feeder prices in the last five years. Heifer
and Steer feeder cattle prices have been steadily rising since 1996.
average $/cwt.
Prices of Steer and Heifer Feeder
Calves
150
500-600lbs
Steers
400-500 lbs
Heifers
100
50
0
1995 1996 1997 1998 1999
Years
Figure 3: Feeder Cattle Prices
Source: Saskatchewan Agriculture and Food: Statistics Handbook, 2001
6.5 Base Case Scenario
The base case scenario as described in the operations plan consists of a 2000 head of
cows. A list of critical success variables with their associated levels of importance
appears in Table 19.
Table 19: Critical Success Variables
Variable
Selling price of calves
Contracting Costs
Level of Importance (1, 2, 3)
1
1
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The price the calves are sold at and the contracting costs paid out are the two most
important parameters affecting profitability, liquidity and solvency of the business. The
calf-selling price is $1.26 per lb. in the base case. The contracting costs are $1.75 per
cow-calf pair for 245 days and $1.50 per cow for 120 days. Meanwhile, the contracting
cost for the bulls are set at $1.75 per day for 365 days.
6.6 Economic Analysis
Net income in the first year is negative and remains negative throughout the 10 year
projection. Since the net income is negative the cash flows also remains negative
throughout the years. The return on equity is calculated as cash flow after taxes divided
by owner’s equity and it represents the yearly return on the owners’ equity and retained
earnings. Return on Assets is calculated as the net income after taxes divided by total
assets owned by the corporation. The net present value and internal rate of return are the
measures used when evaluating the economic performance of the project. The IRR in
this project is –100%. The NPV of the project is negative at $3,878,384. The negative
IRR and NPV imply that the base case is not feasible.
Table 20: Break Even Analysis
Base Case
Worst Case
Best Case
Calf Price
$
1.26
$
0.72
$
1.35
NPV
(3,878,384)
(6,831,396)
(3,386,216)
Calf Price Variable
Average Annual Cash
IRR
Flows
Average Annual Net Income
-100%
(2,865,799)
(439,481)
-100%
(6,076,552)
(1,041,113)
-100%
(2,330,673)
(339,208)
Best Case
Base/Worst Case
Contracting
Prices
NPV
$
1.15 (1,679,810)
$
1.75 (3,875,960)
Contracting Cost Variable
Average Annual Cash
IRR
Flows
Average Annual Net Income
0.2%
(468,467)
3,760
-100%
(2,863,155)
(438,992)
Breakeven calf price
$
1.65
Breakeven Contracting Price
$
1.16
When examining the contracting prices the best case was found to be $1.15 per day but
this would only allow the producers to net $11,346 in one year. This is not enough for a
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family to live on assuming that the only income the family has is the 100 cow-calf
operation. In the worst case scenario, the producer is paid $1.75 per day and would net
$26,869 (refer to table 22) which is still an insufficient income for a family to live on.
6.7 Producer Operating Costs
The following statement reveals what the producer would make if they were being paid
$1.33 per day for 245 days for a cow-calf pair and $1.13 per cow for 120 days. They will
also be getting $1.33 per day for the bulls. These contracting costs are based on the break
even contracting costs. This summary shows that the producer would only make $11,346
net for a year worth of work.
Table 21: Producer Operating Cost Using The Breakeven Contracting Price
Calf Sales
Contracting for cows
Contracting for cow/calf pairs
Contracting for Bulls
Total Revenue
Operating Costs
Feed
Bedding
Breeding
Manure Removal
Facility and Fence
Miscellaneous
Subtotal Operating
120 days
245 days
365 days
Operating Interest
Total Operating Cost
Net Cash Income
Fixed Cost
Depreciation
Facilities
Equipment
Interest on Investment
Facilities
Equipment
Grazing Cost
Total Fixed costs
Total costs
Return to labour and Management
$
$ 13,560.00 $1.13per day
$ 32,585.00 $1.33 per day
$ 1,941.80 $1.33 per day
$ 48,086.80
$ 11,414.00
$ 2,900.00
$ 1,986.28
$ 1,650.00
$
737.68
$
400.00
$ 22,027.96
$ 1,101.40
$ 23,129.36
$ 26,058.84
$ 1,725.60
$ 2,809.80
$ 1,207.92
$ 1,201.97
$ 6,666.00
$ 13,611.29
$ 36,740.65
$ 11,346.15
Source: Saskatchewan Agriculture and Food, Economics and Farm Management Section, 1999. (The
breakdown of the numbers can be found in appendix A)
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In the table below the revenue made by the producer is based on the producer being paid
$1.75 per day for a cow-calf pair and $1.50 per day for the cow when she is without the
calf. In addition, throughout the whole year, the producer is being paid $1.75 per day for
the bulls. In the summary above it is assumed that the producer has 100 cows and 4
bulls.
Table 22: Producer Operating Costs Using Base Case Contracting Prices
Summary Statement - Cow - Calf Enterprise - 100 cows
Total
Revenue
Calf Sales
Contracting for cows
Contracting for cow/calf pairs
Contracting for Bulls
Total Revenue
Operating Costs
Feed
Bedding
Breeding
Manure Removal
Facility and Fence
Miscellaneous
Subtotal Operating
120 days
245 days
365 days
Operating Interest
Total Operating Cost
Net Cash Income
Fixed Cost
Depreciation
Facilities
Equipment
Interest on Investment
Facilities
Equipment
Grazing Cost
Total Fixed costs
Total costs
Return to labour and Management
$0.00
$ 18,000.00
$ 42,875.00
$ 2,555.00
$63,430.00
$1.50per day
$1.75 per day
$1.75 per day
$ 11,414.00
$ 2,900.00
$ 1,986.28
$ 1,650.00
$
737.68
$
400.00
$ 22,027.96
$ 1,101.40
$ 23,129.36
$ 40,300.64
$
$
1,725.60
2,809.80
$ 1,207.92
$ 1,201.97
$ 6,666.00
$ 13,611.29
$ 36,740.65
$26,689.35
Source: Saskatchewan Agriculture and Food, Economics and Farm Management Section,
1999.
