Animal Science Department

 

Date of this Version

December 1991

Comments

Published for Proceedings, The Range Beef Cow Symposium XII December 3, 4 & 5, 1991, Fort Collins, Colorado.

Abstract

It has often been said, “The only certain thing in this world is change.” This is, without a doubt, quite true in production agriculture. Changes in the beef cattle industry come in the form of technology, markets, weather, consumer preferences, etc. These changes present challenges and hardship to some and to others opportunities and profits. Another interesting thing about change is that we and/or the industry are, for whatever reason, often slow to adapt and adopt.

In this presentation, we will talk about some of the changes that are being suggested in beef production and financial records; and the analytical systems employed in an effort to further move the industry in the right direction of change. Specifically, we will address the importance of an integrated records system as it relates to the efforts of the National Cattlemen’s Association’s Integrated Resource Management (IRM) subcommittee to develop Standardized Performance Analysis (production and economic measures) in relation to the guidelines of the Farm Financial Standards’ Task Force (FFSTF) for financial analysis for agriculture (FFSTF, May 1991). The FFSTF basic objective was to provide standardization in the terminology and performance measures for evaluating ranch and farm financial performance throughout the United States. This group was supported by the American Bankers’ Association, Cooperative Extension, USDA, the Farm Foundation, Farm Credit Service, Farmers’ Home Administration, and a number of land grant institutions and private lenders and others. The underlying assumption of both these efforts is complete production and financial records.

Why the renewed focus in recent times on good records, complete financial information, better decision making, better management? Much has stemmed from the events of the early- to mid-1980s when American agriculture went through a rather dramatic restructuring. As a consequence of the events of the late 1970s and 1980s, the livestock industry, as well as other segments of agriculture, recognized the need to be more competitive with other sectors in our economy. It was decided that more complete financial and production information would be required than in the past to demonstrate the ability of the producer and the industry to compete for available capital—both in national and international markets. The question was asked: How can we demonstrate that as an industry we’re profitable? The answer was, standards must be developed that are compatible with general accepted accounting principles (GAAP) used in other industries. This would require the efforts of each individual producer and, of course, the industry as a whole.

One of the reasons for developing the integrated production and financial records (SPA) for the beef/cow industry is to provide business performance documentation that can be used for evaluation in the market place. Further, this type of financial and production performance information and data will have a direct effect on those producers making individual management decisions. With complete production and financial information, ranchers and farmers can make informed decisions, which in the long-run will result in financial progress and financial sustainability. One of the important problems in agriculture, and certainly within the beef industry, has been historically low-rates of profitability, compared to other industries with similar capital investment and risk. So, if we are to compete with other segments of our society who compete for capital as well, we must be able to compete with rates of return that are competitive with other investment alternatives.

Again, the efforts, which have been expended by land-grant institutions through their Extension beef cattle specialists and others, have resulted in rather dramatic changes in the beef industry over time. Certainly, we have seen considerable progress in the weights of the steer calves we are weaning currently. In 1960, the average was around 380 pounds; this has increased to well over 500 pounds based on 1990 data. This certainly demonstrates that production efficiencies are being addressed and are improving. However, when we move from production to economic efficiencies, we have to keep in mind that production improvements have a cost attached to them. In order to evaluate the effect of those production efficiencies, we need to have both good production records and good financial records. If ranchers and farmers today can evaluate their production programs and their financial efforts in a logical and meaningful way, profits are going to be enhanced.

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