Variations of the “need to measure to improve management” quote are staples of business and industry mission statements and dogma throughout all sectors of the globe.
Ranch and farm operations are not exempt from this appraisal.
AgriProfit$ measures performance
For 35 years, producers in Alberta have had access to the AgriProfit$ Business Analysis and Research Program (AgriProfit$), which reports business management benchmarks and information. Ann Boyda, livestock economist with Alberta Agriculture and Forestry, is part of the group that handles AgriProfit$ today. The survey-based platform provides financial and production performance measures for government agencies, farmers and academia to shine a light on productivity and unit production costs. Results are used in evaluations, budgets and planning.
“AgriProfit$ helps producers understand their performance and profitability over time, and how their operation compares to other like businesses. It requires both financial and production information to investigate the profitability, financial efficiency and risk-bearing capability of the entire operation and how each enterprise interacts with one another and affects profitability.”
This is accomplished through a suite of programs examining cow-calf, backgrounding, crop, forage, pasture, dairy, greenhouse and beekeeping.
Profit varies across farms and between years, driven by fluctuations in price, production and costs. Boyda stresses it is critical farm business managers know how each of these key profit drivers affects their business’s profits. This knowledge helps them analyze risk and resilience and make spending decisions for the long term. A fundamental understanding of individual business and unit production costs allows more accurate profit-driven choices.
Data for AgriProfit$ is collected annually with participating Alberta producers outlining their farm’s income, expenditures, plus inventories of assets and liabilities. Navigation guides are provided and if necessary, specialists are available to help gather and enter needed data or interpret results upon completion.
AgriProfit$ calculates an accrued revenue and expense statement for each enterprise and provides unit efficiency information, which is compared to benchmarks for relevance.
For a cow-calf enterprise, key indicators of breeding, gestation and feed usage are referred to as GOLD: Growth (weaning weight), Open (rate), Length (of calving period) and Death (losses).
Immediate and downstream benefits
Boyda explains steady growth in voluntary involvement has occurred over the years as the system has evolved from a manual data collection survey to electronic capture.
Direct benefits to individual producers include:
- Cow-calf enterprise report and physical performance providing the unit cost — dollar per cow wintered and dollar per pound weaned of all costs and returns from producing weaned calves. It also incorporates physical performance indicators — length of breeding and calving period, conception and weaning rates, death loss, winter feed uses and grazing costs.
- Backgrounding enterprise report analyzing pen-by-pen dry lot and grasser performance. Days on feed, average daily gain and unit production costs, as well as break-even pricing based on sale price ($/cwt).
- Forage, crop and pasture enterprise report presenting costs and returns on a field-by-field basis, expressed in total and per-acre values.
At the individual level, enterprise reports help managers understand and assess their operations plus reflect on their positioning beside provincial peers. This instigates healthier farm-level decisions and greater market efficiency and performance.
Benefits are not limited to individual owners and managers. The data is aggregated in a way so that individual operations can’t be identified. It’s then used by researchers, as well as policy-makers to develop agricultural strategies. These results may go directly to the farmer but are a crucial part of creating better regulatory and policy decisions.
Enterprise analysis on a national scale
Kathy Larson, research associate of agriculture and resource economics at the University of Saskatchewan, says as the size and value of cow-calf operations increase, the need to adopt business tools such as enterprise analysis and cash-flow planning becomes even more important for all Canadian locations.
She cites a Farm Management Canada’s Dollars and Sense study that found top agricultural managers have several common practices including the calculation and use of cost of production. Accuracy of enterprise analyses depends on the precision of production and financial records.
She credits University of Kentucky extension professor Darrh Bullock and colleagues with the following: “The area of beef cattle management that usually gets the least attention is the task of collecting, maintaining and utilizing records … the level of record-keeping practiced on a farm often defines the level of success the operation can expect to achieve.”
Larson explains that ranchers collect records, but analysis and application in decision-making is sometimes lacking.
“Each ranch has a limited number of resources, time and money,” she says. “If resources are to be dedicated to data collection and analysis, it makes sense to know which records to collect and how to use the data to make decisions to achieve operational goals.”
A new University of Saskatchewan study funded by the Beef Cattle Research Council (BCRC), Mitacs and the Saskatchewan Ministry of Agriculture’s Development Fund is researching record-keeping, and will provide recommendations on which production and financial records are most valuable to track and use for decision-making. The principal investigators are Eric Micheels and Kathy Larson, with graduate student Brooklyn Braun.
Answering this question involves interviewing commercial cow-calf producers across Canada and conducting a winter 2021-22 survey to determine how records are being used plus their association with profitability and productivity. Research findings will support the BCRC’s record-keeping modules.
Boyda stresses the need for assessment to improve production and profitability on ranches and farms.
“Many producers are surprised at the magnitude of the true costs of production, taking into consideration all economic activity involved, allocating joint costs to specific activities, and valuing their choices,” says Boyda. “Armed with this information, cow-calf operators are better equipped to pursue their upcoming year’s goals and put a plan in place to make them happen.”
Readers in Alberta can learn more about and sign up for AgriProfit$ on its website. The Farm Management Canada Dollars and Sense report is available at fmc-gac.com/dollarssense. The Beef Cattle Research Council has a a number of resources on its website such as a Cow-Calf Production Indicators Calculator on its Decision Making Tools page plus an introduction to record-keeping and benchmarking.