Refer to appendix A to get the break down on the numbers.
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6.8 Contingency Plan
The contingency plan for Triple C looks at diversifying the business into a feeder/finisher
program where the cattle would be directly marketed to the processors. By doing this
Triple C would eliminate the middleman thereby increasing revenues. Also, by
delivering directly to the processors Triple C could demand a higher price for its’ product
because of the high quality cattle it could deliver and it could also supply the processors
with a certain number of cattle every year. As well, these finished calves would be born
and raised on the farm, which would reduce the risk of disease and infections.
6.9 Additional Scenarios
Triple C has other options available other than what is shown in the base case. Other
possible options include a different size cattle herd to start up with, as well as an
adjoining background/finisher operation so that Triple C could market its cattle straight to
the meat processor.
7.0 Conclusion and Recommendations
Over the course of the project, Triple C has run into several items that are viewed as a
cause for concern when starting a cow-calf contracting business in Saskatchewan.
Firstly, the contracting cost for the business is 96% of the expenses that the business
incurs. Triple C has decided not to lower the contracting costs because it is not
economical for the producer to enter the industry if the contracting costs are too low.
Secondly, the calf price is a critical variable. Cattle prices are known for their
fluctuations and Triple C would be unable to maintain operations if cattle prices were to
fall dramatically.
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Thirdly, Triple C entered the industry by purchasing 2000 head of cattle, which is a large
amount of inventory to pay for at one time. At this point and time in the industry, cattle
prices are quite high, which make it extremely expensive to start.
Fourthly, Triple C has decided to raise all of its capital by way of selling shares. Raising
capital through shares would be a very difficult task. Investors want a high internal rate of
return and since Triple C has a negative internal rate of return, investors are not likely to
invest in the company.
Triple C recommendations:
1. The company should start with a lower cattle inventory and build up more slowly.
2. The company should consider building their own facilities to produce the cattle
thereby eliminating the contracting costs.
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8.0 References
Personal Interviews
Dodge City, Saskatoon, Saskatchewan, October, 2001.
Flaman Sales Ltd., Saskatoon, Saskatchewan, October, 2001.
Tim Highmoor, Master program at the University of Saskatchewan, Saskatoon,
Saskatchewan November, 2001.
Aginfonet. http://www.aginfonet.com. October, 2001.
Agriculture and Agri-Food Canada. Canadian Cattlemen Quality Starts Here, Good
Production Practices for Cow-Calf Producers. January, 2000.
Farm Business Management FBMInet-BC: Commodity Information.
http://www.fbminet.ca/bc/commod/beef.htm. November, 2001.
Future Shop. http://www.futureshop.ca. September, 2001.
Manitoba Agriculture and Food.
http://www.gov.mb.ca/agriculture/livestock/beef/baa01s15.html. October, 2001.
Office Depot. http://www.officedepot.com. September, 2001.
ReMax Blue Chip Realty Yorkton, Saskatchewan.
http://www.remaxyorkton.com/mainpages/index.htm. November, 2001.
Saskatchewan Agriculture and Food.
http://.agro.gov.sk.ca/docs/livestock/beef/productioninformation/bradeg.asp. November,
2001.
Saskatchewan Agriculture and Food. Cow-calf Lease Agreements. Revised March
2000.
Saskatchewan Agriculture and Food: Statistics handbook.
http://www.agr.gov.sk.ca/docs/statistics/finance/other/Handbook99.pdf. November,
2001.
Saskatchewan Agriculture and Food, Economics and Farm Management Section.
Cow-calf Enterprise – Financial and Production Targets for Farm Managers – Workbook
Series. December, 1999.
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SaskTel. http://www.sasktel.com. October, 2001.
Staples. http://www.staples.com. September, 2001.
Statistics Canada. http://www.statcan.ca/english/censusag/tables.htm. October, 2001.
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Appendix A
Producer Cow Calf Contracting Handbook
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Producer Cow Calf Contracting Handbook
“Triple C”
Source: Agriculture and Agri-Food Canada
Good Production Practices for Cow-Calf Producers
Benefits of Good Production Practices
 Increase consumer confidence in the safety, quality and consistency of our beef.
 Increase market share for our beef both locally and internationally.
 Ensure humane and ethical treatment of animals
Unique Individual Animal Identification
 All newborn calves are uniquely identified with an ear tag at birth.
 All cows and bulls are uniquely and permanently identified with an identification tag
on their left ear.
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Record Keeping
 Records are kept on breeding, deaths, culls, sales, purchases, other transfers, feeds
and feeding.
 All processing and treatments (individual animal, mass injection or through feed and
water) are recorded, including vaccinations, medications (injectable, feed or water)
and other treatments (e.g. deworming). Treatment records include the date the animal
was treated, its eartag number, disease, drug used, dosage, location of injection on
animal, withdrawal period, and person who treated the animal.
 Cattle inventory records are maintained and updated each time cattle are processed.
 Drug inventory records are kept (including feed medication) and regularly checked
with the actual inventory. The expiry date on products is reviewed regularly.
 Records are kept on culled animals, and they include the date culled, animal ID,
reason for culling, selling price, and disposition if sent to slaughter (passed
condemned, and if condemned, reason why)
 A record is kept of each person’s responsibility at the ranch, and what procedures
they perform (job description)
Facilities, Hygiene and Cattle Handling
 Handling facilities are kept clean and in good working condition. They are
consistently maintained and repaired well in advance of anticipated use.
 Cattle are handled gently and humanely at all times, based on their natural instincts,
to avoid injury to cattle and cattle handlers.
 Staff will be trained on proper animal handling and treatment techniques.
 All equipment is kept clean and in good condition, including surgical equipment (e.g.
castrating and dehorning equipment), as well as treatment and feeding equipment
(e.g. scales and mixers).
 A sanitation program is in place for the equipment and the facilities.
Safe Animal Health Product Use
 All animal health products are used according to label directions.
 Animals are properly restrained when injecting medications or during implanting
procedures.
