Are you a cattle manager or a cost manager?
Like every other business, ranchers have to keep the cost of raising cattle balanced against prices offered by the market.
“Thirty years ago, input costs were relatively low and cattle producers concentrated on improving reproduction rates and weaning weight,” said Tom Troxel, associate head-Animal Science, for the University of Arkansas System Division of Agriculture. “Times have changed.”
Even though cattle prices have risen, so have the costs of just about everything that goes into a cattle operation.
“In other words, cattle producers must become cost managers,” he said. “High reproduction rates and weaning weights are still important; but with the high cost of doing business and high equipment costs, managing those input costs probably has more to do with profitability than managing reproduction rates and weaning weights alone.”
Cost of raising a cow
A manager needs to know production costs. The 300 Day Grazing program conducted at the Livestock and Forestry Research Station at Batesville keeps production and financial records on a 40 head cow/calf operation. For the past year, production cost alone was $665 per cow, excluding labor, farm insurance, utilities, interest and depreciation.
The goal of the 300 Day Grazing program is to demonstrate how to graze cattle for 300 days of the year. Due to the drought of 2012 and culling 20 percent of the herd, the 300 Day Grazing demonstration fed more hay than normal—79 days.
“Many producers are surprised that it costs $665 per cow per year,” Troxel said. Harlan Hughes, a North Dakota State University professor emeritus and columnist for BEEF magazine, pegged the average cow cost from the northern plains at $831. Hughes’ cow cost included hired labor, farm insurance, utilities, interest and depreciation that the 300 Day Grazing budget did not. The 300 Day Grazing demonstration doesn’t include fuel and oil, repairs, pasture costs, etc.
“One can see the $665 300 Day Grazing cow cost per year increasing to the $800 cow cost very easily when those costs are included,” he said.
“One very interesting point was the income side,” Troxel said. “The gross income per animal for the 300 Day Grazing demonstration was $1,050. Hughes reported $1,002 for the average gross income per cow for the northern plains cow-calf herds.”
The economic net return per cow for the 300 Day Grazing demonstration was $385 and the return for the northern plains cow-calf herds was $347-- nearly the same.
“Managing costs and putting the cost where it will make the most return,” Troxel said. “That’s what the cattle business is all about today: Being a cost manager.”