Black Ink 9-23-13
October 15, 2013
The average carrying cost of a cow has probably doubled in your lifetime.
According to Texas data, those costs have jumped to nearly $600 per head from maybe half that a few decades ago. At a recent meeting, a Nebraska ag business economist estimated the number had climbed to $800. You can blame that on everything from land and feed prices to labor and fuel.
But rather than play the blame game, it's better to get up a game plan for what to do about it.
Spreading fixed costs over a greater number of head helps. Herd rebuilding might be in the cards, depending on where you're located on the drought/recovery continuum, so there's no better time to look at what really makes a difference in the cow-cost equation and what doesn't.
Every animal scientist, ag economist and farm business manager will tell you that reproduction is key. Of course, that is logical. You can't make money if you have nothing to sell.
An expert once told me when weighing reproduction and costs, the key is not to cut inputs so much that you're hurting reproduction. Look at your feed bill, but don't stretch the herd so thin that more of them can't breed back. Watch your labor inputs, but don't skip an expert's help if you need it during the AI season. And on and on.
Once you get past the obvious cost-cutting measures, it gets a little trickier.
Jim McGrann, professor emeritus at Texas A&M University, implemented the Standardized Performance Analysis (SPA) benchmarking program in the Lone Star State. "One of the problems we run into is that guys don't calculate cow costs, and things get out of perspective," he says.
Take bull-buying for example: Purchasing an unknown bull for a bargain price versus spending a little more on quality genetics is not necessarily a smart way to reduce inputs. The effect of that decision will show up all over your ranch, perhaps in forage use, maybe during calving time,likely at marketing — and likely for several years to come.
By spending a little more in a category that won't increase cow costs by much, you could dramatically improve your revenue potential. If you've got genetics that increase weaning weight just 10 to 20 pounds, that could easily pay for a more expensive bull. Improved calving-ease genetics can decrease labor costs and increase profit. Think about even one more live calf.
Examples like this could range from a slightly pricier mineral package to a more effective pharmaceutical product.
Weighing every decision based on the dollars-and-cents of it all can be exhausting, but it is nearly impossible if you don't even know what basic carrying cost you're starting from.
Bottom line is a question: If your cow costs have doubled since you started in this business, do you know why?
Questions? E-mail MReiman@CertifiedAngusbeef.com. ❖