 If a needle breaks in the animal during injection, it is found and removed by a
veterinarian.
 Injection and implant sites are clean before injections are given.
 All injections are given in the neck; never in the top hip or thigh.
 No more than 10 ml (cc) is used in any one-injection site location. Multiple injections
are spaced 2-3 inches apart.
 Separate, labeled syringes are used for different products. Syringes are cleaned each
day and before a different drug is used in the same syringe.
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




Label directions are read before a medication is used to ensure the proper use
(disease), dosage, and location of administration, frequency and timing of
administration, withdrawal periods, negative side effects and storage.
All products are stored according to label directions in a separate, well ventilated,
clean location. Food is not stored in refrigerators that are used for animal medication.
Needles are changed recurrently (every 10-15 uses) or when bent, dull, burred or
dirty.
All drug withdrawal periods are strictly followed.
All staff are trained, including temporary relief staff (neighbors), on proper disease
detection, treatment protocols and drug use, record keeping and animal handling
techniques.
Culling
 Records are maintained on culling decisions and the disposition of culls is noted.
 Bulls are culled for unsatisfactory breeding soundness, physical defects, poor body
condition, and chronic disease.
 Cows are culled for disease, cancer eye, production inefficiency, poor maternal
behavior, bad feet and legs, inadequate body condition score, lack of teeth, wild
temperament, mastitis, udder defects, infertility (open or late), etc.
 Culls are sold in a timely manner and when in good body condition. If this is not
possible, they are fed until they are in good body condition.
 Cull cattle that are sold either directly to the packer or through an auction market,
should implement good cattle handling practices which provide feed and water for
animals held for an extended time.
Feeding Practices
 Feeding programs are designed to meet the requirements of all classes of cattle on the
farm. Feeding levels are adjusted when environmental stresses (wind, rain, snow, and
extreme cold) increase nutrient requirements, in order for the cattle to remain healthy.
 All cattle are dehorned to minimize dominant animals controlling access to feed.





If possible, cattle should be grouped by age, weight, and condition score to ensure all
cattle receive sufficient feed for their physical requirements. Younger, lighter cattle
have additional nutrient requirements for growth compared to older cattle.
Performance may suffer if larger, more dominant animals limit the younger ones’
access to feed.
Feed storage facilities are kept dry, clean and free of contaminants (medications,
pesticides, herbicides, fertilizer, rodents)
Pastures and water supplies are in good condition and are monitored regularly.
Feed equipment, feed bunks, and watering bowls are kept in good condition. They
are cleaned and repaired when necessary to ensure proper functioning and avoid
unsafe feed contamination.
Records are kept on all feed formulas.
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


Cattle are not overcrowded and there is sufficient feed, water and bedding space for
each animal.
A manure management program has been developed and implemented, and it
includes a nutrient management plan, management of wintering site runoff, controlled
access to water bodies (e.g. rotational grazing, off-site watering, access ramps,
fencing) and riparian management.
Feeding grounds are located away from water sources and cattle are rotated to ensure
natural spreading of nutrients.
Feed Preparation
 Incoming feed is inspected on arrival. Feeds are sampled and tested when
appropriate.
 Homegrown forages are sampled and sent for analysis as soon as possible after
harvest so that the results can be used to design the winter feeding program.
 Water sources are tested routinely for human and livestock safety.
 Feeding programs should be reviewed to determine if they continue to meet the
herd’s needs.
Calving
 A sanitation program for calving equipment, facilities, and treatment of sick and
scouring calves is in place.
 Calving records are maintained and include: calving date, cow and calf unique
identification, calving ease, calf vitality, calf sex, breed, birth weight, sire, mothering
problems (e.g., maternal behavior, milking ability), as well as any treatments or
deaths.
 Every effort is made to ensure calves receive 10% of their body weight of colostrum
in the first 12 hours after birth, either through suckling, stomach tubing or bottlefeeding. Frozen colostrum is kept from cows, preferably from within the herd.
 All newborn calves are identified with a unique ear tag at birth. A backup tag, with
the same ID number is on hand.
 Cows are checked frequently for calving difficulties and assisted early to avoid
calving complications.
 Bull calves intended for the feedlot are castrated using a humane and approved
technique by trained staff, prior to six months of age.
 All calves are dehorned in an effective, humane manner prior to 3 months of age.
 Adequate space and bedding is provided to ensure the animals’ well being and to
reduce the risk of disease.
Breeding
 Bulls pass a breeding soundness evaluation.
 Individual animal history records (including genetic history) are obtained from the
previous owner on all breeding stock.
 Replacement heifers are selected for maternal and reproductive ability, carcass traits
and production efficiency, depending on end use.
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
Breeding records are kept.
Weaning
 Animal inventory (cattle count) records are verified at weaning.
 Calves and cows are weighed and ear tags are monitored. If ear tags are missing, ear
tags are replaced to individually identify each animal. Records are kept on lost tags
and new ID, if new tags are different from previous ID.
 During pregnancy examinations, the cows are examined for disease and defects (e.g.
cancer eye, lump jaw, and lice). Cattle are culled, treated or fed appropriately.
Glossary of Cattle Terms
A
Anestrus. The nonbreeding season. [Females not in heat (estrus).]
Antibiotic. A substance that destroys or inhibits the growth or action of microorganisms.
Antibody. Protein produced by the body and carried in the blood that provides
protection against a specific disease by interacting with the disease-causing agent and
neutralizing it.
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Antigen. An enzyme, a toxin, or another foreign substance (usually protein) to which an
animal body reacts by producing antibodies specific to the invading antigen.
Appetite. The immediate desire to eat when food is present. Loss of appetite in an
animal is usually caused by illness or stress.
Artificial Insemination (A.I.) The deposition of spermatozoa in the female genitalia by
artificial rather than by natural means.
Aseptic. Refers to something being free from pathogens microorganism.
Average Daily Gain (ADG). The average daily liveweight that an animal increases by.
B
Backgrounding. The period in the life of a calf from weaning to around 800lb (364kg),
when it is ready to go on a high-energy finishing ration.
