Breedcow+ Assumptions - Revision history

Breedcowadmin at 05:08, 12 June 2023

2023-06-12T05:08:08Z

Lara: /* Gross margins in Breedcow+ */

2020-08-24T03:37:52Z

Gross margins in Breedcow+

Lara: /* Gross margins in Breedcow+ */

2020-08-24T03:37:07Z

Gross margins in Breedcow+

Lara: /* The concepts underpinning Breedcow+ */

2020-08-24T03:34:53Z

The concepts underpinning Breedcow+

Lara: /* The concepts underpinning Breedcow+ */

2020-08-24T03:34:42Z

The concepts underpinning Breedcow+

Lara: /* The concepts underpinning Breedcow+ */

2020-08-24T03:34:27Z

The concepts underpinning Breedcow+

Lara: /* The concepts underpinning Breedcow+ */

2020-08-17T01:19:36Z

The concepts underpinning Breedcow+

Lara: /* The concepts underpinning Breedcowplus */

2020-08-17T01:19:15Z

The concepts underpinning Breedcowplus

Lara: /* Cow culling assumptions in the Breedcowplus program */

2020-08-12T02:57:28Z

Cow culling assumptions in the Breedcowplus program

Lara: /* Cow culling assumptions in the Breedcowplus program */

2020-08-12T01:26:58Z

Cow culling assumptions in the Breedcowplus program

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 [[Breedcow+|Breedcow+]] uses gross margins to measure the profit outcomes of a set of herd structure, turnoff and husbandry decisions. Gross margins are shown as an aggregate for the herd, per head, and per adult equivalent.
-Typically, livestock gross margins comprise gross income from cattle trading (sales less purchases) less those costs that vary as herd size or herd composition change (variable costs) plus or minus the value of inventory change. The calculation of a livestock gross margin in Breedcowplus is simplified through the use of a steady state herd modelling approach that removes the need to value inventory change (since there is none). This approach does not reduce the validity of the livestock gross margin produced as a tool to quickly scan and rank the choices available for improving herd profitability. Indeed it should give a more consistent estimate of gross margin than the accounting approach.
+Typically, livestock gross margins comprise gross income from cattle trading (sales less purchases) less those costs that vary as herd size or herd composition change (variable costs) plus or minus the value of inventory change. The calculation of a livestock gross margin in Breedcow+ is simplified through the use of a steady state herd modelling approach that removes the need to value inventory change (since there is none). This approach does not reduce the validity of the livestock gross margin produced as a tool to quickly scan and rank the choices available for improving herd profitability. Indeed it should give a more consistent estimate of gross margin than the accounting approach.
-The only costs used in the calculation of Breedcowplus gross margins are variable costs. The essential characteristic of a variable cost is that it changes proportionately to changes in enterprise size (or to change in components of the enterprise). Apportioning overhead or other costs to various production systems is likely to give a misleading comparison. The test for a variable cost as used in Breedcowplus is “one more animal equals one more unit of cost”.
+The only costs used in the calculation of Breedcow+ gross margins are variable costs. The essential characteristic of a variable cost is that it changes proportionately to changes in enterprise size (or to change in components of the enterprise). Apportioning overhead or other costs to various production systems is likely to give a misleading comparison. The test for a variable cost as used in Breedcow+ is “one more animal equals one more unit of cost”.
-A secondary profit measure, gross margin after interest on herd capital, is also calculated in Breedcowplus. This calculation includes a notional interest cost on herd capital and is one method of accounting for the differing capital requirements of alternative herd structures. Strictly speaking, this interest rate should be the “opportunity cost” of capital, i.e. what it could earn in its best alternative employment if it was not tied up in cattle. For example, a management change that leads to a reduction in herd capital could use the rate paid on the most expensive loan as the opportunity cost, since paying off some of that loan off would be an obvious use for surplus capital. If no loans are held by the business, the long term deposit rate could be the most applicable interest rate to use.
