Commercial Bison Production:
Economic Analysis and Budget Projections

Steve Metzger and V.L. Anderson
Carrington Research Extension Center
North Dakota State University

Summary
Herd records from multiple commercial bison herds from 1993-1996 totaling 860 cow years were summarized for animal performance, expenses, and income through weaning. A budget for planning purposes was constructed for calving percentages of 70%, 80%, and 90%. Gross income averaged $833.63 per cow with a net return of $158.65. Major expenses were feed at $190.56 per cow and interest at $162.94. Average weaning rate per cow exposed was 64.91%. Weaning weight for all calves averaged 394.16 pounds. Budget projections with a 70, 80, and 90% calf crop indicate -94, 46 and $196 per cow per year is available for servicing debt and living expenses. Long term financial projections (20 year) indicate net worth increases from $5,325 per cow at 80% weaning rate to $10,371 at 90% weaning rate. Decreasing expenses $50 per cow improves net worth by 13.6% in 20 years while increasing weaning rate from 80 to 90% improves net worth by 94.8%. The combined improvements increase net worth by 121.2% in 20 years. Individual producers may have an advantage that will allow greater profit such as low initial expense from entering the industry several years ago, selling breeding bulls, custom feeding, or income from cooperative marketing of bison meat. The single most important factor for profitable bison herds is percentage of calves weaned. Expenses certainly affect net return but not to the extent of calves weaned. Production practices which lead to very high weaning rates need to be researched and put into practice by all producers.

Key Words: Bison cows, Budgets, Expenses, Income.

Introduction
Commercial bison production is expanding rapidly in the Northern Plains. Consumer demand for bison meat and positive returns for existing bison producers from sale of breeding stock are major economic factors supporting expansion. A potential danger is for producers to pay more for purchased females than future production and returns will support. New producers and lenders are especially in need of actual data to determine the potential for profit before investment. This paper presents actual performance information and financial data from existing commercial bison herds. Planning budgets were developed using three levels of herd performance, and long term projections were made for the two profitable levels of production.

The Farm Business Management Program
Several bison producers with herds of various size have been enrolled in the Carrington School District Farm Business Management Program for the past four years. The program is a thorough record keeping system for an entire farm that analyzes each crop and livestock enterprises individually in order to determine profit centers. Records are summarized for each producer for each year for each enterprise. Producers can identify profit centers; measure growth, and compare enterprises with peers, anonymously.

Common enterprises and whole farm data from producers within similar geographic regions are averaged for comparative purposes. A summary is published for each program, region, and for the state of North Dakota which includes overall production and economic averages for each enterprise as well as production information for the high profit 20% and low profit 20% of producers. Depreciation schedules are included for equipment (10 years) and facilities (30 years) in this analysis system as well as inventory values at both cost and market values.

Bison Herd Performance Records
The bison enterprise analysis was conducted using cow/calf production records through the sale of calves after weaning. Added costs and returns from feeding bulls, selling breeding bulls, marketing meat, or cooperative participation were not included in this analysis.

Bison cow records (n=860) from a total of 4 producers over four years (1993-1996) were pooled and reported on a per cow basis. All herds were located in the coteau drift prairie in east central North Dakota. Producers agreeing to the use of their data were owner/managers of family bison enterprises with a minimum of 20 head of bison cows per herd. Most farms/ranches are diversified crop/livestock operations but other enterprises, such as wheat or sunflower production were analyzed separately. Income for bison producers was generated from the sale of bull and heifer calves and from custom cow herd maintenance. Any replacements retained to increase herd numbers and/or replace cows that died were considered purchased at market price. Bull calves were generally sold in early December after being weaned for 1 to 40 days. Heifer calves were usually sold between early December and late February. Animals were sold at the annual North Dakota Buffalo Association public bison auctions or by private treaty.

Performance data is presented in Table 1. Feeds were identified by type and quantity and priced according to current market value or actual purchase price. Some cows were fed a pelleted commercial feed supplement prior to and during breeding season with a total of .1771 tons per cow consumed. Other feed ingredients consist of grass hay, 3.161 tons; salt/vitamin/mineral supplement, .0785 tons; and pasture, 6.27 animal unit months. A very small amount of straw was used as feed.

A pregnancy percentage of 66.98 indicates a problem with conception but few losses were observed during and after calving. The culling rate of .14% is due to death loss only as no breeding females are being marketed. Average weaning weights were 394.16 pounds with 254.86 pounds weaned per cow exposed.

Bison Cow Herd Economic Analysis
Expenses, income, and returns are presented in Table 2. Direct expenses include all the specific categories where items can be identified such as feed, veterinary supplies and services, leases, repairs and other. Total direct expenses per cow averaged $630.46. The charge for pasture, $48.08, includes lease or ownership costs, fencing, and other activities such as water development and spraying. Interest costs total $162.94 for operating and intermediate loans. Fuel and repairs appear to be higher than is common for beef operations but frequent travel to check pasture animals, more improvements on facilities uses, and small herd size may be reasons for these costs. Other miscellaneous expenses total $56.49.

Gross returns were $864.35 per cow. Net return averaged $233.89 with a labor and management charge (including family labor) of 75.24 per cow leaving a return over labor and management of $158.65. The value of production in the budget projections is calculated by averaging returns per bull calf sold ($750) and returns per heifer calf sold ($2050).

