Costs and Returns for Cow-Calf Producers
Carrington Area Farm Business Management
Program
Introduction
The current level of high prices within the beef industry and the
current position of cow-calf producers within the cattle cycle has given rise
to renewed interest in the management of beef cow herds to produce the greatest
level of profitability possible. Beef
producers need to maximize their profits at all levels of the cattle cycle may
generate the profits needed to operate and grow their businesses throughout the
cycle. Producers need to know and
understand their own levels of production and expenses. A better understanding of how an individual
producer’s cow herd compares to others in both production and profitability is
critical to the sustained operation and growth of their beef cow-calf
business. One way to better understand
production and profitability numbers is to review the production, income and
expense numbers for average-and high-profit beef cow-calf producers within the
same geographic area.
Procedure
Data for this study was compiled through the Carrington Area Farm
Business Management Program in conjunction with the North Dakota Farm Business
Management Program. The Carrington
program is one of 13 programs in the statewide
The minimum number of producers involved in the study in any one year
was 18 with a maximum of 27. A total of
245 herds was involved with a total of 27,752 cows. The 20% high-profit herds numbered 51 with a
total of 5,488 cows. The high-profit
herds are included as part of the total herd group. The base of herds was quite consistent over
the 11 years with several herds being involved for the entire 11-year period.
While all costs were gathered on a 12-month basis, the income side of
the enterprise, except for the sale of cull breeding stock, was terminated at
weaning when the calves were physically separated and sold or transferred to a
separate feeding enterprise. While
producers were encouraged to weigh all calves, it must be acknowledged that
some producers did not weigh all calves at the time of weaning and transfer out
of the herd. For these calves, weights
were estimated using the sale weights of herd mates and similar type
calves. All replacement breeding stock
was held in separate enterprises and its costs and returns are not included
with the beef cow-calf data contained within this study.
Results and Discussion
The cows in the high-profit herd group weaned calves that weighed an
average of 590 pounds as shown in Table 1, for an advantage of 42 pounds over
the whole herd group. This more
importantly translated into an average of 552 pounds weaned per exposed female
for a 54-pound and $44.65 advantage over the total group. The average annual net cost of replacing the
breeding stock within the herd was calculated to be $24.88 for the high-profit
group, an advantage of $16.67 per cow over the total herd group which averaged
$41.55 per cow.
Total direct costs showed an advantage of $29.33 for the high-profit
herd group. The high-profit group had a
$13.52 lower feed cost, while the veterinary expenses and livestock supplies showed
only a $2.57 difference between the two herd groups. All non-grazing feed costs were listed at
market value, while grazing costs were listed at the actual cost of production
for the various range and pasture lands.
Operating interest costs were slightly over one-half as much for the
high-profit group, perhaps reflecting the need for less borrowed operating
money. The high-profit group showed a
$5.86 advantage when all overhead costs were totaled. The high-profit and average groups were quite
close with totals of $58.19 and $64.05 respectively. Overhead interest was substantially lower for
the high-profit herds as they recorded $9.64 per cow as opposed to $17.37 for
the total group.
Over the 11-year period the high-profit herd group achieved an annual
total cost of $330.46 as compared to the average of $382.32 for the total herd
group. The average net return favored
the high-profit group as they exceeded the overall average by $96.51 per cow to
finish the 11-year period with an annual profit of $152.42 per cow. When calculated over the 11 years, this
amounts to an additional $1,061.61 of profit per cow. The cost of production per cwt. including the
cost of inventory change was calculated to be $74.24 and $58.28 respectively
for the average-and the high-profit groups.
The annual operator labor charge was very similar for both groups, being
calculated at $45.44 and $47.36 per cow or at $8.82 and $8.35 per cwt. of
production.
Summary
This 11-year period gives producers a very good look at how the beef-cow
business functions through the entire cattle cycle. While some producers do raise livestock feeds
for less than market value, there are those that may be higher-cost-feed producers
and the market values assigned to these feeds may not cover the cost of
production. It is important that
producers also know and understand the true cost of production for the feeds
they raise and feed to livestock. Some
livestock operations may benefit more from purchased feeds if they have high
costs of production for their own home-grown feeds. It should also be noted that beef-cow herds
provide an excellent home market for such things as damaged grains and the
by-products of many cash grain crops.
Setting both production and economic goals is important for livestock
producers. Producers should consider
striving for the higher number of pounds weaned per exposed female, such as the
552 pounds listed for the high-profit group.
Producers also need to know what their annual cost is to maintain their
breeding herd, whether it is by purchasing or raising replacement animals. Producers should aim for $30.00 to $35.00 per
cow as an annual net cost of replacing animals.
This cost or value of the net inventory change will be greatly affected by
such things as the cost of replacement animals, the number of productive years
spent within the herd, and the cull value of these animals when sold.
The other major item for consideration is that of total costs. Even with the difference in feed costs considered,
producers should aim for total direct costs of approximately $260.00 per
cow. Overhead costs which are typically
in the range of $58.00 to $64.00 per head should also be reviewed. Approximately one-half of all overhead costs
are made up of interest and the depreciation value of equipment and building
that are tied to the livestock enterprise.
With all costs, including net inventory change, considered producers
should aim for a total in the range of $330.00 to $350.00 per cow, keeping in
mind that $25.00 to $35.00 of that amount is the annual cost per cow for
breeding herd replacements. By working
towards these production and economic goals producers can better position
themselves for higher returns today and a stronger future in the livestock
industry.
References
Metzger, S.S.
Carrington Area Farm Financial and
North Dakota Farm
and Ranch Business Management Annual Reports for Region 3, 1994-2004. North Dakota Department for Career and
Technical Education,