Beef Cow-Calf Profits
Lower but Varied in 2008
Steve Metzger, Farm Business Management Coordinator,
Direct costs per cow increased $22 from $369 in 2007 to $391 in the past year. The single largest increase was in feed cost per cow which moved up from $278 to $288 in 2008. On the other hand, overhead costs showed a $12 decrease per cow, easing off to $63 per cow as compared to $75 in 2007. The single largest decrease was in overhead interest costs which decreased by $5.56 per cow.
In addition to the direct and overhead costs already listed, there was also an increase in the cost of maintaining the breeding herd, sometimes referred to as “Inventory Change”. In 2007 this average annual herd maintenance cost was $56.33 per cow, but increased to $64.01 by the end of the 2008 year.
The total of the direct, overhead and inventory change costs for 2008, averaged $518 per cow as compared to $501 for the preceding year. This means that a herd weaning an average of 518 pounds per cow, at a price of $1.00 per pound is only breaking even and makes no direct payment to the operator for his time, labor and management. Any returns to the operator would come in the form of economic gains on range or pastures used and on feeds produced and used by the herd. In other words, the various feeding enterprises would be providing the profit and not the cow-calf enterprise itself.
The numbers above, while painting a less than desirable picture for the average cow-calf producer, must be tempered by the fact that high profit cow-calf producers are continuing to make money while the average producer is barely breaking even. The high profit herds, numbering 24 with an average of 176 cows per herd, produced a profit of $130 per cow in 2008. They did this, in comparison to the average producer, by weaning 30 more pounds per cow, reducing direct and overhead expenses by $55 per cow, reducing the inventory change cost by $15 per cow and by having calves that brought an average of $4.13 more per cwt. for a total of $103.31 per cwt. for calves sold or transferred out.
While the high profit herds did generate a $130 profit per cow, or $118 more than the average herd, they also generated $284 more profit per cow than the low profit herds, which numbered 23, and averaged 129 cows per herd. This group, made up of the 20% lowest profit herds, had a calculated profit of a negative $154 per cow.
What producers can take away from this information is that while costs are higher and calf prices lower than a year ago, there is still money to be made in the cow-calf business. Secondly, producers must know their own production numbers and their own costs of production. Using average numbers is okay to get a budget started, but producers need to input their own production data and their own costs to find out where they really stand in the cow-calf business. Every farm or ranch is unique in both its management style and in how it produces income and justifies its expenses. In order to best manage both production and expenses we need to know what they are and the real impact they have on the bottom line.
To view additional livestock and crop enterprises, as well as other farm financial information, I would suggest producers go to the website ndfarmmanagement.com Additional information on the North Dakota Farm Business Management Program may be secured by contacting Steve Zimmerman, State Supervisor for Agricultural Education at the State Capitol, at 701-328-3162. The Farm Business Management program is sponsored by the North Dakota State Department of Career and Technical Education.
- ### -