Balanced Ration. A ration which provides an animal with the proper proportions and
amounts of all the required nutrients for a period of 24 hours.
Birth Weight (BW). The weight of a calf taken within 24 hours after birth. Heavy birth
weights tend to be correlated with calving problems, but the conformation of the calf and
that of the cow are contributing factors.
Bloat. A digestive disorder of ruminants, usually characterized by an abnormal
accumulation of gas in the rumen, usually seen on the animal’s upper left side.
Brand. A mark used as a means of identification.
Brand Name. Any word, name, symbol, or device, or any combination of these, often
registered as a trademark or name, which identifies a product and distinguishes it from
others.
Bred. Refers to an animal that is pregnant.
Breed.


Animals that are genetically pure enough to have similar external
characteristics of color and conformation, and when mated together produce
offspring with the same characteristics.
The mating of animals.
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Breed Type. The combination of characteristics that makes an animal better suited for a
specific purpose.
Breeder. Owner of the dam (cow) at the time of service who was responsible for the
selection of the sire (bull) to which she was mated.
Budget. A projection of records and accounts and a plan for organizing and operating
ahead for a specific period of time.
Bull. An uncastrated male bovine.
Bull Testing. Method for evaluating the breeding soundness of beef bulls.
Bulling Heifer or Cow. A heifer or cow that is in estrus (heat).
C
Caesarian Section. The surgical procedure of taking an unborn animal, at or near
parturition, from the uterus by cutting through the abdominal and uterine wall. Caesarian
sections are required when the pelvic opening is too small to accommodate the passage of
the fetus or when the fetus is hopelessly mal-positioned.
Calf. The sexually immature young of cattle.
Calf Crop. The percentage of calves produced within a herd in a given year relative to
the number of cows and heifers exposed to breeding.
Calving. The act of giving birth.
Calving Difficulty. Abnormal or difficult labor, this causes difficulty in delivering the
fetus and placenta.
Carrying Capacity. The number of animal units (one cow, plus suckling calf-if there is
a calf; or one heifer 2 years old or over) a property will carry on a year-round basis.
Cash. The cash price refers to the price of live animals, not to a futures contract.
Cash Market. Cattle bought and sold for immediate delivery.
Castrate.
 To remove the testicles.
 An animal that has had its testicles removed.
Castrating. The unsexing of a male animal.
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Colostrum. The milk secreted by mammalian females for the first few days before and
following parturition, which is high in antibodies and laxatives.
Conception. The fertilization of the ovum or egg. The process of conceiving or
becoming pregnant.
Conformation. Body shape or form.
Cow. A mature female of the bovine species, usually having had at least one calf.
Cow-Calf System. The breeding of cows and the raising of calves.
Creep Feeding. A supplement for calves that are nursing their dams.
Crossbred. The offspring of a sire and a dam of differing breeds.
Crossbreeding. The mating of animals of different breeds.
Cull. An animal removed from the herd because it is below standards.
Culling. The process of eliminating less productive or less desirable cattle from a herd.
Custom Cattle Feeding. The feeding of cattle for a fee, usually without taking
ownership of animals.
Cutting. The separation of one or more animals from a herd.
D
Dehydration.
 The loss of water from the animal’s body as a result of sickness or not
drinking water.
 The removal of most or all moisture from a substance for the purpose of
preservation, primarily through artificial drying.
Depreciation. Costs represented by fixed assets, the original cost of which is partly
recaptured, currently.
Diet. A feed ingredient or mixture of ingredients, including water, which is consumed by
animals.
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Direct Selling. Producer sells livestock directly to packers, local dealers, or farmers
without the support of commission firms, selling agents, buying agents, or brokers.
Disease. An illness, a sickness, or any deviation from a state of health.
Drugs. Substances of mineral, vegetable, or animal origin used in the relief of pain or for
the treatment of a disease.
E
Early Weaning. The practice of weaning young animals earlier than usual.
Environment. The sum total of all external conditions that affect the life and
performance of a living creature.
Estrus (Heat). The recurrent, restricted period of sexual receptivity in cows and heifers.
Cows and heifers that are not pregnant usually come into heat 18 to 21 days following
their previous estrus.
F
Feed (Feedstuff). Any naturally occurring ingredients, or material, fed to animals for the
purpose of sustaining them.
Feed Additive. An ingredient or a substance added to a feed to improve the rate and/or
efficiency of gain of animals, it may also prevent certain diseases, or preserve feeds.
Feed Grain. Any of several grains most commonly used for livestock or poultry feed,
such as oats and barley.
Feed Out. To feed an animal until it has reached market weight.
Feeder Cattle. Young animals that carry insufficient finish for slaughter purposes but
will make good gains if placed on feed.
Feedlot. A lot or plot of land on which animals are backgrounded or finished for market.
Finish. To fatten an animal for slaughter. Also, the degree of fatness of such an animal.
Fixed Expenses. Expenses which do not change as business volume changes, such as
real estate taxes, interest on mortgage, depreciation, insurance, manager’s salary, and
similar items.
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Forage. Vegetable material in a fresh (pasture), dried (hay), or ensiled (silage) state,
which is fed to livestock.
Forward Contract. A forward contract calls for delivery at some time in the future. In
a forward contract, a cattle producer might make a deal with a buyer during the summer
months that calls for delivery of cattle in the fall at the price agreed upon in the contract.
Futures. A term used to designate any and all contracts which are made or established
subject to rules for delivery at a later date.
Futures Contract. A standardized, legally binding transaction in which the seller
promises to make delivery of a specified quantity and type of commodity at a specified
location(s) during a specified future month.
Futures Trading. The futures market is a way in which to provide (1) an insurance
medium in the marketing field, and (2) the facilities and machinery for underwriting price
takers.
G
Gestation. (Pregnancy). Refers to the carrying of the products of conception in the
uterus from fertilization to parturition. Gestation period is the time between mating
(conception) and parturition.
Grade. A measure of how well an animal or product fulfills the requirements for the
class.
