Average Cost to Raise a Beef Calf
Author(southward): 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 bound calving herd that sold weaned calves in the fall of 2020 and provide an estimate of profitability for the upcoming year. Tabular array 1 summarizes estimated costs for a well-managed spring-calving cowherd for 2020. Every performance is unlike, so producers should evaluate and change these estimates to fit their situation. Annotation that in this table we are not including depreciation or interest on equipment/fencing/facilities, also 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 boilerplate basis. Therefore, a steer / heifer average price of $1.30 per lb is used for the assay, which is actually the same price that was used last year. Weaning charge per unit was estimated at 85%, pregnant that information technology is expected that a dogie volition be weaned and sold from 85% of the cows that were exposed to the bull. Based on these assumptions and adapted for the weaning rate, boilerplate calf revenue is $608 per cow.
Pasture maintenance costs are causeless to be relatively low at $20 per acre, and would include only bones cash costs of pasture clipping (fuel, maintenance, repairs), and a limited amount of reseeding, fertilizer, and fencing repairs. Producers who consistently utilize larger amounts of fertilizer to pasture basis would run into much college pasture maintenance costs. The pasture stocking charge per unit is assumed to be 2.0 acres per moo-cow, merely producers should carefully consider the stocking rate for their operation as this volition vary greatly. Stocking rate impacts the number of grazing days and wintertime feeding days for the functioning (i.e. high stocking rates will mean more than hay feeding days), which has big implications for costs on a per cow basis.
These bound calving cows volition utilize 2.five tons of hay per moo-cow, and the estimated cash price of making this hay (fuel, maintenance, repairs, supplies, fertilizer, etc.) is $35 per ton. Mineral cost is $35 per cow, veterinary / medicine costs $25, trucking costs $xv, mechanism greenbacks costs for winter feeding and other miscellaneous jobs is $15, and other costs (insurance, property taxes, water, etc.) are $forty. Breeding costs are $xl 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, just larger operations may market place cattle in larger groups and pay lower commission rates.
Breeding stock depreciation and interest are major costs that are often overlooked. They are generally not greenbacks costs that need to exist paid on a yearly basis, unless you take a loan on them, just they are existent costs that need to be paid at some bespeak. Equally an example, assume a bred heifer is valued at $1300, has 8 productive years, and has a cull 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 cow depreciation per year. The actual depreciation will vary across farms. When buying bred replacement heifers, the initial heifer value is articulate. With farm-raised replacements, this cost should exist the revenue 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 every bit a purchased bred heifer. At an average value of $950 (halfway between bred heifer and cull value) over her lifespan on your subcontract, and assuming a 3% interest charge per unit results in a $29/cow/year interest cost, or a total of $117/cow/year in combined depreciation and interest.
Note 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 moo-cow. At first glance, this positive return looks impressive, but is too misleading. A number of costs were intentionally excluded because they vary profoundly across operations. Observe that no depreciation or interest on equipment/fencing/facilities was included. Notice likewise that labor and country costs were also non included. Thus, the gross return needs to exist adjusted past these costs to come up with a true return to the subcontract.
Since these costs vary so much from one operation to the adjacent, it may be helpful to pick a specific sized farm and provide estimates for these costs: a twoscore-moo-cow operation that is producing its own hay and has all farming operations on its ain land (80 acres of pasture and thirty acres of hay).
Assume this farm has on average $50K in equipment which depreciates roughly $1000 every year, or $25/cow/twelvemonth in depreciation. At 4% interest, an additional price of $2000 in interest per year, or $50/cow/year, would be realized. Presume 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 $fifty/cow/year in depreciation and $25/moo-cow/year in interest.
If we have ii.0 acres of pasture and .75 acres of hayground per cow, and value that at a country rent of $36/acre, that would be $100/cow/yr in land rent. Presume also that we have adamant we have $100/moo-cow/yr in labor, which would amount to $4000 total per twelvemonth for the entire herd.
These non-greenbacks costs add upward to $350/moo-cow/twelvemonth on our case farm: $150 per moo-cow in depreciation/interest on equipment/fencing/facilities and $200 per cow in land rent and labor. Nosotros encourage you lot to estimate these for your own performance, but the unfortunate reality is that they quickly add upwardly on nearly farms. The $168/cow/year gross return over cash costs and moo-cow depreciation does not wait quite as good now. Afterwards adjusting for these other costs, the net return (all costs included) is –$182 per cow per year, or –$7280 for the 40-cow subcontract.
