How Much Does Beef Cow Cost
Author(south): Greg Halich, Kenny Burdine, and Jonathan Shepherd
Published: February 25th, 2021
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The purpose of this article is to examine cow-calf profitability for a spring calving herd that sold weaned calves in the fall of 2020 and provide an judge of profitability for the upcoming year. Tabular array ane summarizes estimated costs for a well-managed spring-calving cowherd for 2020. Every operation is different, so producers should evaluate and modify these estimates to fit their situation. Annotation that in this tabular array nosotros are not including depreciation or interest on equipment/fencing/facilities, as well as labor and land costs.
Calves are assumed to be 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'south and heifers in the low $120'due south, on a state boilerplate footing. Therefore, a steer / heifer average toll of $ane.30 per lb is used for the analysis, which is actually the same toll that was used last year. 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 calf revenue is $608 per moo-cow.
Pasture maintenance costs are causeless to be relatively depression at $20 per acre, and would include only basic greenbacks costs of pasture clipping (fuel, maintenance, repairs), and a limited amount of reseeding, fertilizer, and fencing repairs. Producers who consistently use larger amounts of fertilizer to pasture ground would see much higher pasture maintenance costs. The pasture stocking charge per unit is assumed to exist 2.0 acres per cow, but producers should carefully consider the stocking rate for their operation as this will vary profoundly. Stocking rate impacts the number of grazing days and winter feeding days for the operation (i.e. loftier stocking rates will hateful more hay feeding days), which has large implications for costs on a per moo-cow basis.
These spring calving cows will use 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 moo-cow, veterinary / medicine costs $25, trucking costs $15, machinery cash costs for winter feeding and other miscellaneous jobs is $15, and other costs (insurance, property taxes, h2o, etc.) are $40. Breeding costs are $40 per moo-cow and should include annual depreciation of the bull and bull maintenance costs, spread beyond the number of cows he services. Marketing costs are currently around $25 per cow, simply larger operations may marketplace cattle in larger groups and pay lower commission rates.
Breeding stock depreciation and involvement are major costs that are ofttimes 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 be paid at some bespeak. As an example, assume a bred heifer is valued at $1300, has 8 productive years, and has a cull moo-cow value of $600. The average yearly depreciation is calculated as follows:
$1300 bred heifer value
–$600 cull-cow value
$700 total depreciation
$700 depreciation / 8 productive years = $88 moo-cow depreciation per yr. The actual depreciation will vary across farms. When buying bred replacement heifers, the initial heifer value is clear. With farm-raised replacements, this price should exist the acquirement foregone had the heifer been sold with the other calves, plus all expenses incurred (feed, breeding, pasture rent, etc.) to reach the same reproductive stage equally a purchased bred heifer. At an average value of $950 (halfway betwixt bred heifer and choose value) over her lifespan on your subcontract, and bold a 3% interest rate results in a $29/cow/yr interest price, or a total of $117/moo-cow/year in combined depreciation and interest.
Notation that based on the assumptions in our example, total 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, but is also misleading. A number of costs were intentionally excluded because they vary greatly across operations. Notice that no depreciation or interest on equipment/fencing/facilities was included. Notice as well that labor and land costs were as well not included. Thus, the gross render needs to exist adapted by these costs to come up with a true return to the farm.
Since these costs vary then much from ane operation to the adjacent, it may be helpful to option a specific sized farm and provide estimates for these costs: a 40-cow operation that is producing its ain hay and has all farming operations on its own land (80 acres of pasture and xxx acres of hay).
Assume this farm has on boilerplate $50K in equipment which depreciates roughly $yard every twelvemonth, or $25/cow/twelvemonth in depreciation. At 4% involvement, an additional cost of $2000 in interest per year, or $50/moo-cow/year, would exist 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 corporeality to $50/cow/year in depreciation and $25/moo-cow/year in interest.
If we take 2.0 acres of pasture and .75 acres of hayground per moo-cow, and value that at a land hire of $36/acre, that would be $100/cow/yr in land rent. Assume also that we have determined we have $100/cow/year in labor, which would amount to $4000 full per year for the entire herd.