+A secondary profit measure, gross margin after interest on herd capital, is also calculated in Breedcow+. This calculation includes a notional interest cost on herd capital and is one method of accounting for the differing capital requirements of alternative herd structures. Strictly speaking, this interest rate should be the “opportunity cost” of capital, i.e. what it could earn in its best alternative employment if it was not tied up in cattle. For example, a management change that leads to a reduction in herd capital could use the rate paid on the most expensive loan as the opportunity cost, since paying off some of that loan off would be an obvious use for surplus capital. If no loans are held by the business, the long term deposit rate could be the most applicable interest rate to use.
 '''Using gross margins in comparisons'''
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 The total cost per head or per adult equivalent is also often quoted and misused. While an interesting historical figure, it does not tell us by how much total cost changes if we change the number of adult equivalents, since only the variable costs change when herd size changes. The “fixed” part of total costs – by definition – does not change for small changes in herd size.
-When relating changing herd size to changing net income via gross margins, a stocking rate effect may have to be considered. If so, stocking rates may be compared by doing two or more runs of Breedcowplus with each run specifying rates, price and husbandry costs consistent with a particular stocking rate.
+When relating changing herd size to changing net income via gross margins, a stocking rate effect may have to be considered. If so, stocking rates may be compared by doing two or more runs of Breedcow+ with each run specifying rates, price and husbandry costs consistent with a particular stocking rate.
-The definition of a variable cost is tied intimately to the meaning and use of the gross margin it is used to calculate. Gross margins are calculated first for a whole enterprise but then are usually expressed per some unit of input, such as per $100 of capital, per full time labour unit, per unit of land or, as in the Breedcowplus program, per adult equivalent.
+The definition of a variable cost is tied intimately to the meaning and use of the gross margin it is used to calculate. Gross margins are calculated first for a whole enterprise but then are usually expressed per some unit of input, such as per $100 of capital, per full time labour unit, per unit of land or, as in the Breedcow+ program, per adult equivalent.
 Husbandry costs include items like vaccines and supplementary feed, where one more animal incurs one more units of cost and one less animal saves one unit of cost.
-'''Gross margins are used in the Breedcowplus program to compare turnoff or husbandry strategies that use the same resources and therefore incur the same fixed costs.''' The difference in the herd gross margin will therefore be the same as the difference in net income when two or more options are compared. We use the gross margin because it is simpler to determine the costs and the outcome is the same.
+'''Gross margins are used in the Breedcow+ program to compare turnoff or husbandry strategies that use the same resources and therefore incur the same fixed costs.''' The difference in the herd gross margin will therefore be the same as the difference in net income when two or more options are compared. We use the gross margin because it is simpler to determine the costs and the outcome is the same.
 Take the example of a herd with figures of $120 per adult equivalent for sales less purchases (and inventory adjustment) and $20 per adult equivalent for variable costs. The gross margin per adult equivalent is $100, telling us that if we ran one less adult equivalent we would reduce the gross margin and hence net income by $100.
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 '''To ensure that herds are compared on the basis of consuming the same amount of feed when making predictions of relative profitability, feed requirements are estimated for each class of cattle relative to an adult equivalent.'''
-'''For the Breedcowplus program an adult equivalent is taken as a non-pregnant, non-lactating beast of average weight 455 kilograms (1,000 lbs) carried for 12 months.'''
+'''For the Breedcow+ program an adult equivalent is taken as a non-pregnant, non-lactating beast of average weight 455 kilograms (1,000 lbs) carried for 12 months.'''
 Animals of average weight over the twelve months of more or less than 455 kilograms are rated in proportion to their average bodyweight over the period. Thus a beast growing from 450 kilograms to 600 kilograms (average 525 kilograms) would be rated at 1.15 adult equivalents for twelve months. (525 divided by 455 equals 1.15)

