Ryan Rhoades’ first job out of graduate school was with the King Ranch Institute for Ranch Management. After serving on the faculty at the institute for seven years, he took a position as an Extension beef specialist at Colorado State University (CSU), and he has been working primarily in producer outreach for Colorado for the last six years.
Ryan told WLJ when he started his position at CSU, he sent out a comprehensive needs assessment to 2,500 beef producers in the state, and the No. 1 response was that producers needed help with business management.
“It was clear that the financials were the No. 1 barrier to success for folks, meaning cash flows, cost of production, debt and all those things that go with it,” Ryan said.
The second most common response was that while ranchers routinely collected information in their red book, they did not know their break-even price within 10 cents a pound.
Ryan saw that ranchers needed help turning data into information that could assist with making sound business decisions. Through the needs assessment and what his research showed, he developed the Total Ranch Analysis for Colorado (TRAC) benchmark program.
Ryan said the development of TRAC was based on the work of Stan Bevers and his development of key performance indicators (KPIs). The National Cattlemen’s Beef Association and others developed the Beef Cow-Calf Standardized Performance Analysis (SPA), and Bevers took that information and integrated the business and production numbers to develop the KPIs.
According to Bever’s website, KPIs provide a rancher with an analysis of the operation to standardize how beef cow-calf operations are evaluated from both a production and financial standpoint.
Ryan said many of the KPIs used in TRAC are based on the work that Bevers developed, and the indicators in TRAC are growing and evolving over time.
There are over 20 benchmark KPIs in TRAC based on production metrics, financial metrics, cost of production metrics and cost centers.
One of TRAC’s reports, the “TRAC 2022 Priority Report,” surveys participating ranches to detail production and financial benchmarks for cow-calf operations in Colorado. The 2022 report’s benchmarks are based on over 30 ranches annually over a three-year period. Ryan said he sat down with each ranch individually to listen to their unique successes and challenges and collect an array of production and financial data. The data is analyzed to determine critical metrics, and a customized report with benchmarks is given to the ranch. This gives the producers the ability to compare their numbers internally and externally year after year and evaluate trends.
Ryan continued that ranchers who want to compare themselves to the benchmarks in the report could do so with the use of SPA documents to calculate similar metrics for their ranch. However, Ryan noted that even within Colorado, certain costs can vary from the Western Slope to the Front Range and other parts of the state, but it gives ranchers a good place to start.
Ryan said a major profitability trend he sees from the subset of the 30-plus ranches is the need to appropriately match stocking rate with carrying capacity. Ryan noted that ranchers have reduced their herds due to drought and are reluctant to repurchase cattle when things are better. However, Ryan said, “The folks that come back to or match their stocking rate closer to their carrying capacity are way more profitable.” Ryan said this is due to the high fixed-cost structures on ranches and the need to spread those costs over more units to reduce the cost per cow.
“We’re talking about developing the right enterprise mix, whether that’s getting rid of some cows and adding in stockers so you can adjust inventory with a little more flexibility, but just being stocked appropriately when the time is right is really important,” Ryan said.
Another driver of profitability is the overhead costs, and Ryan noted that many producers have too much stuff, and depreciation is oftentimes the biggest contributor.
Ryan is also trying to convince ranchers to look seriously at their hay enterprise.
“A lot of places don’t need to be making their own hay because it just costs them way more when they get down into the details than they think,” Ryan said.
Ryan noted one of the keys to profitability is not to focus on maximizing production parameters, but to think about optimizing them. Ryan continued that while EPDs for growth have gone up dramatically in the last 20 years, weaning weights have been static during that time. Ryan suggests as much as 20% of the variation in weaning weights could be attributed to one factor: rainfall.
“I tell people if you’re already at the median or in the top 30% of weaning weights, you should not even be looking at that or focused on that because it’s going to be difficult to cost effectively push that number any higher,” Ryan said. “It doesn’t matter what the genetic potential is; there seems to be a resource limitation preventing us from fully expressing it.”
Ryan clarified that some people might have a differing view, but from what he has seen, it makes the most sense.
Ryan said the types of KPIs used in TRAC and SPA documents are universal, and producers from other states can use those in their operations.
“So a really interesting finding, if calculated using similar methods, is that the average total cow cost, no matter where you go, no matter what state you’re in, (is) fairly similar,” Ryan said. “But what’s different is how you got to that number, like feed versus depreciation versus pasture lease costs. All the individual line item expenses can be very different, but at the end of the day, the average total cost to run a cow is not all that different.”
A copy of TRAC can be obtained by contacting Ryan at ryan.rhoades@colostate.edu. For more information on KPIs and Bevers’ work, visit www.ranchkpi.com. — Charles Wallace, WLJ editor
