Cow-Calf Contracting Cow-Calf Contracting ServicesServices

C. Smith, V. Pipke, C. Smith, V. Pipke,

D. Moen, L. SpeddingD. Moen, L. Spedding

Mission StatementMission Statement

The mandate of the cow-calf contracting corporation is to produce and distribute high quality calves to the cattle market. Triple C will also provide an opportunity for producers to enter the cattle industry. Market penetration will be achieved through strong marketing plans.

Background of Triple CBackground of Triple C

Virtual cow-calf contracting service Contracting cows to selected

producers Public Corporation Publicly owned by shareholders

Industry OverviewIndustry Overview

Beef is #1 meat eaten by consumers

Beef production is changing in response to consumer demands

WGTA - Crow Rate Local Concerns Environmental Concerns International Concerns

Goals and ObjectivesGoals and Objectives

Short term goals To produce a high quality calf crop To provide superior service to the

producer Long term goals

Expand business throughout Sask. Provide a return to investors

Marketing Plan

Marketing Plan

The Marketing MixThe Marketing Mix

Products and Services Price Promotion Location

Products and ServicesProducts and Services

Product - Calves Service - Contracting

Producer CommentsProducer Comments

Pricing PolicyPricing Policy

$1.75/cow-calf/day $1.50/cow/day $1.75/bull/day

PromotionPromotion

Meetings (Producers/Investors) Newspaper

LocationLocation

Competitor AnalysisCompetitor Analysis

Product - Other cow-calf producers Service - Other contracting

companies

Target MarketTarget Market

Geographic Demographic

Production and Operations Plan

Start up CostsStart up Costs

Cattle purchase $2,360,000 Building/Land $59,000 Commercial Equip. $92,193 Office Equip. $11,353 Initial Shipping Cost $10,480

Total $2,533,026

OperationsOperations

Stock selection Importance of record keeping Quality control program Capacity limits

Human Resources Plan

Organizational StructureOrganizational Structure

Board of Directors

5 DirectorsLawyer, Manager,

Investor, Veterinarian, Producer

Manager

Vet Assistant Accountant

Secretary

Triple C Employees Triple C Employees

Benefits Training programs

Financial Plan

Financing Budget AssumptionsFinancing Budget Assumptions Sources of funding

Type ‘A’ shares- $1.00/share $1,950,000 of equity required

Critical Success VariablesCritical Success Variables Level of importance:

Critical=1

Selling price of calves 1 Contracting costs

1

RevenueRevenue

Calves $1,282,050 Culled Bulls $26,250 Culled Cows $311,520

Total $1,619,445

Break Even AnalysisBreak Even Analysis

Calf Price Variable

Calf Price NPV IRRAverage Annual

Cash FlowsAverage Annual Net

IncomeBase Case 1.26$ (3,878,384) - (2,865,799) (439,481) Worst Case 0.72$ (6,831,396) - (6,076,552) (1,041,113) Best Case 1.35$ (3,386,216) - (2,330,673) (339,208)

Contracting Cost VariableContracting

Prices NPV IRRAverage Annual

Cash FlowsAverage Annual Net

IncomeBest Case 1.15$ (1,679,810) 0.2% (468,467) 3,760 Worst Case 1.75$ (3,875,960) - (2,863,155) (438,992)

Breakeven calf price 1.65$

Breakeven Contracting Price 1.16$

2002 2007 2011Revenues 1,619,445$ 1,787,998$ 1,935,387$ COGS 1,593,407$ 2,181,290$ 2,242,001$

Gross Profit 28,038$ (393,292)$ (306,614)$ Expenses 89,420$ 87,298$ 90,950$

Income Before Taxes (63,382)$ (480,590)$ (397,564)$ Income Taxes -$ -$ -$

Net Loss (63,382)$ (480,590)$ (397,564)$

Net Cash Flow to Equity (306,052)$ (517,408)$ 2,209,660$

Expected Return on Equity -

Summary of Financial ResultsSummary of Financial Results

ConclusionConclusion

Infeasible due to: high cattle prices high production costs

standard contracting costs are too high

cash tied up in inventory

RecommendationsRecommendations

Start with lower cattle inventory Build facilities to produce our own

cattle, thereby eliminating contracting costs

Questions or Comments

Questions or Comments