Competitive Agricultural Systems in a Global Economy
Computer Software Tools to Enhance Ranch Profitability
Issue
The ranching business is by nature multifaceted, with expertise required
in three main management areas: range, financial, and livestock production.
The success of each ranching enterprise is dependent upon the operator's
skills in each of these areas. Given that many ranchers are in the ranching
business because they treasure the lifestyle, financial management can
often be neglected. Yet it is the area where the rancher can define
the strengths and weaknesses of the operation to ensure the ranch will
still be in the family for the next generation. Drought, low prices
and having fewer pounds of beef to sell all make it critical for Arizona
ranchers to understand and analyze their finances with greater precision.
In addition, last year's drought was the first time many Arizona ranchers
were forced to remove all their cattle from public lands. This forced
liquidation and uncertainty regarding restocking has caused several
ranchers to reevaluate whether they should get back into the ranching
business.
What has been done?
Cooperative Extension addresses ranch financial management by providing
hands-on workshops. Three UA faculty have developed diagnostic software
tools that pinpoint problems for ranch profitability and assist in record
keeping, cash flow analysis, drought mitigation options, retained ownership,
and evaluating the decision to restock the ranch after the animals have
been removed. Data used for the computer workshops is based on actual
figures from the University of Arizona's V Bar V ranch. The ranch restocking
software evaluates the costs and returns associated with variations
in buying replacements or waiting for replacements to come from within
the herd over time.
Today's computers and software provide relatively easy tools for recording
and analyzing ranch management decisions. With appropriate inputs, the
computer can numerically and visually evaluate how business decisions
have the potential to threaten or enhance the financial health of an
operation. However, using computers can be a barrier to those who have
never had the opportunity to learn how. Each software tool has been
designed and written with rancher input to make it user-friendly and
relevant for Arizona ranchers. Training is conducted using a portable
20-machine wireless computer laboratory. This mobile lab environment
allows faculty to reach underserved communities that normally do not
have access to computer facilities. Over the past two years, 16 workshops
have been held, with plans underway to expand the program to increase
outreach to remote communities where little, if any, hands-on ranch
management training has occurred.
Impact
During 2001-2002, the Planning for Profitability curriculum, diagnostic
financial spreadsheet and restocking decision tool have been taught
to 341 ranchers and agribusiness professionalsapproximately 80
percent of the industry based on total market salesthroughout
Arizona and Utah. According to exit interviews collected after several
of the workshops, 89 percent of the participants interviewed stated
that the way the keep records would change as a result of the workshop;
83 percent reported that the workshop would influence their management
practices, and 63 percent reported an increase in their understanding
of ranch financial management.
"It gave me a better understanding of how and why we need to do
a proposed budget for better management." workshop participant
"Will follow expenses more closely. The workshop helped show how
and what." participant
"More effective way to see possible alternative methods and what
is influencing our ranch." participant.
Funding
USDA: RMA
The Western Center for Risk Management Education
Arizona Cooperative Extension
Contact
Trent Teegerstrom, research specialist
Department of Agricultural and Resource Economics
The University of Arizona
Economics Building, 403F
Tucson, AZ 85721
Tel: (520) 621-6245; FAX (520) 621-6250
Email: tteegers@ag.arizona.edu
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