Grain. Seed from cereal plants.
Grow Out. To feed animals so that they attain a certain desired amount of growth with
little or no fattening.
Growth. The increase in size of the muscles, bones, internal organs, and other parts of
the body.
H
Hay. Dried forage.
Heat (Estrus). The period when the female will accept service by the male.
Hedge. The purchase or sale of a futures contract as a temporary substitute for a
merchandising transaction to be made at a later date. Usually it involves opposite
positions in the cash market and the futures market at the same time.
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Hedgers. Persons who desire to avoid risks, and who try to increase their normal profit
margins through buying and selling futures contracts. They are feeders, packers, and
others actually involved in the production, processing, or marketing of beef or other
products. Their primary objective is to establish future prices and costs so that
operational decisions can be made on the basis of known relationships.
Heifer. A female bovine that has not yet given birth to a calf. Sometimes used to denote
females until their second calving.
Herd. A group of cattle (animals) collectively considered as a unit.
I
Immunity. The ability of an animal to resist or overcome an infection to which most
members of its species are susceptible.
Immunization. The process and procedures involved in creating immunity (resistance to
disease) in an animal. Vaccination is a form of immunization.
Ingest. To eat or take in through the mouth.
Intramuscular. Within the muscle.
L
Lactation. The secretion of milk. The period in which an animal is producing milk.
Liquidity. Convertibility of assets to cash.
Livestock Auctions. Trading centers where animals are sold by public bidding to the
buyer who offers the highest price.
Long. The buying of an open futures market contract. A trader whose net position in the
futures market shows an excess of open purchases over open sales is said to be long.
M
Management. The act or art, of managing, handling, controlling, or directing an
operation.
Manure. Mixture of animal excrements (consisting of undigested feeds plus certain
body wastes) and bedding.
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Market Class. Animals grouped according to the use to which they will be put, such as
slaughter or feeder.
Market Grade. Animals grouped within a market class according to their value.
Mineral Supplement. A rich source of one or more of the inorganic elements needed to
perform certain essential body functions.
Mortality. Death or death rate.
N
Nutrients. The chemical substances found in feed materials that can be used, and are
necessary, for the maintenance, production, and health of animals. The chief classes of
nutrients are carbohydrates, fats, proteins, minerals, vitamins, and water.
Nutrition. The science encompassing the sum total of processes that have as a terminal
objective the provision of nutrients to the component of cells of an animal.
O
Open. A term commonly used to indicate an unpregnant female.
Owners’ Equity (Net Worth). Total investments made in the business plus profits
earned through operations which have remained in the business (retained earnings).
P
Parturition. The act of giving birth.
Pasture. An area with plants that may be harvested by grazing animals.
Performance Data. The record of the individual animal for specific traits such as birth
weight, weaning weight, post weaning gain, yearling weight, etc.
Performance Test. The evaluation of an animal’s performance.
Polled. An animal that naturally has no horns.
Premium. Where the cash price is above the futures.
Prenatal. Before birth.
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Price Cycle. That period of time during which the price for a certain kind of livestock
advances from a low point to a high point and then declines to a low point again.
Price Margin. The difference between the cost per cwt of the feeder animal and the
selling price per cwt of the same animal when finished.
Produce. A female’s offspring. The produce-of-dam commonly refers to two offspring
of one dam.
Profit. Whenever revenues exceed expenses during a given accounting period of time –
usually 1 year.
Q
Quality


Refinement of an animal, as shown by a neat and well-chiseled head, fine
texture of hair, and clean bone.
A term used to denote the desirability and/or acceptance of an animal or feed
product.
R
Random Mating. A system of mating where every female (cow and/or heifer) has an
equal or random chance of being assigned to any bull used for breeding in a particular
breeding season.
Ration (s). The amount of feed supplied to an animal for a definite period, usually for a
24-hour period. However, in practical usage, the word ration implies the feed fed to an
animal without limitation to the time in which it is consumed.
Replacement Heifers. The top end of the heifer calves selected to replace the older
cows that are culled from the herd.
Roughage. Feed consisting of bulky and coarse plants or plant parts, containing a highfiber content and low total digestible nutrients, arbitrarily defined as feed with over 18%
crude fiber. Roughage may be classed as either dry or green.
S
Scouring. One of the major problems facing livestock producers is scouring (diarrhea) in
young animals. It may be due to feeding practices, management practices, environment,
or disease.
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Shrinkage.
 The amount of loss in body weight when animals are exposed to adverse
conditions, such as being transported, severe weather, or shortage of feed.
 The loss in carcass weight during the aging process.
Sire. The male parent of an animal.
Steer. A male bovine castrated before the development of secondary sex characteristics.
Stockers. Calves and yearlings, both steers and heifers, that are intended for eventual
finishing and slaughtering and which are being fed and cared for in such a manner that
growth rather than finishing will be realized. They are generally younger and thinner
than feeder cattle.
Straw. The plant residue remaining after separation of the seeds in threshing. Used as
bedding for the cattle.
Stress. Any physical or emotional factor to which an animal fails to make a satisfactory
adaptation. Stress may be caused by excitement, temperament, fatigue, shipping, disease,
heat or cold, nervous strain, number of animals together, previous nutrition, breed, age, or
management. The greater the stress, the more exacting the nutritive requirements.
Supplement. A feed or feed mixtures used to improve the nutritional value of basal
feeds (e.g. protein supplement –soybean meal). Supplements are usually rich in protein,
minerals, vitamins, antibiotics, or a combination of part or all of these; and they are
usually combined with basal feeds to produce a complete feed.
T
Tattoo. Permanent identification of animal produced by placing indelible ink under the
skin; generally put in the ears of young animals.
Toxic. Of a poisonous nature.
U
Udder. The encased group of mammary glands with each gland having a nipple or a teat.
Underfeeding. Usually, this refers to not providing sufficient energy. The degree of
lowered production is related to the extent of underfeeding and length of time it exists.
V
Vaccination (shot). An injection of vaccine to produce immunity or tolerance to disease.
