Potential shortcomings of output:input ratios as indicators of economic efficiency in commercial beef breed evaluations

Abstract

In recent years animal breeders have increasingly made use of output:input ratios and simple measures of economic efficiency, such as annual profits, as a basis for comparisons and evaluations of the commercial applicability of alternative beef breeds. In many instances, however, output:input ratios may produce fallacious indications of economic efficiency that may, in turn, lead to erroneous conclusions regarding the true commercial applicability of the breeds evaluated. Errors potentially arising from the use of output:input ratios in breed evaluations may be attributed to a combination of 1) a narrow range of input use values under which most breeds are evaluated and 2) the inability of output:input ratios, including average annual profitability, to reflect consistently the economic objectives of commercial cow-calf producers. An alternative basis for breed comparison and evaluation is, therefore, developed from economic theories related to optimal investment and asset replacement. Comparison of the results obtained with this alternative to those obtained from output:input ratio evaluation, including annual profitability, indicate that potential value differences of as much as 33% may result from the use of output:input ratios as a primary basis of commercial breed evaluation.