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AgriProfit$ & cost of production for cow-calf producers

 
  From the August 20, 2018 issue of Agri-News
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 Calculating your cost of production (CoP) is an important step in assessing performance and understanding the current health of your business. Ann Boyda, livestock economist at Alberta Agriculture and Forestry (AF) explains how the AgriProfit$ Business Analysis program can help cow-calf producers figure out their CoP.

“The CoP is measured in terms of cents per 100 lb. of calf weaned for cow-calf producers,” says Boyda. “It is an indication of the outlay required to produce each pound of beef. It includes all costs associated with producing the animal.”

The AF AgriProfit$ Business Analysis Program provides this standardized performance indicator. Explains Boyda, “A comparison of your CoP indicates whether there is scope for improvement or where you are performing well. It looks at the cow-calf operation as a collection of enterprises. In addition to cow-calf - for example - there may be backgrounding, hay, pasture, replacements heifers.”

“To get the whole picture, you need detailed financial and production information,” says Boyda. “The CoP can be used to compare the health of your business year on year and against other beef producers. There is value in comparing successive years as CoP can vary greatly between years due to a range of circumstances: drought, changes to herd management, unusual or one-of expenses such as pasture establishment.”

Boyda adds that producers need a good understanding of their CoP if they wish to improve their performance, with an eye to efficiencies.

AgriProfit$ Efficiency Measures:

  • Technical efficiencies capture physical measures of output and input use for cow-calf producers. Examples can include:
    • Pregnancy percentage as an indicator of breeding efficiency but also highlights cow body condition and reproductive problems.
    • Calving percentage incorporates pre-natal calf mortality and pregnancy percentage
    • Weaning percentage adds calf mortality to calving percentage.
    • Weaning weight as a measure of productivity, however pounds of calf weaned per exposed female provides a more robust measure.
Boyda notes that too great a focus on technical measures can place too much attention on maximums, such as weaning weights, or minimums, such as death loss. Often times, maximums and minimums are not optimal in terms of economic outcome.
  • Economic efficiency measures include values of inputs and outputs as well. “Think of least cost feed rations. Ration formulation may change, not because of changes in the nutrient contribution of feeds, but due to changing values of feed ingredients,” explains Boyda. “Economic efficiency measures tend to focus on optimal levels rather than physical maximums and minimums: dollars of return per pound weaned and dollars of return per cow wintered. However - here again caution needs to be taken - changes in output values or input costs can lead to improved returns but may be the result of changing market conditions.”
AgriProfit$ looks at a combination of technical and economic efficiency measures needed for maximum economic returns. “Technical efficiency measures help understand physical productivity and identify weaknesses in production systems. Economic efficiency measures focus on optimal use of inputs relative to the value of outputs. It takes both to ensure that the operation is moving in the right direction,” says Boyda.

Boyda makes the following suggestions when determining CoP:

    • Look at CoP over successive years and look for consistent trends. Try not to make changes solely based on only one year.
    • A good record system will help measure the productivity and input use. Time and effort are needed to capture the full picture of performance based on production and financial information.
    • Producers should look to a combination of technical and economic measures to manage their operations. Programs like AgriProfit$ can help provide these measures.
Find more information about the AgriProfit$ Business Analysis and Research Program. It is free to farmers/producers/ranchers. Go to www.agriculture.alberta.ca/agriprofits to register for the 2018 production year. Interviewers will begin scheduling farm visits in January 2019, to collect and compile the detailed data. In return, producers will receive individual farm business analysis as well as provincial benchmarks for comparison.

Contact:
Ann Boyda
780-422-4088

 
 
 
 
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For more information about the content of this document, contact Ann Boyda.
This document is maintained by Christine Chomiak.
This information published to the web on August 10, 2018.