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Veterinarian. One who treats diseases or afflictions of animals medically and surgically.
W
Weaning. The removal of young animals from their mothers so that suckling is stopped.
Weanling. A weaned calf.
Withdrawal Time. The time required between the application or feeding of a drug or an
additive and the slaughter of the animal to prevent any residue of the drug from
remaining in the carcass.
Working Capital. Excess of current assets over current liabilities.
Y
Yearling. An animal that is 12 to 18 months of age.
Calving Records
Date
Cow Cow Calf
ID
BCS Tag
*
Calf
Sire
Calf
Sex
Birth Calving Calf
Cow
Wt
Ease
Vitality Problems
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*Cow BCS- body condition score
Calving Ease
1. Unassisted
2. Udder problems
3. Easy pull
4. Hard Pull
5. Caesarian
Calf Vitality
1. Abortion
Cow Problems
1. Wild and aggressive
2. Stillborn
3. Alive & slow
4. Alive & lively
2.
3.
4.
5.
Abandoned calf
Reluctance to allow suckling
Adoption
Inadequate milk
Drug Inventory Record
Date
Received
Product
Name
Quantity
Lot #
Serial #
Expiration
Date
Date
Used
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Actual
Inventory
63
Crew
Initial
Individual Treatment Records
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Ranch________________
Tag __________ Lot____________ Pen ___________
Sex___________
Date


Diagnosis
Product
Dose
Injection Comments
Site
Withdrawal
Date
All intramuscular injections must be given only in the neck area.
Conduct visual check for needles after each injection.
Mass Treatment Record
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Pen
Move
Date_______________
Lot__________________
Product ______________
Dose ________________
Pen________________
Location of Injection _______________
Site __________
Tag Number
Tag Number
Tag Number
Tag Number
Tag
Number
Processing Record
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Lot_________
Home Pen__________
Tag Sequence_______________
Number of Head_________
Brand_________
Tag Location______
Sex_________
Processing Date(s)__________________
Tag Color________
Weight________ Type_________
Arrival Date(s)____________________
Processing Message_________________________________________________________________
Lot Message_______________________________________________________________________
Procedure
Products
Lot
Serial
Expiry
Date
Dose
Route
Site
Crew
Vaccination
Parasite
Treatment
Implant
-arrival
-re-implant
Prophylactic
Antibiotics
Other
**Note other Procedures (castration, aborting, dehorning)
Cow-Calf Enterprise
Financial and Production Targets for Farm Managers
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Withdrawal
Date
Production Profile
Number of cows
Average cow weight (lbs)
Number of bulls
Calving per cent
Post calving death loss
1.5%
Weaning per cent
92.5%
Average weaning weight of steers (lbs)
Average weaning weight of heifers (lbs)
Average weaning weight of calves (lbs)
Cow replacement rate
Purchase value of replacement heifers
$
Selling price of cull cow
$
Purchase value of replacement bulls
$
Selling price of cull bulls
$
552
529
540.5
10%
1,100.00
700.00
2,000.00
1,000.00
Calf Revenue
Number of cows
Weaning per cent
Number of calves produced
Average calf weight (lbs)
Average calf price
Revenue/calf
Total calf revenue
100
92.5%
92.5
540
1.22
658.80
60,939.00
$
$
$
2000
1200
80
94%
Operating Cost
Feed
Feed componet costs(/tonne)
Roughage (/tonne)
Barley (/tonne)
Straw (/tonne)
Salt - $4.50/25kg
1:1 trace mineral - $21.00/25kg
$
$
$
$
$
1) Roughage
Tonnes of roughage/cow
Number of cows
Total tonnes of roughage needed for cows
Price/tonne
Total roughage cost for cows
2
100
200
$
40.00
$ 8,000.00
50.00
75.80
29.33
0.18
0.84
2) Grain
Kg of grain/day
Number of days fed
Number of cows
3
170
100
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Kg of grain needed
Tonnes of grain needed for cows
Price/Tonne
Total grain cost for cows
51000
18
$
75.00
$ 1,350.00
3) Salt (cobalt iodized)
Kg/cow/year
Number of cows
Kg of salt needed
Price/kg
Total cost of salt
$
$
4) Mineral (1:1 trace)
Kg/cow/year
Number of cows
Kg mineral needed
Price/kg
Total cost of mineral
22
100
2200
$
0.84
$ 1,848.00
12
100
1200
0.18
216.00
Total cost of feed (including salt and minerals)
$11,414.00
Bedding
Tonnes bedding/cow/year
Number of cows
Total tonnes of bedding needed
Price/tonne of bedding
Total bedding cost for cows
1
100
100
$
29.00
$ 2,900.00
Breeding
1) Feed for bulls
Tonnes roughage/bull/year
Price of roughage
Total roughage cost/bull
2) Grain
Kg barley/day
Number of days fed
Kg barley/bull/year
Tonnes of barley/bull
Price/tonne
Cost of barley/bull/year
3) Salt and minerals
Salt cost/bull/year
Mineral cost/bull/year
Total salt and mineral cost/bull/year
5) Pasture
Pasture cost/bull
Total cost/bull
Number of bulls
$
$
3
50.00
150.00
$
$
3
170
510
0.51
75.00
38.25
$
$
$
1.89
10.00
11.89
$
$
113.00
313.14
2
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Total breeding cost
$
626.28
Community Pasture Fees
Cost/cow/day
Number of days
Cost per cow
Calf cost for the season
Cost per cow-calf pair
Number of cows sent
Total community pasture costs
0.30
195
$
58.50
15
$
73.50
40
$ 2,940.00
Manure Removal
Manure removal costs
$ 1,650.00
Facility and Fence - Repair and Maintenance
Total facility replacement cost
Repair rate (1% of replacement cost)
Total facility repair cost
Annual fence repair cost (estimate)
Total facility and fence repair cost
Insurance cost (Assume $.50 per $100 of facility value)
Facility and fence cost
$34,512.00
1%
$ 345.12
$ 220.00
$ 565.12
$ 172.56
$ 737.68
Miscellaneous
Assume miscellaneous expenses
$
Subtotal operating costs
$20,041.68
Operating Interest
Subtotal operating cost
Divide by 2 to get average
Operating interest rate
Total operating interest
$20,041.68
$10,020.84
10%
$ 1,002.08
Fixed Costs
Depreciation
1) Facilities
Purchase price
Salvage value
Years of useful life
Facilities depreciation
2) Equipment
Tractor and loader
Purchase price (livestock share)
Salvage value
$
400.00
$34,512.00
$
20
$ 1,725.60
$16,220.00
$ 1,622.00
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Years of useful life
Tractor and loader depreciation
10
$ 1,459.80
Other equipment (mix mill, baler etc)
Purchase price
Salvage value
Years of useful life
Other equipment depreciation
$15,000.00
$ 1,500.00
10
$ 1,350.00
Total equipment depreciation
$ 2,809.80
Interest on Investment
1) Facilities
Purchase price
Salvage value
Interest Rate
Facilities interest on investment
$34,512.00
0
7%
$ 1,207.92
2) Equipment
Tractor and loader
Purchase price (livestock share)
Salvage value
Interest rate
Tractor and loader interest on investment
$16,220.00
$ 1,622.00
7%
$ 624.47
Other equipment (mix mill, baler etc.)