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 '''Using gross margins in comparisons'''
-Whether a cost is considered a husbandry or variable cost depends in the end on why gross margins are used as a comparison instead of net incomes.
+Whether a cost is considered a husbandry or variable cost depends in the end on why gross margins are used as a comparison instead of net incomes. Always allocate market prices in the prices worksheet to all the classes of cattle modelled to ensure that the full capital value of the herd is calculated.
 For example, if the gross margin per adult equivalent is $90, substituting one adult equivalent at $90/AE for one unit at $50/AE will increase net profit by $40 per adult equivalent substituted, or running one less adult equivalent, where the gross margin per adult equivalent is $90, would reduce net income by $90 (ignoring any stocking rate effects).

← Older revision		Revision as of 03:37, 24 August 2020
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	'''Using gross margins in comparisons'''		'''Using gross margins in comparisons'''
		+
	Whether a cost is considered a husbandry or variable cost depends in the end on why gross margins are used as a comparison instead of net incomes.		Whether a cost is considered a husbandry or variable cost depends in the end on why gross margins are used as a comparison instead of net incomes.

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 The [[Breedcow+|Breedcow+]] program generates its own structure around a starting number of weaner heifers retained. The size of the overall herd is adjusted by altering the starting number of weaner heifers. The final herd structure depends on the number of weaners produced plus death rates and sales for each age group included in the model. The outputs of the model are herd structure, herd value and gross margins.
-''''Please note'''' that all herd numbers in the Breedcow+ program are calculated to full precision, but displayed as integers (they are not rounded to the nearest whole number although they show on the screen as whole numbers). This level of precision is needed to achieve a balance in stable state but can cause rounding errors in the display. For example, a worksheet may show 113 steers aged three years when a calculation based on whole numbers may only indicate 112.
+'''Please note''' that all herd numbers in the Breedcow+ program are calculated to full precision, but displayed as integers (they are not rounded to the nearest whole number although they show on the screen as whole numbers). This level of precision is needed to achieve a balance in stable state but can cause rounding errors in the display. For example, a worksheet may show 113 steers aged three years when a calculation based on whole numbers may only indicate 112.
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 The [[Breedcow+|Breedcow+]] program generates its own structure around a starting number of weaner heifers retained. The size of the overall herd is adjusted by altering the starting number of weaner heifers. The final herd structure depends on the number of weaners produced plus death rates and sales for each age group included in the model. The outputs of the model are herd structure, herd value and gross margins.
-'''''Please note''''' that all herd numbers in the Breedcow+ program are calculated to full precision, but displayed as integers (they are not rounded to the nearest whole number although they show on the screen as whole numbers). This level of precision is needed to achieve a balance in stable state but can cause rounding errors in the display. For example, a worksheet may show 113 steers aged three years when a calculation based on whole numbers may only indicate 112.
+''''Please note'''' that all herd numbers in the Breedcow+ program are calculated to full precision, but displayed as integers (they are not rounded to the nearest whole number although they show on the screen as whole numbers). This level of precision is needed to achieve a balance in stable state but can cause rounding errors in the display. For example, a worksheet may show 113 steers aged three years when a calculation based on whole numbers may only indicate 112.
 ----

← Older revision		Revision as of 03:34, 24 August 2020
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	The [[Breedcow+\|Breedcow+]] program generates its own structure around a starting number of weaner heifers retained. The size of the overall herd is adjusted by altering the starting number of weaner heifers. The final herd structure depends on the number of weaners produced plus death rates and sales for each age group included in the model. The outputs of the model are herd structure, herd value and gross margins.		The [[Breedcow+\|Breedcow+]] program generates its own structure around a starting number of weaner heifers retained. The size of the overall herd is adjusted by altering the starting number of weaner heifers. The final herd structure depends on the number of weaners produced plus death rates and sales for each age group included in the model. The outputs of the model are herd structure, herd value and gross margins.
		+
		+	'''''Please note''''' that all herd numbers in the Breedcow+ program are calculated to full precision, but displayed as integers (they are not rounded to the nearest whole number although they show on the screen as whole numbers). This level of precision is needed to achieve a balance in stable state but can cause rounding errors in the display. For example, a worksheet may show 113 steers aged three years when a calculation based on whole numbers may only indicate 112.

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 ===The concepts underpinning Breedcow+===
-The Breedcowplus program generates its own structure around a starting number of weaner heifers retained. The size of the overall herd is adjusted by altering the starting number of weaner heifers. The final herd structure depends on the number of weaners produced plus death rates and sales for each age group included in the model. The outputs of the model are herd structure, herd value and gross margins.
+The [[Breedcow+|Breedcow+]] program generates its own structure around a starting number of weaner heifers retained. The size of the overall herd is adjusted by altering the starting number of weaner heifers. The final herd structure depends on the number of weaners produced plus death rates and sales for each age group included in the model. The outputs of the model are herd structure, herd value and gross margins.
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← Older revision		Revision as of 01:19, 17 August 2020
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−	===The concepts underpinning ~~Breedcowplus~~===	+	===The concepts underpinning Breedcow+===

	The Breedcowplus program generates its own structure around a starting number of weaner heifers retained. The size of the overall herd is adjusted by altering the starting number of weaner heifers. The final herd structure depends on the number of weaners produced plus death rates and sales for each age group included in the model. The outputs of the model are herd structure, herd value and gross margins.		The Breedcowplus program generates its own structure around a starting number of weaner heifers retained. The size of the overall herd is adjusted by altering the starting number of weaner heifers. The final herd structure depends on the number of weaners produced plus death rates and sales for each age group included in the model. The outputs of the model are herd structure, herd value and gross margins.

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-===Cow culling assumptions in the Breedcowplus program===
+===Cow culling assumptions in the Breedcow+ program===
 Cow sales in [[Breedcow+|Breedcow+]] may be before or after mating or they may be sales of spayed cows a year or more after spaying.

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 Cow sales in [[Breedcow+|Breedcow+]] may be before or after mating or they may be sales of spayed cows a year or more after spaying.
-Sales before mating or spays are entered as the percentage of opening numbers for each age group. ''''Sales after mating are expressed as a percentage of the number of cows mated.'''' This is a change from earlier versions of this program.
+Sales before mating or spays are entered as the percentage of opening numbers for each age group. '''''Sales after mating are expressed as a percentage of the number of cows mated.''''' This is a change from earlier versions of this program.
 Sales before mating will typically be a general heifer surplus, or cows reaching the nominated culling age, or breeders revealing faults such as bottle teats, bad temperament, bad calf, or failure to raise a calf. They may also be cows identified as non-pregnant the previous year but held over to fatten for sale.