Efficiency is important to the profitability of an individual cattle operation and to the competitiveness of the industry as a whole. In times of changing output and input values, it is very important to keep in mind what efficiency is and what it isn't. It is probably most common to think of efficiency in physical or technical terms, which are based on quantity of output relative to quantity of input. This includes common production values such as feed/pound of gain and pounds of calf weaned/cow. Such physical measurements often provide the rules of thumb that guide day-to-day decisions in an operation.

However, most producers recognize that there are limits to the extent that physical measures of efficiency are economical. What really matters is economic efficiency, which can be thought of as the value of outputs relative to the value of inputs. This results in the important distinction between maximizing production and optimizing production. This explains, for example, why we see different types of cattle in different parts of the country.

In more extensive production environments, a smaller cow, and thus a smaller weaning weight, is more economical than the bigger cow size that works better in other regions. Technical efficiency is part of economic efficiency, but it is not the whole story. This leads to the most important point in this discussion: changing input and output values can change the economic efficiency even when the technical efficiency has not changed. And that can lead to a situation where the optimal decision changes. Relying on physical production guidelines can lead to less economical results when output and input values change.

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