Financial decisions: Tools to assess practice sustainability topic at WSGLT clinic
McFadden – On June 23, the Wyoming Stock Growers Land Trust (WSGLT) hosted a grazing and management clinic at Sims Cattle Company of McFadden.
In addition to an educational ranch tour and grazing overview of the Sims family’s holistic grazing and sustainability program, attendees also listened to educational talks on selecting management strategies.
University of Wyoming Extension Livestock Marketing Specialist and Area Educator Bridger Feuz discussed financial tools to determine the sustainability of various practices.
When looking at current research on profitable producers from several companies such as CattleFax, Feuz noted there is a significant difference in financial investments between the top 20 percent and bottom 20 percent of producers.
“When they look at those profitable producers, what producers find consistently is that they spend a little bit more money on range pasture improvement and on genetics and a little less money on everything else than everybody else,” said Feuz.
He continued, “In general, they’re low-cost producers, but they invest in their future with range and pasture improvements and genetics.”
According to Feuz, profitable producers are typically successful investing money into strategies that pay off long-term versus simply buying inputs.
“Sometimes inputs make a lot of sense for us from an economics perspective, so I’m not saying don’t use those, but the more we can spend money on things like range improvements, the better,” commented Feuz.
Feuz noted that cow costs have increased dramatically over the last several years, rising from a national average of $425 per cow per year to approximately $900 per cow per year.
“Calf prices were going up at the same time, so as cow costs were going up, we didn’t notice it as much as we necessarily would have otherwise,” said Feuz.
Now that calf prices are decreasing, he encouraged producers to consider why their cow costs have increased.
“Is the reason our cow cost went up because we took some of that extra capital and invested it in some range and pasture improvements or genetic improvement?” asked Feuz.
He continued, “If that’s the case, now that calf prices are headed back down, and we know we have to tighten our belts, we don’t want to lose that production because those genetics are still there.”
Alternatively, if producers invested the money simply into higher inputs, such as feed programs, Feuz noted the increase in production could be lost as producers are forced to cut costs.
Many producers employ several strategies when making management decisions for their ranch including monitoring, record keeping and use of economic tools, said Feuz.
He also noted that most ranchers are cautious before making changes on their ranch.
“I think most ranchers have a healthy dose of skepticism. It keeps us out of some trouble, but it also can keep us from making some changes that could make big differences on our operations, too,” commented Feuz.
While many tools are helpful in decision making, Feuz cautioned producers that many have weaknesses and shortcomings that should be taken into account.
“The weakness of many of these is they’re good at giving us a snapshot of where we’re at, but they’re not great at helping us fully understand when we make changes where we’re going to be,” he said.
Feuz continued, “When it’s easy to change the numbers, sometimes we forget all the numbers we need to change before we look at the bottom line.”
When determining if a management strategy is economical, a planning tool Feuz suggests is the partial budget process.
“This partial budget process forces us to ask ourselves four questions every time we make a change on our ranch,” he said.
The first question producers should consider when looking at a change is what new or additional costs will be incurred.
“Next, we should look at what current income will be lost or reduced, followed by what new or additional income will be received,” continued Feuz.
The fourth question producers should consider is what current costs will be reduced or eliminated.
“It seems simple, but if we can force ourselves to answer each of those four questions each time, we’ll be better at making decisions on our ranch, and it really gives us a good snapshot of whether we are going to be better off or worse off when we make that change,” he commented.
“When producers call and ask if a decision they’re considering makes sense, the partial budget tool is the tool I send them,” concluded Feuz.
Emilee Gibb is editor of Wyoming Livestock Roundup and can be reached at firstname.lastname@example.org.