Building a Profitable Ranch Business – Beef Cattle Standard Performance Analysis
One of the most essential responsibilities in our businesses is to ensure the economic sustainability of our companies for the future of our business or future generations. Most ranchers have suffered multiple years of low margins due to market prices below the average total economic cost of production. Even today, with a much better prices outlook than a year ago, breakeven prices are still high for most cow-calf operations.
Board Update 3/13/2023
Tulia, Amarillo, Dalhart Average – Cattle Prices by Category 3/9/2023
Dates & Deadlines
3/27-31/2023 – Ranch Management University
4/6/2023 – RWFM Stewardship Webinar Series: Water Law Overview & Update
4/14/2023 – Owning Your Piece of Texas
4/19-21/2023 – Prescribed Burn School
4/25-26/2023 – Hemphill County Beef Conference, Canadian
5/4/ 2023 – RWFM Stewardship Webinar Series: Wild Pigs in Texas
Building a Profitable Ranch Business – Beef Cattle Standard Performance Analysis
One of the most essential responsibilities in our businesses is to ensure the economic sustainability of our companies for the future of our business or future generations. Most ranchers have suffered multiple years of low margins due to market prices below the average total economic cost of production. Even today, with a much better prices outlook than a year ago, breakeven prices are still high for most cow-calf operations.
Especially these last years affected by the drought, cattlemen were challenged to reduce production costs, be more competitive and increase the profitability of their herds.
One of the most critical risk management strategies to successfully manage a profitable business is establishing and measuring production, economic, and financial performance objectives, determining the unit cost, and benchmarking with alternative production systems.
As Peter Drucker said: “You Can’t Manage What You Can’t Measure.” Financial and production performance objectives must be established to manage a profitable business. Those could be profit objectives, rate of return on assets and working capital, equity growth, crop and cattle unit cost of production, or grazing efficiency, among other measures.
Beef-Cattle Standard Performance Analysis
One of the best tools available to measure your ranch’s productivity, financial performance, cost of production, and profitability, is the Beef-Cattle Standard Performance Analysis (SPA). In 1992, the National Cattlemen’s Association adopted the Standardized Performance Analysis (SPA) system developed by NCBA producers, the National Integrated Resource Management Coordinating Committee, and Texas A&M AgriLife Extension Specialists.
The main objective of this system is to help producers reduce their cost of production and improve their efficiency. There are always opportunities to improve within your beef-cattle operation. The first step with SPA is to learn where you are standing and identify the areas of opportunities or weaknesses.
Using a SPA is an annual process that will help cattlemen improve their ranch profitability by analyzing trends and seeing the results of decisions made. It is an excellent tool for accurately analyzing production, financial, and economic performance to measure progress and goals. Integrating long-term management strategies and tools such as SPA will help ranchers maintain an efficient unit cost of production, improve production performance, and enhance profits.
Historical Production Costs
Thanks to SPA, we have a unique historical integrated production and finance benchmark system for the beef cattle industry in our state. The database showed that production costs were the most significant variable correlated with ranch profitability. The top 25% of ranches with the highest net income were operations with lower production costs.
Maintaining an efficient production system with low costs is one of the most critical variables for a profitable and sustainable ranch. Using our resources more efficiently could help us reach those goals. An efficient grazing system, a herd size that fits your environment, or an accurate stocking rate will allow us to reduce costs.
Implementing SPA in your ranch
At Texas A&M AgriLife Extension, we have prepared software and worksheets to help producers of any size use SPA at any time in their operations. These tools will help you organize your production and financial and economic information to analyze your cow-calf enterprise better. Producers will complete an in-depth financial and production analysis. Participating producers will receive a report analysis showing their rank with other producers in the database. Don’t hesitate to contact us for more information about SPA and how to use it in your operation.