Can show how sensitive an operation is to different selling prices and cattle price insurance coverage levels
A new decision support tool to assist cattle producers in calculating their cost of production and risk exposure has been posted to Alberta Agriculture and Rural Development’s website.
Rancher’s Risk and Return is an Excel spreadsheet calculator that takes an innovative approach to assessing the market price risk that cow-calf and feedlot producers continually face.
“This is really a useful thing and should be in the hands of farmers,” says Peter Papez, risk analyst with AFSC.
“The new calculator takes traditional cost of production calculations through to the assessment of financial risk and risk mitigation,” says Bruce Viney, risk management specialist with Alberta Agriculture and Rural Development. “The calculator estimates the financial risk effects from leverage, and measures the risk protection offered through livestock price insurance strategies. Rancher’s Risk and Return will be an important tool as producers consider new ways to manage downside threats while staying in position to take advantage of the exiting new upside market opportunities appearing on the horizon.”
Rancher’s Risk and Return also helps producers calculate useful information when they are considering making structural changes to their operations or when they are considering the financial return impacts of different borrowing levels. The calculator can easily show how sensitive an operation’s bottom line is to different selling prices and cattle price insurance coverage levels and these results are shown in easy-to-read tables and graphs.
“Rancher’s Risk and Return assists in estimating the costs of home-raising replacement heifers and other activities from backgrounding to yearling grazing and through to various finishing scenarios,” says Viney. “The calculator is an easy-to-use enterprise analysis tool that is designed in two parts and is specific to cow-calf and feedlot enterprises. It has a great deal of flexibility to quickly provide valuable information using familiar cow-calf budgets and traditional feedlot profit projections.
“The big advancement from traditional models is the ability to quickly assess financial risk and calculate the costs and benefits of cattle price insurance strategies specific to your own farm or cattle-feeding venture. While the Rancher’s Risk and Return modelling tool can get down into some detailed calculations, it still allows for easy what-if analyses and scenario comparisons.”
Rancher’s Risk and Return is available for free download from the Alberta Agriculture and Rural Development website.