What sets a top-performing bison producer apart from a low performer? About fifty cents.
That was one of the key preliminary findings of a multi-year benchmarking study that compares performance indicators in Alberta and Saskatchewan bison herds.
“Our main objective was to develop a performance indicator that allows us to evaluate farms relative to one another,” said Mira van Burck, one of four University of Alberta students leading the project.
“You all have different herd sizes, so we wanted to bear down and make it comparable all across the board.”
Since 2012, researchers have been collecting “a huge dataset” of financial information from bison ranches across the western Prairies, said van Burck, who spoke with her group at the recent Wildrose Bison Convention. For this portion of the project, van Burck and her classmates focused on the total costs associated with finishing bulls, with data from about 25 producers.
The group divided the costs on a per-head basis and then grouped each cost into four categories to determine the percentage of costs in each category: operating costs (including feeder costs, fuel, utilities, and repairs); fixed costs (including depreciation on buildings and machinery); capital costs (including land improvements, handling facilities, and equipment); and feed costs, (including feed, salt, and minerals).
From there, they developed a performance indicator called a cost-return ratio.
“Basically, we took all the total returns from your operation and then divided them by all the total costs,” said Timothy Goodkey, who also worked on the project. “The higher the ratio is, the better the operation.”
The cost-return ratios ranged from $0.97 to $1.43, with an average of about $1.08.
“This means every dollar that a top-performing farm spends on inputs, they get $1.43 back as a return,” said group member Zhao Wang.
The group then analyzed how top-performing farms allocated their costs to get the most returns, and found (unsurprisingly) that operating and feed costs were both the largest expenses and the dominant factor in profitability.
“Operating and feed costs are the biggest game changers when we’re looking at our cost-return ratio,” said van Burck.
The biggest component of operating costs was feeder costs, said group member Alex Shuttleworth.
“Your top four guys are spending about 80 per cent of their total budget on their feeder costs and their operating costs, which includes trucking, insurance, and all those other things that help make your operation run day to day,” she said.
“(If you look at the data for the feeder costs), the top four guys are spending about $300 less on average than the guys at the bottom. That’s a pretty big jump.
“I know it’s really hard within the market to get the best prices you can when you’re purchasing bison. But that’s a really big factor for what’s helping these top-performing guys get to the position that they’re in.”
Next, they looked at the makeup of the total feed costs.
“If you average the four guys at the top, they’re spending about 17 per cent of their total costs on feed and feed alone, whereas the (lower-performing producers) are only spending about 10 per cent of their total budget on feed,” said Shuttleworth.
“As they progress further and further along to becoming more profitable, they’re spending a lot more on their feed than the guys who have a lower cost-return ratio.
“Seven per cent doesn’t really sound like much, but it adds up pretty quickly. And clearly for some guys, it’s paying off.”
While this piece of the project has been completed, the students will be looking at performance indicators for finishing heifers and are hoping to find more bison producers to participate in the research, said van Burck.
“The better the input that we get, the better the output.”