The reason for the smile was twofold. For one, it’s hard to imagine anyone who has managed to survive in the often volatile beef sector who hasn’t long ago realized you have to work to try and make at least a few dollars at the end of the year. Secondly, the idea of reinforcing the idea of profitability is far from new and is, in fact, an oft-revisited theme.
The reason is actually not so hard to understand. We, and in this I suggest business in general, not just farming, can easily be followed by big number revenues, equating a hefty cheque with profitability.
It is quite understandable, given society always seemed focused on making more dollars without factoring in the costs associated with achieving a higher cheque at day’s end.
In farming, it is also very much a reality tied to the goal of higher production and equating that with profit. If an acre of land produces ten more bushels of a crop, it seems obvious it is more profitable. If a calf weans at 50 pounds heavier, profits have to be higher. Neither the additional bushels nor added pounds are not necessarily profitable production.
There are costs to production – fertilizer, labour, fuel, crop production products in the case of crops – and those need to be factored against the production.
One can easily imagine upping input costs, and while getting a positive boost in production, that boost not offsetting the added input investment costs. However, ‘the system’ of agriculture largely pushes the idea of maximizing production as the measure of success.
It might sound good at the coffee shop to brag about big bushel crops, but the real measure of farm success has to be those bushels generating a net profit. At present, achieving profits for crops is not as challenging given the high returns possible from strong markets.
The cattle sector is different right now, with higher feed costs and much tighter margins to work with, so controlling costs to give the operation a better chance at being profitable is a must.
If a sharper pencil can help profitability in a tighter price market, it should be a useful and much-used tool at all times, as net income would seem the most important number in a business ledger.
- Calvin Daniels
Comment on this article at lmtimes.ca/calvin
Disclaimer: opinions expressed are those of the writer.
