You may know what you want out of your operation, but do you record what you put into it? Knowing the difference between what you get and what you give is essential for profitable decision-making. This is the purpose of calculating cost of production.
The Canadian Cow-calf Cost of Production Network launched in 2020 with the objective to benchmark different production systems across Canada. Baseline data was collected from 115 producers who attended virtual focus groups between January and March 2021. This created 25 cow-calf and 3 dairy-beef production systems. These benchmarks are the first set in a standardized pan-Canadian process looking at the many types of cow-calf production systems across the country. The network only requires data to be submitted every five years; and should reduce response burden for producers while allowing for improvements to be tracked into the future. Results from the 2020 reference year are now available online.
Does your operation look like one of the 28 systems we’ve modelled so far? Don’t hesitate to investigate by reviewing the individual Farm Summaries. The Farm Summary reports include physical performance indicators, whole farm results, cow-calf enterprise and retained ownership enterprise information for the 2020 baseline year and five years of historical indexing. These reports can provide a valuable starting point for data-driven decision-making, industry competitiveness and continuous improvement within your own operation.
A Summary of the 2020 Results explores the network data from a national perspective. For example, we calculated the average total cost per cow in cow-calf operations in Canada at $1,124/head, with cash cost at 64% or $704/cow, depreciation cost at 11% or $130/cow, and opportunity costs at 25% or $290/cow. Where does your operation stand compared to the national average? Operations with the lowest cost per cow and per pound weaned were farms with the lowest unpaid hours spent, who focused all their labour on-farm, diversifying enterprises and working toward positive economies of scale. Is your operation at the low range of unpaid labour at just 2.4 hours per cow, or the high end, at 37.6 hours per cow?
Figure 1. COP network baseline farms
Resources
Analysis of baseline cost of production data resulted in the production of several additional resources for producers.
A great place to start exploring these resources is the Calculation Choices for Evaluating Cost of Production. Several choices for calculating cost of production are available depending on what you would like to evaluate. For example, do you want to know your breakeven price on buying new calves? Which breeding stock provide the best bang for your buck? Whether management changes are providing a return on investment? How about whether your operation measures up to industry competitors? You may choose different methods for calculating cost of production based on what questions you want answered.
Cows depreciate over time and that this can present a considerable cost on cow-calf operations. Understanding how this depreciation occurs can help you improve your marketing strategy for cull cows. Methods and scenarios for calculating and reducing Cow Depreciation is a resource that does just that. It explains how to evaluate the costs of raising replacement heifers versus purchasing bred heifers, increase the salvage value of your cows, and suggests possibilities for improving a cow’s productive years.
The network provides opportunity for continuous learning, which is one of the top farm management practices that contribute to financial success. Within the network, producers are encouraged to share what they know, learn from others, and find support to attain their future goals. As part of this maxim, we asked network participants what their advice would be for young producers and new entrants. Recommendations for Young Producers includes advice on production, risk management, and finance. Suggestions included working with your environment and making decisions based on what you have, and then spending time on management so that you understand how those resources can be used efficiently. Other suggestions included investing in quality breeding stock, preparing for shortages from drought, and building an operation slowly. Thirty-four percent of producers also suggested that young producers should network!
Next Steps
What is next for the network? We’re strengthening our baseline dataset with more production systems. As such, we are inviting producers to sign-up for next year. All producers are welcome to apply for the next round of data collection that will take place January to March 2022. See Figure 2 for a list of missing production systems. Follow one of the links below to sign-up and a provincial coordinator will contact you in December 2021 with more details.
- Cow-Calf Producer (English) Sign-up
- Cow-Calf Producer (French) Formulaire d’admission
- Dairy-beef producers
In the meantime, we are modelling future farm scenarios to support our current network participants in their short and medium-term goals. Together, participants developed ambitious but attainable future farm goals during their virtual focus groups, based on what they included in their vision of success. It’s remarkable that producers across the country singled out two key attributes that make a successful farm. For Canadian cow-calf producers, a successful farm is a profitable farm, and viable business that can be passed on to future generations. Learn more about What is a Successful Farm and what measurable goal posts producers within the network have set for achieving success. Whether improving average daily gain, grass management, or death loss, we’re busy calculating what those goals might look like for profitability, and what trade-offs may be needed to get there. Perhaps we can do the same for you in 2022.
Figure 2. Missing Production Systems
Additional resources:
- Why a Cost of Production Network?
- Networks Make the Dream Work
- A New Approach to Cost of Production Benchmarking
- Economics of Raising or Buying Heifers for Beef Cow Replacement
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