 The foundation for success of any business is an understanding and knowledge of expenses and revenues. While this financial information is a key component of effective decision-making. Many producers find the process of assembling the information and putting it into a usable format to be formidable.
Objectives:
- Determine the estimated costs and benefits
of various production and marketing strategies
available to beef producers.
- Assemble an expert-choice model that
producers can use to evaluate their options
as they make ranch and marketing decisions.
- Develop benchmark information for the
industry that individual producers can use
for comparison purposes.
 Activities, Progress, and Results:
- Develop flow-chart for production/marketing options. This was completed for production and
marketing.
- Cost the various options. This was completed for production. Cost fluctuations made it difficult to
get stable cost information.
- Develop Excel-based choice models. This was completed for production. Marketing model is not
being tested.
- Give presentations and workshops to validate the model and educate faculty and producers about
the model.
- Develop a field survey based on the model to collect benchmark data. Activity was discontinued at
the request of industry.
- Analyze the benchmark data and publish the results. Activity was discontinued at the request of
industry.
Report Summary:
Cost of production is a key piece of information needed to make the best economic decision when
selling animals. When calculated, the cost of production helps determine the minimum selling price
needed to avoid losing money. If the price the buyer pays is less than your cost of production, you
will lose money.
The objective of this project was to determine the estimated costs and benefits of various production/
marketing strategies available to beef producers. If more cost-effective alternatives to those
approaches currently in use could be identified, then these were to be included in the analysis. This
information would then be assembled into an expert choice model that producers could use to evaluate
their options as they make decisions.
A cost calculator was developed and is described the publication “Calculating the Cost of Production
for a Cow-Calf Operation” (CTAHR publication LM -11). The calculator runs on Microsoft
Excel and uses information that producers supply to figure the cost of producing a calf. The information
needed by the calculator is described in the publication, and blank worksheets are provided for
making notes.
Once the cost calculator was finished, personnel with the CTAHR Cooperative Extension Service
were provided with training so that they could use the calculator with their clients. At the same time,
plans were made to survey various producers across the state to establish cost-of-production enchmarks.
To this end, a pre-test was deemed necessary to make sure the cost calculator was free of
errors and understandable to producers.
The pre-test was completed in the first
part of the year. Feedback from this effort
resulted in changes to the calculator to
correct some minor problems. At that time,
producers became concerned about efforts to
use the calculator as part of an effort to
establish cost-of-production benchmarks.
As a result of the feedback from producers,
the cost calculator was modified to
become Calf-XL. Another publication to
accompany the software has been drafted.
An example that demonstrates the usefulness
of the software to producers is now included.
Efforts to complete a cost-of-production
survey have been discontinued.
 Marketing Options:
Efforts have been made to outline the marketing
options available to producers. Figure
1 summarizes the worksheets that need to be
developed for an Excel workbook that would
become a marketing cost calculator similar
to the cost-of-production calculator.
A number of challenges have been
encountered in identifying the information needed to complete the workbook, which was difficult to
obtain from roducers’ records. At the same time, the dynamic nature of the marketing channel
results in extensive cost fluctuations. In some cases, costs are not known until after the fact, and even
then the costs vary widely.
Efforts to produce a manageable workbook will continue, although the funding for the project has
expired. At this point, the cost structure is the factor preventing its completion. Then, the instrument
will be tested and the documentation will be completed.
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