A little here, a little there — how do you know when costs creep too high?

New cost-of-production program aims to offer cow-calf producers a better way to identify problem areas

Bad weather. Market volatility. The pandemic. There are a lot of things outside of your control as a cow-calf producer, but your cost of production doesn’t have to be one of them.

Brenna Grant.
photo: Supplied

“As the industry has been rocked by COVID-19, there is an opportunity for producers to examine what they can control — their cost of production,” said Brenna Grant, manager of Canfax Research Services.

“During the boom years when prices are high, it’s easy for costs to get out of hand. But regular evaluation of what’s happening with those numbers can tell you where creep may be occurring.

“Knowing where this creep is occurring can help bring attention to managing it.”

Producers always notice when land prices or rent, wages, and equipment costs go up. But items such as overall input costs and productivity can be trickier to manage without careful monitoring. That’s when the classic line, you can’t manage what you don’t measure, comes into play.

Related Articles

“Good record-keeping helps take the guesswork out of decision-making,” said Ann Boyda, livestock economist with Alberta Agriculture and Forestry.

“A lot of producers do have financial information that gives them a financial picture. But in combination with their production management, they are better able to identify on a per-unit production basis where efficiency gains can occur.

“A lot do it informally or base it off experience, but having the actual data to validate their experience is beneficial for them.”

Record-keeping also allows producers to identify trends over time.

“That way, if they’ve changed a strategy, they can see how it’s impacting their operation,” said Boyda.

But monitoring cost-of-production data is a task that easily slips into ‘I’ll do next week/month/year’ territory.

“Many producers don’t want to track per-unit costs every year, as it takes time and requires both financial and production data,” said Grant. “Given many of the numbers don’t change much from year to year, it’s not considered worthwhile.”

Tools such as AgriProfit$ — an Alberta Agriculture program that tracks production and financial performance — can help, but there is “a complexity” to it that makes it tricky without good records.

“There’s a lot of detailed information required, whether it’s rations, feed amounts, feed quality, the grazing period,” said Boyda. “They have to be tracking their information on a continuous basis, and that’s why we need to emphasize record-keeping.”

Cost-of-production network

Benchmarking can also help with that, by comparing the cost of production of different practices and marketing strategies, she added.

“Estimating and managing production costs requires a great deal of information that varies from farm to farm,” said Boyda.

“By tracking their progress, producers can see how well they are meeting their targets.”

And a new Canadian Cow-Calf Cost of Production Network will be building those benchmarks for cow-calf producers across the country. Led by Canfax, the network will allow producers in every province to do an apples-to-apples comparison of their operations’ performance to that of other producers here in Canada and elsewhere.

“The network provides producers an opportunity to share their experiences and learn from each other,” said Boyda.

Participating producers will be placed into focus groups based on their eco-regions (areas with similar soils and climate) and production practices, and within those 26 groups, producers will share information for data collection and brainstorming, said Grant. Participants will receive a $500 honorarium. Focus groups are expected to start in January.

“Having someone who is able to say, ‘I tried that and it doesn’t work for this production system or environment for these reasons,’ can help save time, energy, and dollars,” said Grant. “It’s really about speeding up the learning process so that producers can focus on things that work.”

That’s ultimately the point of monitoring cost of production — “identifying incremental improvements… that help drive efficiency and financial performance,” said Boyda.

“The bottom line is profitability and sustainability,” she added. “The ability to measure and manage costs is central to successful operations. If they’re looking to be in the business in the future, they need to keep an eye on this type of information.”

For more information on the Canadian Cow-Calf Cost of Production Network or to sign up, visit canfax.ca.

About the author

Reporter

Jennifer Blair

Jennifer Blair is a Red Deer-based reporter with a post-secondary education in professional writing and nearly 10 years of experience in corporate communications, policy development, and journalism. She's spent half of her career telling stories about an industry she loves for an audience she admires--the farmers who work every day to build a better agriculture industry in Alberta.

Comments

explore

Stories from our other publications