In March I offered three suggestions for benefiting from the better times, invest in your people, manage to improve your land and don’t spend your money before you actually have it. I think these three still stand. This month’s article is about how to adjust to the better times so that we will have more profit to reinvest in our business.
We are experiencing better times in the cattle business. I see two major changes that are happening right before our eyes. One is the rising prices since January. This is a most welcome improvement, one we have been anticipating for a long time. The second change is the introduction of the Western Livestock Price Insurance Program (WLPIP) to B.C., Saskatchewan and Manitoba in early April. A similar program has been available in Alberta for the past four years.
Change always creates opportunity. These two events have created fundamental change in our industry. The question is: How can we as individual producers find and benefit from the opportunities being presented?
The last major change we experienced in the cattle business was BSE in 2003. That was a negative change and there wasn’t a lot of choice following BSE. We either changed or exited the business. Even though the change was negative it still created opportunity. Most of the opportunity from BSE was in learning how to be low-cost producers. I think it will be beneficial to carry this learning and these practices forward.
The change we are seeing today is different. It is a positive change. This time there will be more choice for producers. Some of us will carry on as we have been. Since prices are stronger this group will likely do better without making any changes. Some of us will realize that things have changed. We will seize the opportunity to adjust our businesses and enjoy increased success.
- More from the Canadian Cattlemen: Guenther: Demand, supply carry cattle producers to ‘this year country’
The biggest factor in choosing to change or choosing to continue the status quo will be our attitude towards our business. Do we see ourselves as business people? Do we manage our business or does it manage us? Is life happening to us or are we creating the future we desire?
I don’t think there is a right or wrong here. There is a choice. It is always best to be honest with ourselves. Pick the road you want to travel and enjoy the journey.
I think ranching is a business. It is a challenging, difficult, rewarding business. It is a business I am proud to be part of. To be successful requires good business skills. There is no conflict between ranching being a business and a way of life. In fact the more you treat your ranch as a business the more likely you are to stay in business to enjoy the way of life you desire.
It is essential that we know our costs. We should analyze our businesses at least yearly. Since we are seeing major change in our industry now would be an opportune time to review our business costs and structure.
Here is a suggested list to get you started. I am not suggesting you need to change all or any aspects of your business. What I am suggesting is that it would be helpful to have real numbers to confirm that you are actually operating in the most profitable way in light of our new circumstances. If your current practices are best suited to these new times stay with them. If you find areas where you might change and be more profitable go for the change.
Topics you might review:
1. Time of calving.
2. Cow size.
3. Cow-calf, cow background, cow yearling or custom grazer.
4. Cost of winter feed.
5. Cost of feeding the feed (yardage).
6. Overhead costs.
8. Length of grazing season.
9. Sell out and retire.
10. Prepare for an inter-generational transfer.
The more information we have the easier it will be to make good decisions. If you require education or help to do these things don’t hesitate to follow through. Investing in yourself and your business will pay big dividends.
Now let’s take a look at price insurance. This program has only just been introduced in Saskatchewan so I have never participated in the program. But I followed the Alberta program fairly closely and feel I understand it.
Price insurance will offer us a price at a future date for a given premium. The price and the premium are set three times a week and vary depending on the circumstances. There are three separate programs: a cow-calf, a backgrounder and a finishing program. There will be an opportunity to price our cattle as far out as 36 weeks in the future. Price insurance will set a floor price. If the market is higher than the floor price we will be able to take advantage of the higher price. Price insurance will also be honoured in the event of a border closing with the U.S.
Producers who know their costs will be in the best position to benefit from price insurance. Will you be one of these producers? The choice is up to you.
My personal assessment is that price insurance is a solid worthwhile program. I encourage everyone to become familiar with it. This knowledge will allow you to decide if the program is of benefit to you. I think price insurance is very favorable to the backgrounding industry. It is also favourable to home-raised long yearlings. The cow-calf program appears to be less favourable. I won’t comment on the finishing program as I don’t have a good understanding of that segment of our industry.
We live in exciting times. There are lots of opportunities. Treating our farms and ranches like a business will allow us to capitalize on the opportunities. I wish you success as we move ahead.
Don Campbell ranches with his family at Meadow Lake, Sask., and teaches Holistic Management courses. He can be reached at 306-236-6088 or [email protected]