As you look back over the last 50 years, it is quite astonishing what has been done to change cattle genetically, to modernize management decisions, and to improve the consumer’s acceptance and pleasure of eating beef. For a cow herd to stay profitable, managers will have to continue to adapt and change to improve efficiency.
Optimizing the ratio between outputs and inputs is the definition of improving efficiency. For cow herds, that means evaluating marketing endpoints, resources and management preferences as the first steps needed to implement improvement. Identifying the biological attributes of cattle that fit the ranch’s production is the next logical step. The ideal cow is dependable, breeds early in the season, requires minimal labor, effectively converts feed resources in pounds of calf, adapts to environmental challenges and produces offspring that meet consumers’ expectations. These attributes will be different not only for the different regions of the country but also the uniqueness of ranch resources that are available. Management decisions also need to be made to provide the cow herd with resources to sustain, flourish and grow. Unfortunately, decisions used to optimize the output-to-input ratio on a biological basis are not necessarily the same decisions used to optimize economic efficiency.
Regardless of whether you are calculating biological or economic efficiencies, results are decided by the relationship between outputs and inputs and not by considering outputs or inputs separately. On the output side of the equation, the magnitude of the gains is important. The gain can come from a single trait or a combination of traits. What often comes to mind are extra pounds, increased number of cows bred, less sickness and/or increased carcass quality grades. Each of these measurements can affect the number of pounds produced and sold.
Gains can also be benefits, which are more difficult to measure, like changes in land resources, water quality, labor inputs and equipment costs. These outputs have an associated economic value. It is important that eventually outputs are converted into their dollar values. This allows the different traits to be compared by the same unit of measurement and be truthfully utilized to make business decisions.
For inputs, it may seem that the first consideration is simply the cost of the input. This is a great starting point. Decision makers need to look deeper than initial cost to find the true input cost. Questions that need to be answered may include: Will it require additional equipment? Is there sufficient time available? Are there additional transportation or implementation costs that need to be added to complete the overall input cost? Just as outputs need to be converted to the common measurement of dollars, so too do the factors used to develop the input side of the equation.
It quickly becomes evident that good measurements lead to good data, and good data is needed to make good decisions. Some traits are easier to measure and convert into dollars than others. A ranch can get the pounds of production by simply weighing calves and recording pregnancy rates by preg checking after the breeding season.
The challenge that complicates things can come from converting your data into dollar values. There are numerous information sources to utilize for this conversion. Your operation records are a starting point. For genetics, you may want to use information from breed association genetic evaluations, while other conversion may be supplied by university and private industry sources. The quality of the information you use is highly correlated to the trust you place in the information source.
Cattle producers have traditionally found that as they adjust their biological output goals to grow, economic efficiency changes in both the value of the additional output and the cost of inputs. As cow herds approach maximum biological endpoints, the law of diminishing returns comes into play. On the other hand, striving to be the absolute cheapest producer removes the ability to invest in products, practices and services that can have substantial positive returns. It is interesting to note that both biological and economic efficiency follow a sigmoidal growth curve and not straight lines. Interestingly, optimizing biological and economic efficiency can or cannot be at extreme ends of the scale. It reminds us of some quotes like, “You cannot starve profit into a cow” and “You can spend your way to the poorhouse.”
In summary, marketing strategy and resource availability will determine the correct management decisions needed to optimize the output-to-input ratio of a given production system. Operations may have similar production goals; however, differences between operations make it necessary for managers to work through their own scenarios to achieve success.
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