Bison Budget
Three budgets were developed from the actual herd data (Table 3) to use for planning purposes. The budgets were developed using a combined bred cow purchase price and breeding charge of $4200 per cow. It is apparent that feed and interest are the significant direct cost factors. After subtraction of all expenses, only $196 would be available per cow to repay the original investment and provide living expenses for a 90% calf crop. The $628 available ($432 interest charge +196) would repay the original investment, with an interest rate of 9% in approximately twelve and one half years, assuming one annual payment per year. By also making use of the $240 set aside for depreciation and herd inventory change, or replacement, the repayment schedule on the original 9% investment would be cut to approximately eight years. The long term sustainability of this tactic is questionable as herd and facility replacement would suffer with no financial allocation set aside for these items during the first eight years of the enterprise.

Long Term Projections
Present day bison costs shown in Table 3, when coupled with long term projections, reveal that controlling all aspects of production costs, including interest paid on the total investment; taking a minimum draw on the business, especially during the first ten years and attaining a high weaning rate are critical factors for the sustained profitability of a cow herd that is highly in debt.

In addition to the budget data as presented in Table 3, ten and twenty year projections were developed using the FINPACK Farm Financial Software System. These additional budgets incorporated scenarios where the annual budgeted operating expenses were entered as indicated or minus $50 per cow with weaning rates of 80 or 90%. A 70% weaning rate was not used in this scenario due to negative returns. All budgets included an annual replacement cost of 5% or $210 per cow for the breeding herd and an equipment and facilities depreciation charge of $30 per cow. These replacement charges maintained the value of the original herd, facilities, and equipment throughout the ten and twenty year periods of the budget projections. An annual cull income of $40 per cow was also incorporated in to the budgets.

The original investment per bred cow was $4,200 and $600 for facilities and equipment. This total per cow investment of $4,800 was amortized over eight years at an interest rate of nine percent. Because these projections are designed to measure herd profitability and potential repayability, it is important to note that in all budget scenarios, no allotment or draw was made for management, family living, or income taxes. Due to the depreciable investment, interest paid on the investment and the annual depreciable replacement costs, the estimated taxes to be paid during the first ten years of the budget scenarios would not be substantial.

Decreasing expenses $50 per cow (Table 5) had the effect of increasing the ten year retained earning or net worth by 15.6% and 21.0% for weaning rates of 80% and 90% respectively. The twenty year net worth increases calculated to 14.4% and 13.6% respectively.

The projected retained earnings or net worth under the various budget scenarios are listed in Table 4. The lower the expenses and the higher the weaning percentage, the more quickly the original investment could be paid off. The investment is considered to be fully repaid in the first year that all borrowed operating money is fully repaid within the same year borrowed, thus no other debt remains. The ten year debt to asset ratio in Table 4 reflects an improving financial condition as decreased expenses and increased weaning percentages are incorporated into the management structure.

Increasing the weaning percentage, and thus the number of calves available for sale, had the greatest single impact on the budgets. Increasing the weaning rate from 80 to 90% while holding all expenses constant had the effect of increasing net worth by 133.9% in ten years and by 94.8% in twenty years (Table 5). The combination of increased weaning rates and decreasing herd expenses produced an increase (Table 5) of 183% in the first ten years and 121.2% over the twenty year period. No allowance was made for other reinvestment of earned profits.

Incorporating additional bison females into an existing and efficient herd, which already has a low remaining debt level is one method of more rapidly recovering the capital investment and reducing the outlay for interest, a major expenditure for this type of business operation.

Discussion and Implications
The data gathered from producers indicates the current prices paid for bison breeding stock will allow little profit even if producers can sustain a high level of production. Granted, there are not large numbers of producers or bison involved but the records are accurate and real. The 66.98% conception is not profitable given the assumptions used. However, there is room for improved reproductive performance. Producers below 80% calf crop especially, need to examine their management carefully and develop a plan to improve their weaning rate. Exceptionally high production coupled with low input costs, reduced interest rates, or other advantage could provide individual producers an opportunity to be more profitable. Producers who procured their animals at reduced prices several years ago, secured their loans at lower interest, or who have a marketing angle (i.e. selling breeding bulls) have greater profit potential.

These data indicate strongly that prices for bison breeding stock should not go higher than current markets, in fact could decrease. If the bison industry is to be sustainable for the long term, there must be room for profit for new and expanding producers. Current enthusiasm is understood, but all producers must acknowledge the economic realities if the industry is to thrive.

Table 1. Commercial bison cow herd inputs and performance (per cow basis).

*Source: Carrington Area Farm Business Mgmt Program (1993-1996)

Table 2. Expenses and income for commercial bison cow herds
(per cow basis).

*Source: Carrington Area Farm Business Management Program (1993-1996)

Table 3. Commercial bison cow herd budgets at three weaning percentage levels*.

*The projected budget is based on actual bison production data collected over a four year period, 1993-1996, from multiple herds located in the Carrington, North Dakota area.
** Based on an average sale price of $1400 per calf weaned
($750 for bull calves + $2050 for heifer calves divided by 2)

Table 4. Financial projections associated with various budget scenarios
(per cow basis).

Table 5. Percentage increase in net worth resulting from decreasing herd expenses and increasing weaning percentages.

* The projected percentage of increase in net worth is smaller after twenty years than ten years because of the accumulation of net worth over the longer twenty year period.

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