Source: Saskatchewan Agriculture and Food
Given the current price and market uncertainties, business management has become cow-calf producers' most important tool in the quest to maintain the profitability of their operation, according to Saskatchewan Agriculture and Food's Wally Vanin.
"Producers must continually measure, monitor, analyze, evaluate, interpret and implement changes in production and financial performance factors or practices. It is only by measuring production and financial performance factors that producers can identify areas for improvement, compare their operations with industry standards, or determine if progress is being made."
Vanin believes producers should separate those things that they can control or influence from those they cannot.
"Producers should gain an understanding of those things beyond their control so that risk management strategies can be developed, including alternate business enterprises, marketing strategies and investment priorities."
Vanin is also of the opinion that producers must concentrate on doing things right and doing the right things.
"Doing things right relates to identifying what you and your resources perform well. You should constantly be seeking efficiency and new ways to achieve that goal. Doing the right things means producing what the market wants or what your cattle buyer wants. It also means marketing your animals in a way to maximizes returns."
It has long being recognized that being a low-cost producer is key to profitability in the commodity-based beef industry. Managing on the basis of unit cost of production (UCOP) allows producers to measure production and costs, as well as to identify areas where improvements can be made, says Vanin.
"By continually measuring production and economic performance, producers can determine if they are making progress towards meeting cost reduction goals and increased achieving increased profits."
Managing a cow-calf operation on the basis of unit cost of production (UCOP) will increase profits.
"Several studies of cow-calf operations have all shown that high-profit operations are characterized by average production, above average marketing skills, below average levels of investment and low annual total costs of production," explains Vanin.
"Unit cost of production refers to the cost to produce 100 pounds of weaned calf. Costs include winter feed and bedding, pasture grazing, and yardage. Yardage includes fuel, building and facility repair, utilities, paid labour, taxes, insurance and depreciation. Production factors such as weaning weight, length of calving season, death loss and calving percentage also influence UCOP.
"UCOP enable producers to directly compare their production costs to market price and other herds."
The Western Beef Development Centre and Alberta Agriculture, Food and Rural Development have collected production and financial information from producers across Western Canada and developed a series of benchmarks for every cost item and production factor, each broken down by geographical region.
There are four distinct regions in Saskatchewan. Not only can producers compare their operations against the industry as a whole, they can compare them against other cow-calf producers in their area.
"Producers must make a commitment to management," Vanin points out. "It is only by measuring production and financial performance that progress can be made."
For more information on cow-calf business management contact the Livestock or Forage Agrologist at your nearest Saskatchewan Agriculture and Food Agriculture Business Centre, or call the Agriculture Knowledge Centre at 1-866-457-2377
For more information, contact:
Wally Vanin
Forage Development Specialist
Saskatoon Agriculture Business Centre
Saskatchewan Agriculture and Food
(306) 933-8268
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