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Inventories for Operational Survival

07 September 2012

US - As the drought continues across SD and the majority of the Corn Belt producers need to start looking at their operations more analytically than they have in the past.

Analyze your inventories. Inventories of feed and livestock are very important. If producers know how much feed they have on hand and also the nutrient analysis of that feed, they can begin to determine how to best meet the requirements of the livestock they’re considering feeding this winter. The lab analysis and the inventory count can be used to start creating rations for each group. The process allows an operation to determine how many head, and for how long, can be fed utilizing the current resources. Any gaps in either feed quantity or quality can be identified now rather than waiting until much later in the feeding season.

These inventories can also provide direction into what purchases need to be made to fill gaps in needed feed. Many producers were able to put up lower quality, mature CRP hay or ditches late this summer. These bales will provide adequate grinding type hay during gestation. And once you know how much additional high quality feed you need to have on hand you now can ensure those types of feed (high quality alfalfa or DDG’s etc) are not used up unnecessarily early, or purchased when needed.

Inventorying livestock by class is also important if producers need to look at herd reduction based on feed resources available. Classifying cows as open, old, poor producers, “crazy”, young, replacement, feeder, stocker etc. gives the producer a better understanding of what they have in the pasture or feedyard, and allows for a methodical herd reduction. By utilizing the data the herd that remains should be much improved because the poor producers and problem causers have been removed.

Other inventories that can be done to help the operation through this tougher stretch are to analyze cash, and where cash can be derived from. Checking and savings accounts are the first spot many will look, and also a location where we may be disheartened by what we find. Other sources could be the sale of unused equipment. Looking at your expenses, are there areas that can be cut or reduced so you can allocate those funds toward maintain the herd/flock? What about your bank? Discussing your situation with your banker is not only a source of cash but also a wise move to make so he is aware that you are looking into the future and are making management decisions to help you weather the drought and the situation it has caused.

These inventories are also important when we consider the very real concern that the drought may last more than one summer. Feed supplies are tight this year, what will you operation do next year? The decision to buy feed instead of reducing the herd may be an expensive alternative if we have to cull the herd in 2013. Maybe making the decision to cull this fall thus eliminating or limiting the amount of feed purchases made helps keep the operation more functional in the long run.

In order to prepare for the winter and 2013 prepare a two year cash flow plan using the detail from your inventories. Look at monthly outflows of feed and cash, as well as any inflows from the sale of livestock or feed. Use milestones or target dates to make adjustments in your plan. For example: Plan B says I will sell 10% of the mature cow herd if there has not been adequate rain during March and May 2013 to green up pastures.

This active cash flow plan may also implement new technologies for your operation because you are going to be more aggressive with your culling decisions. Maybe you will implement synchronization and artificial insemination on your replacement heifers because by doing so you were able to sell the bulls (and not feed them) that normally would have been in pasture with them. Or your target date of September 1, 2013 is reached and there has not been enough late summer rain to hold your pastures so you use ultra sound to cull the open, non-nursing cows in your herd.

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