How Much Will I Make Off 20 Beef Cattle
Author(s): Greg Halich, Kenny Burdine, and Jonathan Shepherd
Published: February 25th, 2021
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The purpose of this article is to examine cow-dogie profitability for a spring calving herd that sold weaned calves in the autumn of 2020 and provide an estimate of profitability for the upcoming yr. Table one summarizes estimated costs for a well-managed spring-calving cowherd for 2020. Every operation is different, so producers should evaluate and change these estimates to fit their situation. Note that in this table we are non including depreciation or interest on equipment/fencing/facilities, likewise as labor and land costs.
Calves are assumed to exist weaned and sold at an average weight of 550 lbs. In the fourth quarter of 2020, steers in this weight range were selling for prices in the upper $130's and heifers in the low $120's, on a state average basis. Therefore, a steer / heifer average price of $1.30 per lb is used for the analysis, which is actually the aforementioned price that was used last yr. Weaning rate was estimated at 85%, meaning that it is expected that a calf will be weaned and sold from 85% of the cows that were exposed to the bull. Based on these assumptions and adjusted for the weaning charge per unit, average dogie revenue is $608 per moo-cow.
Pasture maintenance costs are assumed to be relatively low at $20 per acre, and would include only basic cash costs of pasture clipping (fuel, maintenance, repairs), and a limited amount of reseeding, fertilizer, and fencing repairs. Producers who consistently apply larger amounts of fertilizer to pasture basis would meet much higher pasture maintenance costs. The pasture stocking charge per unit is assumed to be two.0 acres per cow, but producers should advisedly consider the stocking charge per unit for their operation as this will vary greatly. Stocking rate impacts the number of grazing days and winter feeding days for the operation (i.e. loftier stocking rates will mean more hay feeding days), which has large implications for costs on a per cow ground.
These spring calving cows will utilize two.5 tons of hay per cow, and the estimated cash toll of making this hay (fuel, maintenance, repairs, supplies, fertilizer, etc.) is $35 per ton. Mineral cost is $35 per cow, veterinarian / medicine costs $25, trucking costs $xv, mechanism cash costs for winter feeding and other miscellaneous jobs is $xv, and other costs (insurance, property taxes, h2o, etc.) are $forty. Breeding costs are $40 per cow and should include annual depreciation of the bull and bull maintenance costs, spread across the number of cows he services. Marketing costs are currently around $25 per cow, but larger operations may market cattle in larger groups and pay lower committee rates.
Breeding stock depreciation and interest are major costs that are oftentimes overlooked. They are generally not cash costs that demand to be paid on a yearly basis, unless you lot take a loan on them, but they are real costs that need to exist paid at some point. As an instance, assume a bred heifer is valued at $1300, has eight productive years, and has a choose cow value of $600. The average yearly depreciation is calculated as follows:
$1300 bred heifer value
–$600 cull-moo-cow value
$700 total depreciation
$700 depreciation / 8 productive years = $88 cow depreciation per year. The actual depreciation will vary across farms. When buying bred replacement heifers, the initial heifer value is clear. With farm-raised replacements, this cost should be the acquirement foregone had the heifer been sold with the other calves, plus all expenses incurred (feed, breeding, pasture hire, etc.) to reach the same reproductive phase as a purchased bred heifer. At an average value of $950 (halfway between bred heifer and cull value) over her lifespan on your farm, and bold a three% interest charge per unit results in a $29/cow/year interest toll, or a total of $117/moo-cow/year in combined depreciation and interest.
Note that based on the assumptions in our instance, full specified expenses per cow are $440 and revenues per cow are $608. Thus, the estimated gross return is $168 per cow. At first glance, this positive return looks impressive, only is also misleading. A number of costs were intentionally excluded considering they vary greatly across operations. Detect that no depreciation or interest on equipment/fencing/facilities was included. Notice also that labor and land costs were also not included. Thus, the gross return needs to be adjusted by these costs to come up upward with a truthful return to the farm.
Since these costs vary so much from one functioning to the next, information technology may be helpful to pick a specific sized farm and provide estimates for these costs: a 40-cow operation that is producing its own hay and has all farming operations on its ain land (lxxx acres of pasture and 30 acres of hay).
Assume this subcontract has on average $50K in equipment which depreciates roughly $g every year, or $25/cow/twelvemonth in depreciation. At four% interest, an additional cost of $2000 in interest per year, or $50/moo-cow/yr, would be realized. Assume also this farm has fencing, barns, working facilities, etc., with an initial value of $50K and a lifespan of 25 years. That would amount to $50/cow/year in depreciation and $25/cow/year in interest.
If nosotros have 2.0 acres of pasture and .75 acres of hayground per cow, and value that at a state rent of $36/acre, that would be $100/moo-cow/twelvemonth in land rent. Assume also that nosotros have determined we have $100/cow/year in labor, which would corporeality to $4000 total per year for the entire herd.
