The Operations Plan University of Saskatchewan.doc

1.0 introduction1.1 mission statementthe 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 backgroundthis 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 cs 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 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 ctriple 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 goalstriple cs 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 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 goalsgoals:short termkey result targetedtarget datehow to measure goalsattainable and realisticaccomplishes company missionto excel in marketing through education of new marketing opportunitiesto use strong markets when selling the cattleyear 1must have taken at least one class in year one on marketingyesyesto stay on the leading edge of research and development in the cattle industrystay on the leading edge of research and technologyevery yearthe ability to produce a high quality calf at a low cost yesyeslow death rate for the cattleless than 3% death rate for the cattleyear 2measurable by death rateyesyeswant a low rate of disease in the herdless than 2% disease rate in the herdyear 1measurable by disease rateyesyesto produce a quality calfideal weight at weaning 540lbsyear 2measurable by the weight of the calfyesyesto provide quality service to the farmerprovide timely, efficient serviceyear 1measurable by comments from the produceryesyestable 1: short term goals continuedgoals:short termkey result targetedtarget datehow to measure goalsattainable and realisticaccomplishes company missionto have efficient cattle transportation costs when moving them from market to producer and producer to marketsafely transport cattle to their destination year 1number of trips and if there was any safety problems in the transportation processyesyesto take 1850 calves to market in the first yearto take 92.5% of the calves to the marketyear 1measurable by number of calves taken to marketyesyesto reward farmers who maintain a high level of standards and produce top quality cattle- proper nutrition- weight- herd health - quality of herdyear 2measurable by weight, quality, and health of herd.yesyes1.5 long term goalsone of triple cs 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.table 2: long term goalsgoals:long termkey result targetedtarget datehow to measure goalsreachable and realisticachieves company missionexpand the business throughout saskatchewanto gain new producers within saskatchewan 15 to 20 yearsby percentage of growth of producersyesyesto 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 yearto guarantee a steady supply of top quality calves year oneby the price received and the ease of finding a market for the cattleyesyeswant at least 1950 of the cows to be pregnant each year out of the 2000 head97.5% conception rateyear onemeasurable by the percentage of cows bredyesyes2.0 industry overview2.1 industry backgroundthe 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.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 concernsbeef 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 rights 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.2.3 environmental concernstriple 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 concernssome 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 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 marketthe 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 soils fertility and to reduce fertilizer expenses. 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.3.0 the operations plan triple cs 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 20022. calves will be sold when they are 8 months of age3.1 site location/landtriple c will purchase an acreage within the rural muni