Will $1.00/lb. Calves
Work in Your Operation?
Figures from the recent 2007 ND Farm & Ranch Business Management Annual Report would indicate that while $1.00/lb. calves may work for the high profit producers, it will leave the low profit producers with a negative net income per cow and may leave the average producer with less than $27 annually per cow for their time and labor.
The 2007 Report summarized the costs and production level
of over 18,300 cows from 126 herds across the state of
Production was a key item in determining profitability. While the average cows produced calves with an average weaning weight of 557 pounds, they ended up producing 527 pounds per cow in the herd and a total of 505 pounds per exposed female. The low profit cows produced 469 pounds with calves that averaged 518 pounds at weaning but with only 449 pounds produced per exposed female. The high profit herds topped the production numbers at 585 pounds per cow, with an average weaning weight of 591 pounds per calf and 543 pounds weaned per exposed female.
Total direct and overhead costs, excluding replacements, was calculated to be $444, $487 and $412 respectively, for the average, low profit and high profit cows. Feed and range or pasture costs per cow, which were a major portion of the direct costs, were very similar for the three groups at $278, $277 and $266 respectively.
Total per cow costs for the average herd were $501 which included an annual replacement cost of $56 per head. The low profit cows had a total cost of $591 which included a replacement cost of $104 per head. The high profit cows produced the lowest total costs at $446 which also included the annual replacement cost of $34 per cow.
High profit cows had a $289 advantage over those in the low profit group. While they produced calves that weighed 73 pounds more at weaning, they also managed to produce 94 pounds more per exposed female. These additional pounds reflect higher levels of both calving and weaning percentages.
While the value of the groups of calves at weaning varied from $111.85 to $114.46 per cwt. many producers have often targeted $100 as a long term average price for selling or transferring out weaned calves. Even with the 2007 prices well above the $100 target, the average producer still earned only a $98 profit per cow. If the price had been $100 the average producer would have seen that profit lowered to $26 per cow for the 2007 year as the total expenses of $501 consumed the vast majority of the value of a 527 pound calf at $1.00 per pound. The high profit cows would have weathered such a price downturn in a more favorable manner. The $585 produced by these cows would leave a net return of $139 per cow after all expenses. This $139 return to operator labor and management would go much farther in assisting with such things as principal payments, family living and other financial demands.
As the price of feed grains and rangelands continues to increase, producers will need to continue to sharpen both their production and their financial management skills. As the target prices of former years turn into the support levels of future years, it will continue to impose a growing demand on producers and will require their best efforts to maintain and grow their businesses.
Producers will find additional information on this and other crop and livestock enterprises as well as a variety of other farm data at 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.
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