Date of this Version
Presented at Range Beef Cow Symposium XXII, November 29, 30, and December 1, 2011, Mitchell, Nebraska. Sponsored by Cooperative Extension Services and the Animal Science Departments of the University of Wyoming, Colorado State University, South Dakota State University, and the University of Nebraska–Lincoln.
Unit Cost of Production (UCOP) and Enterprise Analysis are tools that ranch managers have been encouraged to utilize in making decisions to improve profit. Managers who have adopted these tools have found them to be valuable in identifying opportunities and problem areas in enterprises on the ranch.
HISTORY OF THE DEVELOPMENT OF UNIT COSTS OF PRODUCTION FOR USE IN RANCH MANAGEMENT DECISIONS
The late 1970s and 1980s were challenging times financially for farm and ranch businesses, forcing many to exit the industry. In the early 1990s, the National Cattlemen’s Association Integrated Resource Management (IRM) subcommittee developed Standardized Performance Analysis (SPA), which was based on production and economic measures. The SPA analysis was designed in relation to the guidelines of the Farm Financial Standard’s Task Force for agriculture, with the overall goal of helping ranchers to utilize and understand financial records in the management of their operations. A number of agricultural economists in Cooperative Extension such as Dr. Jim McGrann Ph.D., Texas A&M and Dr. Harlan Hughes Ph.D., North Dakota State University, were foundational in developing financial and production record keeping methods as well as software for producers to use in the analysis of their businesses.
THE USE OF UNIT COST OF PRODUCTION AND ENTERPRISE ANALYSIS IS IMPORTANT TO LONG TERM RANCH BUSINESS SUCCESS
The old adage “you can’t manage what you don’t measure” is still true in relation to managing the ranch business. Knowing UCOP and the economic contribution of each enterprise on the ranch are foundational tools for making effective decisions in the management of ranch resources. However, a critical first step in calculating UCOP is to actually have production and financial records. These records do not have to be complicated, but they must be accurate and thorough. Records also need to allow for the allocation of expenses to different enterprises within the ranch. Many computerized financial record keeping programs are designed to easily track and allocate expense within enterprises.