What is in this article?:
As members of a SPA-IRM group, cattlemen began to understand which data they needed to keep in order to analyze their ranching business efficiency from a variety of angles. SPA is nothing new; it's still an extremely useful tool in gauging efficiency in a herd.
How do computers fit in?
Hughes says computers aid the process of year-end analyses by allowing ranchers to ask more “what if” questions. After compiling data for a rancher, Hughes says he's often asked such questions as: “If I change my calving date, what will that do to costs, returns and UCOP?”
“It's pretty easy to make some changes in your data input, turn the computer loose and let it grind out the next set of analyses,” Hughes says. But if you had to do it by hand, the time required would be prohibitive.
Montana State University has farm management cost analysis Excel spreadsheets available at: www.montana.edu/wwwextec/softwaredownloads.html. South Dakota's SPA-IRM groups also use Excel to run analyses. Some software packages (see “Computer Savvy: Recordkeeping,” p. 52, October 2007 BEEF) can also run analyses. FINPACK is another tool (www.cffm.umn.edu/Software/FINPACK/index.aspx), but ranchers should have training on how to use it, Hughes says.
In existence since the '70s, FINPACK is computer software designed for year-end analysis and year-end ranch and farm business planning by combining accounting records and production records. Farm business management specialists across the Northern Plains rely on FINPACK, which takes into account SPA guidelines. The only disadvantage Hughes sees is that FINPACK necessitates a large amount of data to grind out numbers.
Regardless of how cattlemen conduct a year-end analysis, experts agree it's vitally important. “We set ourselves up for success by being responsive,” Mousel says. “Either sustain or improve.”
Roadblocks in analysis
Keeping records and conducting an analysis isn't intuitive to cattlemen, says Barry Dunn, King Ranch Institute for Ranch Management executive director.
Reflecting on 20+ years of IRM and SPA work in the '80s and '90s, Dunn points out three roadblocks to producers not running year-end analyses.
There isn't much help out there. “The average county agent doesn't have the skills.”
Most people don't have accrual-adjusted financial records needed to complete an analysis. “It takes an accrual-adjusted accounting system, or tremendous amounts of adjustments to a cash system, to make it work.”
There's no incentive to run analyses when profit margins are high. “The market has been just exceptional of late. It's not a big thing for people when they're making $200/head.”
But, he adds, if “you have millions of dollars invested in land, cattle and equipment, it's responsible stewardship of the management of your assets to take a more sophisticated look at your operation.”