Purchase price
Salvage value
Interest rate
Other equipment interest on investment
$15,000.00
$ 1,500.00
7%
$ 577.50
Total equipment interest on investment
$ 1,201.97
Grazing Costs
1) Fence costs (costs per mile)
Depreciation
Original cost per mile
Salvage value per mile
Years of use
Depreciation cost of fence
Interest on Investment
Original cost per mile
Salvage value per mile
Interest rate
Interest on investment in the fence
Total fence cost per mile
$ 2,600.00
$ 500.00
20
$ 105.00
$ 2,600.00
$ 500.00
7%
$ 108.50
$ 213.50
2)Water development(cost/dugout-cost of water development in the yard is included in the facility costs)
Depreciation
Original cost per dugout
$ 3,000.00
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Salvage value per dugout
Number of years of use
Depreciation per dugout
$
$
500.00
20
125.00
Interest on Investment
Original cost per dugout
Salvage value per dugout
Interest rate
Interest on dugout investment
Total cost of dugout
$ 3,000.00
$ 500.00
7%
$ 122.50
$ 247.50
3) Owned Pasture
Cows to be pastured
Stock rate (cows per quarter section)
Quarter sections needed
Value of pasture land per quarter
Investment rate
Investment cost per quarter
Taxes per quarter
Cost per quarter
Investment cost of owned pasture
Number of miles fenced
Fence costs per mile
Total fence costs
Number of dugouts
Cost per dugout
Total dugout costs
Total pasture cost
100
45
2.22
$16,000.00
4%
$ 640.00
$ 180.00
$ 820.00
$ 1,822.22
3
$ 213.50
$ 640.50
1
$ 247.50
$ 247.50
$ 2,710.22
Average pasture cost/cow
$
27.10
Summary Statement - Cow - Calf Enterprise –
100 cows
Total
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Revenue
Calf Sales
Contracting for cows
Contracting for cow-calf pairs
Total Revenue
Operating Costs
Feed
Bedding
Breeding
Community Pasture Fees
Fuel, Lube and Repairs
Manure Removal
Facility and Fence
Miscellaneous
Subtotal Operating
6 months
6 months
Operating Interest
Total Operating Cost
Net cash Income
$12,253.68
$ 27,000.00 $1.50 per day
$ 31,500.00 $1.75 per day
$70,753.68
$ 14,164.00
$ 2,900.00
$ 1,959.08
$ 2,700.00
0
$ 1,650.00
$ 1,082.80
$
700.00
$ 25,155.88
$ 1,257.79
$ 26,413.67
$ 44,340.01
Fixed Cost
Depreciation
Facilities
Equipment
Interest on Investment
Facilities
Equipment
Grazing Cost
Total Fixed costs
Total costs
Return to labour and Management
$ 1,725.60
$ 2,809.80
$ 1,207.92
$ 1,201.97
$ 6,786.00
$ 13,731.29
$ 40,144.96
$30,608.72
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Appendix B
Livestock Contract Agreement
Source: Saskatchewan Agriculture and Food, Cow-calf Lease Agreement
Livestock Contract Agreement
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This agreement made in duplicate, the _____ day of ________________ A.D.
200__
BETWEEN
_______________________________________________________________________
(Name)
of _____________________________________________________________________
(Address)
In the Province of Saskatchewan, here-in-after called the “Owner”
AND
_______________________________________________________________________
(Name)
_______________________________________________________________________
(Address)
In the Province of Saskatchewan, here-in-after called the “Operator”
THE PARTIES AGREE AS FOLLOWS:
1. Description of the Herd
(a) The Owner shall deliver 100 cows described in Schedule A (“the Herd”) at the
Operator’s ranch on or before ____________, 200__.
(b) The Herd shall arrive in good condition. Animals shall average 1200 pounds
at date of delivery and shall be in good health. A professional veterinarian
shall settle any dispute relating to health or condition of animals and each
party shall pay one-half of any costs that may arise.
(c) All Cattle will be clearly marked with the Owners brand and tag.
(d) A professional veterinarian shall certify bred cows from the herd to be
pregnant. The owner shall be responsible for costs relating to pregnancy
testing.
(e) The livestock will be fed and cared for at the facilities on
____________________ (farm name) and will not be moved without the Owner’s
consent.
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2. The Offspring
(a) It is agreed and understood that the Owner owns the Herd. All offspring born
during this agreement are the property of the Owner until the date of sale of
each year.
(b) All offspring will be identified with the Owner’s tag.
3. Breeding
(a) The owner shall provide four breeding bulls which meet mutually agreeable
standards and any injured or non-performing bulls will be replaced at the
expense of the Owner so that the cow to bull ratio is no more than 25 cows to
one bull.
(b) The Operator agrees that the bulls will be placed with the cows on April 1 and
removed by June 20 of each contract year.