These not-greenbacks costs add upward to $350/cow/year on our instance subcontract: $150 per cow in depreciation/interest on equipment/fencing/facilities and $200 per cow in land rent and labor. We encourage you to approximate these for your own operation, but the unfortunate reality is that they quickly add up on well-nigh farms. The $168/moo-cow/year gross return over greenbacks costs and cow depreciation does non expect quite as good now. After adjusting for these other costs, the net return (all costs included) is –$182 per cow per year, or –$7280 for the 40-cow farm.
Some other fashion to look at this is to only include the depreciation and interest for equipment/fencing/facilities ($150/cow/yr), and not include state and labor ($200/moo-cow/year). In this case, the return would increase to $18/cow/twelvemonth, and would correspond the farms return to land and labor. Did this farm really lose money on a cash footing? No, not if they are using their ain labor and their country is paid for. But the farm besides did not make a real profit. This farm substantially paid the equipment/fencing/facilities depreciation and interest in full, but the cattle farmer and state effectively worked for free.
These numbers will vary across operations, simply estimating your ain cost construction is extremely important. Our gauge is that compared to our case farm, there are far more moo-cow-calf operations of like size with a college price structure than in that location are operations with a lower toll construction in Kentucky. Put simply, well-managed leap calving herds were likely covering all cash costs, convenance stock depreciation/interest, and depreciation and interest on equipment/fencing/facilities, merely were non generating a return on their labor or land this last year.
Readers can use Table 2 to modify the analysis based on their cost structure and expected calf prices, for 2020 and hereafter years. It uses all costs except for land and labor, so the table shows a return to country and labor.
Every bit an example, nosotros used $1.30/lb in our base scenario as the expected steer/heifer price for 2020. Given the cost construction, we used ($0 change on the left-manus side of the table), the expected return to state and labor is $18/cow/year, only as was previously described. If a cattle farmer sold their calves for an average price of $1.35/lb, and had a $50/cow/twelvemonth cheaper price construction (-$50 modify on the left-hand side of the table), their expected return to land and direction would be $92/moo-cow/year. If another cattle farmer idea the $ane.30/lb dogie price was accurate, but had $fifty/cow/twelvemonth more expensive cost structure (+$50 on the left-paw side), their expected return to land and direction would be -$32/cow/year. In this concluding example, they had no render to their land and labor and were $32/cow/year short in covering all their depreciation and interest expenses.
Predicting cattle prices is well-nigh incommunicable given the numerous factors that touch on the market. While the impact of higher feed prices on feeder cattle and dogie values is cause for business, several other factors paint a more optimistic picture for the current year. The size of the US cowherd continues to shrink, which ways the 2021 dogie crop volition be smaller. Domestic demand is likely to amend throughout the year as eating place business picks up. Finally, beef exports showed a lot of comeback in the fourth quarter of 2020, and this trend is probable to go along into 2021.
Given that, our all-time judge for fall 2020 prices for that aforementioned 550 lb steer/heifer are in the $i.35-ane.45/lb range. At a $one.40/lb price, and using the same cost structure, the render to land and labor would now exist estimated at $65/cow/year. This would still not fully compensate a cow-calf operator for the value of their labor, and would not provide whatsoever return to state, but it would be an improvement from 2020. Put only, profit continues to be a challenge for moo-cow-dogie operations which ways that efficiency and price command volition be of great importance once more.
Reducing and managing costs was i of the main focuses of the Cow-Dogie Profitability Conferences that were held during the wintertime of 2019-2020. Unfortunately, COVID-nineteen forced us to abolish over half of the conferences we planned to deliver final yr. The expert news is that we will be offering these in a virtual format this winter on the evenings of March 23-25. Registration, agendas, and other data tin can be found at the Virtual Cow-calf Profitability Conference webpage. We hope that you will join united states of america on those evenings as we think every cow-calf operator in Kentucky tin can benefit from the material being covered.
Greg Halich is an Associate Extension Professor in Farm Management Economics for both cattle and grain production and can be reached at Greg.Halich@uky.edu or 859-257-8841. Kenny Burdine is an Associate Extension Professor in Livestock Marketing and Management and tin exist reached at kburdine@uky.edu or 859-257-7273. Jonathan Shepherd is an Extension Specialist in Farm Management and can exist reached at jdshepherd@uky.edu or (859) 218-4395.
Author(s) Contact Information:
Greg Halich | Acquaintance Extension Professor | greg.halich@uky.edu
Dr. Kenny Burdine | Associate Extension Professor | kburdine@uky.edu
Jonathan Shepherd | Extension Specialist | jdshepherd@uky.edu
Source: https://agecon.ca.uky.edu/cow-calf-profitability-estimates-2020-and-2021-spring-calving-herd
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