Every day, the news seems to be dominated by the rising costs of fuel and food.
Likewise, it is akin with the increasing costs of inputs on the farm. If you have not started to think about how this is going to affect your management, you’d better. Producers who adjust their management to meet the current conditions are much more likely to remain in business.
Every producer needs to look at his or her operation under a microscope to determine areas of inefficiencies and to work on addressing those problems. Most producers will come to one of two solutions: 1) Keep outputs the same and reduce input costs, or 2) Keep input costs the same and increase outputs.
Either of those options represent ways of increasing production efficiency. One thing is certain, detailed records to track expenses and income are important in either of those scenarios. Each producer can take those records and determine fairly quickly if there are expenses that seem out of line. This is where your local county agents can be of assistance. They can compare your budgets and production levels to records that have been collected on different projects across the state.
Once you have done all you can to control costs, the only thing left to work on is the income side. To increase income, you must increase the pounds of calves sold and/or the value of the calves sold. Cattle-Fax analysts have previously listed key value-added attributes, which they called the “stair steps to profitability.” These include:
- Performance history from the feedlot and packer adds $2 to $5 per hundredweight.
- Certification of preconditioning and weaning programs adds $4 to $8 per hundredweight.
- Source and age verification adds $10 to $25 per hundredweight.
- Verification of production practices that qualify for natural or premium programs adds $3 to $7 per hundredweight.
Cattle-Fax analysts have also previously listed the “11 habits of high-return producers.” These are:
1. Below-average annual cow costs.
2. Lower-than-average calf breakeven levels.
3. Lower feed costs.
4. Lower interest expense, less debt.
5. Lower general operating expenses.
6. Higher average weaning weights.
7. Higher conception rates.
8. More pounds weaned per cow exposed.
9. More high-quality bulls with good genetics.
10. Preventative herd-health programs.
11. High-quality pastures to maintain nutritional requirements of the cow.
How many of these “good habits” do you have? As you can see, the first five items in this list deal with controlling costs. In most cases, controlling costs may be easier to accomplish than increasing income. Sometimes increasing revenue requires spending money in some areas. Increasing expenditures can actually lower costs if you look at it in terms of cost per unit of production, such as per pound of weaned calf. If a $20 expense results in 40 additional pounds of weaned calf, you come out ahead. Examples that would fall in this category include expenses for implants, preconditioning or better genetics.
The management changes needed to be successful in the current market and economy will be different for each individual producer. The one certainty will be that those who fail to change and optimize production will continue to face financial difficulties. This would be a great time to gather some records and spend some time with your local county agent and develop a plan that will help you to become more efficient.