This is Part Two of a three-part series (see Part One and Part Three in the coming weeks).
Editor’s note: this article is also available in French. Download the translated version here.
As the industry has been rocked by COVID-19, volatile market prices and uncertainty have occurred. There is an opportunity for producers to examine what they can control – their cost of production. During the boom years when prices are high it is easy for costs to get out of hand. You may be considering changes to your operation but are not sure where you will get the biggest bang for your buck.
The Canadian Cow-Calf Cost of Production Network (CDN COP Network) will develop benchmarks for specific production systems and ecoregions across the country. Scenarios will be developed for what future farms could look like utilizing the 5% Rule to identify where incremental improvements could be made around productivity, input costs, and output prices. Each production system will have its own set of opportunities, limitations, and areas where greater focus may be beneficial. Consider cattle operations with different production systems:
- A beef operation in the east is considering raising dairy-beef but is uncertain about the costs and management changes needed to succeed.
- A small, land-locked operation may be utilizing multiple income streams from multiple different commodities to manage risk. The focus is on using each acre in different ways throughout the year to generate revenue.
- A large, specialized operation may be focused on economies of scale in purchases and sales and efficiencies in labour productivity.
When looking at competitiveness and profitability, each region needs to evaluate the limitations and opportunities unique to them. Is land, labour, or capital the limitation? Will the biggest impact for the operation come from reducing input costs, or improving productivity, or increasing price? Continue reading