(c) The Owner shall be responsible for replacing each open animal with a bred
animal.
4. Management, Care and Veterinary Services
(a) The Operator shall supply at his or her cost water, pasture, feed, vitamins and
minerals, necessary shelter and all labor for supervision and care of the
animals, in order to promote growth, prevent disease and care for the well
being of the Herd and its offspring.
(b) The Operator shall care for the livestock in accordance with currently
accepted and recommended practices in the Province of Saskatchewan.
(c) The Owner agrees to pay the cost of processing and a chute charge of $2.00
per head for processing. The operator will only be paid for two applications
per year. Processing includes the following:
- IBR
- BVD
- Implants
- Blackleg
- Ear Tag
- Ivomec
(d) The Operator will keep the livestock in good condition, maintaining a
condition score of not less than _____________.
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(e) The Operator shall permit the Owner to enter the premises to examine the said
animals at any time.
5. Death, Loss, Forced Sale and Insurance
(a) Death, loss or forced sale of any animal from the Herd shall be at the expense
of the Owner, up to a loss rate of two cows or 2%. Any losses greater than
this shall require a veterinarian, at the cost of the Operator, to verify the cause
of death. If the cause of death is by natural causes, the Owner agrees to
accept the loss.
If the Operator is deemed negligent toward the death, loss or forced sale of an
animal from the herd, as determined by the above veterinarian, then the
Operator will be responsible for the replacement cost of that animal with an
animal which is mutually acceptable to both parties.
(b) Death, loss or forced sale of any of the offspring of the Herd shall be at the
expense of both parties, shared in the same proportion as the calf crop,
between the Owner and the Operator up to a maximum loss rate of three
animals or 3%. Any losses greater than this shall require a veterinarian, at the
cost of the Operator, to verify the cause of death. If the cause of death is by
natural causes, the Owner and the Operator agree to share the loss in the same
proportion as the calf crop. All costs associated with the sale or disposal of
any of the off-spring as well as any revenue will be shared in the same
proportion as the calf crop.
If the Operator is deemed negligent toward the death, loss or forced sale of an
off-spring of the Herd, as determined in this section, then the Operator will be
responsible for the replacement cost of that animal which is mutually
acceptable to both parties.
(c) The Operator or Owner individually may, at his or her own expense, carry fire
and liability insurance on the Herd or its offspring and that party would be
entitled individually to all insurance proceeds.
6. Culls and Their Replacements
(a) On or before _________________ (date) of each year of this agreement, the
Owner and Operator shall mutually agree upon the livestock that are to be
culled.
(b) The Owner will receive 100% of the proceeds from the sale of all cull animals
and is responsible for all trucking and marketing costs.
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(c) Upon the sale of cull animals, the Owner shall replace each cull animal with
an animal mutually acceptable to both parties.
7. Division of Income
(a) The owner is entitled to the profits from 100% of the offspring each year.
8. Duration of This Agreement
(a) This agreement shall remain in force for 48 months from the date of
commencement. The term of this Lease may be extended by mutual
agreement between both parties for a further period upon the same terms and
conditions as contained herein, except as otherwise agreed in writing by both
parties.
9. Termination of this Agreement
(a) This agreement will commence on _____________________(date) and expire
on ____________________(date). The Owner or the Operator may terminate
this agreement by providing 120 days written notice to the other party or by
mutual agreement at any time.
(b) Upon termination of this agreement the Owner shall pick up the original cattle
or their replacements from the Operators farm.
(c) At the time of pickup the cattle shall weigh 1200 pounds and shall be in good
health. If the parties cannot agree concerning the health of a particular cow
the matter shall be determined by a veterinarian with the expenses shared
equally by both parties. If a particular cow does not weigh the specified limit
or is not in good health the Operator shall replace the cow with another which
meets the standards.
(d) Upon the death of the Operator, the agreement will terminate immediately
and the herd and the Owner’s offspring shall be returned to the owner, with
the owner responsible for transportation costs. The operators estate will be
entitled to the agreed to compensation as if the Operator was still alive.
10. Owner’s Rights
(a) If during the term of the lease, any of the goods and property of the Operator
are seized by any creditors of the Operator, or if the Operator makes any
assignment of property involved in the lease for benefit of creditors without
first obtaining written consent from the Owner, or if the Operator becomes
bankrupt, this lease shall, at the option of the Owner, become forthwith
Comm 492 College of Commerce and College of Agriculture, University of Saskatchewan
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forfeited and void and the year’s share of the offspring shall become forthwith
due.
(b) The Operator shall permit the Owner to enter onto the ranch to examine the
Herd and its offspring on any day during the hours of 8:00 a.m. and 9:00 p.m.
11. Operator’s Right
(a) The Operator, given yearly, the said share of the offspring and performing the
covenants, promises, agreements and undertakings herein contained on his
part, shall and may peacefully possess and enjoy said cattle for the duration of
the agreement without any interruption or disturbance from the owner or any
person claiming through or under the Owner.
12. Provisions for Arbitration
(a) Any disagreement which may arise between the contracting parties with
respect to the rights and responsibilities as provided for by this agreement,
shall when a mutually satisfactory settlement cannot otherwise be reached, be
submitted to arbitration, pursuant to The Arbitration Act.
13. Subsidies or Compensation
(a) Any subsidies or compensation arising from the Herd shall go to the Owner;
and any subsidy or compensation arising from the offspring of the Herd shall
be shared in the same proportion as the calf crop.
14. Other Provisions
SIGNED AND DELIVERED on ______________________, 200__.
__________________________
Witness
____________________________
Owner
SIGNED AND DELIVERED on ______________________, 200__.
__________________________
Witness
Schedule A – “The Herd”
____________________________
Operator
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79
Number of
Animals
Breed
Age
Sex
Brand/Tattoo
Comm 492 College of Commerce and College of Agriculture, University of Saskatchewan
Other Features
80
Appendix C
Financial Plan
Comm 492 College of Commerce and College of Agriculture, University of Saskatchewan
81