These non-cash costs add up to $350/moo-cow/year on our case farm: $150 per cow in depreciation/involvement on equipment/fencing/facilities and $200 per cow in country rent and labor. We encourage you to estimate these for your own functioning, but the unfortunate reality is that they quickly add together up on near farms. The $168/cow/twelvemonth gross render over greenbacks costs and moo-cow depreciation does non look quite every bit skilful now. After adjusting for these other costs, the cyberspace return (all costs included) is –$182 per moo-cow per year, or –$7280 for the 40-cow subcontract.
Another way to expect at this is to only include the depreciation and interest for equipment/fencing/facilities ($150/cow/year), and not include land and labor ($200/cow/year). In this instance, the return would increase to $18/moo-cow/yr, and would stand for the farms return to land and labor. Did this farm actually lose money on a greenbacks basis? No, not if they are using their ain labor and their land is paid for. But the farm also did non make a existent profit. This farm essentially paid the equipment/fencing/facilities depreciation and interest in full, but the cattle farmer and country effectively worked for costless.
These numbers will vary across operations, but estimating your own price construction is extremely important. Our gauge is that compared to our example farm, there are far more cow-calf operations of like size with a higher price structure than there are operations with a lower cost structure in Kentucky. Put simply, well-managed leap calving herds were likely covering all cash costs, breeding stock depreciation/interest, and depreciation and interest on equipment/fencing/facilities, but were non generating a return on their labor or land this last year.
Readers can utilize Table two to modify the analysis based on their cost construction and expected calf prices, for 2020 and future years. It uses all costs except for state and labor, so the table shows a return to land and labor.
As an example, we used $1.30/lb in our base scenario as the expected steer/heifer price for 2020. Given the toll structure, we used ($0 change on the left-hand side of the tabular array), the expected return to land and labor is $18/cow/year, just equally was previously described. If a cattle farmer sold their calves for an average price of $one.35/lb, and had a $50/moo-cow/year cheaper cost structure (-$fifty modify on the left-paw side of the table), their expected return to state and management would be $92/cow/yr. If another cattle farmer thought the $1.30/lb calf price was accurate, but had $50/cow/year more than expensive price construction (+$50 on the left-hand side), their expected return to land and management would be -$32/cow/twelvemonth. In this last example, they had no render to their land and labor and were $32/cow/yr brusque in covering all their depreciation and interest expenses.
Predicting cattle prices is nearly impossible given the numerous factors that affect the market. While the touch of higher feed prices on feeder cattle and calf values is cause for concern, several other factors pigment a more optimistic motion-picture show for the electric current twelvemonth. The size of the US cowherd continues to shrink, which ways the 2021 calf crop will be smaller. Domestic demand is likely to better throughout the year as eating house business picks up. Finally, beef exports showed a lot of improvement in the quaternary quarter of 2020, and this trend is probable to keep into 2021.
Given that, our all-time guess for fall 2020 prices for that aforementioned 550 lb steer/heifer are in the $ane.35-one.45/lb range. At a $ane.40/lb price, and using the aforementioned cost structure, the return to land and labor would now exist estimated at $65/cow/year. This would still not fully recoup a cow-dogie operator for the value of their labor, and would non provide whatsoever return to state, simply information technology would exist an comeback from 2020. Put simply, turn a profit continues to be a challenge for cow-calf operations which means that efficiency and cost command will be of groovy importance once again.
Reducing and managing costs was one of the principal focuses of the Cow-Calf Profitability Conferences that were held during the wintertime of 2019-2020. Unfortunately, COVID-19 forced the states to abolish over half of the conferences we planned to deliver last year. The good news is that we volition be offering these in a virtual format this winter on the evenings of March 23-25. Registration, agendas, and other information tin exist establish at the Virtual Moo-cow-dogie Profitability Conference webpage. We hope that you lot will join us on those evenings as we remember every cow-calf operator in Kentucky can benefit from the material being covered.
Greg Halich is an Associate Extension Professor in Farm Direction Economic science 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 Direction and tin can exist reached at kburdine@uky.edu or 859-257-7273. Jonathan Shepherd is an Extension Specialist in Farm Management and can be reached at jdshepherd@uky.edu or (859) 218-4395.
Writer(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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