Some other way to look at this is to but include the depreciation and interest for equipment/fencing/facilities ($150/cow/year), and not include country and labor ($200/cow/yr). In this case, the return would increase to $xviii/cow/year, and would correspond the farms return to land and labor. Did this farm actually lose coin on a cash footing? No, not if they are using their ain labor and their land is paid for. Simply the subcontract also did not make a real profit. This subcontract essentially paid the equipment/fencing/facilities depreciation and interest in full, but the cattle farmer and land finer worked for gratis.
These numbers will vary across operations, but estimating your ain price structure is extremely of import. Our guess is that compared to our example farm, there are far more cow-calf operations of similar size with a higher cost structure than at that place are operations with a lower cost structure in Kentucky. Put simply, well-managed jump calving herds were likely roofing all cash costs, breeding stock depreciation/interest, and depreciation and interest on equipment/fencing/facilities, but were not generating a return on their labor or state this last twelvemonth.
Readers tin use Table 2 to modify the analysis based on their cost structure and expected calf prices, for 2020 and future years. It uses all costs except for country and labor, then the tabular array shows a return to land and labor.
Every bit an example, we used $ane.30/lb in our base of operations scenario as the expected steer/heifer price for 2020. Given the cost construction, we used ($0 alter on the left-hand side of the tabular array), the expected return to land and labor is $18/cow/twelvemonth, merely equally was previously described. If a cattle farmer sold their calves for an boilerplate cost of $ane.35/lb, and had a $fifty/cow/year cheaper cost structure (-$50 change on the left-hand side of the table), their expected render to land and direction would exist $92/cow/year. If another cattle farmer thought the $1.thirty/lb calf toll was accurate, just had $50/cow/year more expensive price structure (+$50 on the left-hand side), their expected return to land and direction would be -$32/cow/twelvemonth. In this last example, they had no return to their land and labor and were $32/cow/year brusk in covering all their depreciation and interest expenses.
Predicting cattle prices is nearly impossible given the numerous factors that affect the market. While the bear on of higher feed prices on feeder cattle and calf values is cause for business, several other factors paint a more than optimistic picture for the electric current year. The size of the U.s. cowherd continues to shrink, which ways the 2021 calf crop will be smaller. Domestic demand is probable to ameliorate throughout the twelvemonth every bit eatery business picks up. Finally, beef exports showed a lot of comeback in the fourth quarter of 2020, and this tendency is likely to keep into 2021.
Given that, our all-time estimate for fall 2020 prices for that same 550 lb steer/heifer are in the $i.35-one.45/lb range. At a $1.40/lb price, and using the same cost structure, the return to state and labor would now exist estimated at $65/cow/twelvemonth. This would still not fully compensate a cow-calf operator for the value of their labor, and would not provide any render to land, just it would be an improvement from 2020. Put but, turn a profit continues to be a challenge for cow-calf operations which means that efficiency and toll control will exist of keen importance once again.
Reducing and managing costs was one of the chief focuses of the Cow-Calf Profitability Conferences that were held during the winter of 2019-2020. Unfortunately, COVID-19 forced the states to abolish over half of the conferences we planned to deliver last yr. The proficient 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 information can be institute at the Virtual Cow-calf Profitability Briefing webpage. We hope that you will bring together us on those evenings as we remember every cow-calf operator in Kentucky tin benefit from the material being covered.
Greg Halich is an Associate Extension Professor in Subcontract Management Economics for both cattle and grain product and tin be reached at Greg.Halich@uky.edu or 859-257-8841. Kenny Burdine is an Associate Extension Professor in Livestock Marketing and Management and can be reached at kburdine@uky.edu or 859-257-7273. Jonathan Shepherd is an Extension Specialist in Farm Management and tin exist reached at jdshepherd@uky.edu or (859) 218-4395.
Author(due south) Contact Information:
Greg Halich | Acquaintance Extension Professor | greg.halich@uky.edu
Dr. Kenny Burdine | Acquaintance Extension Professor | kburdine@uky.edu
Jonathan Shepherd | Extension Specialist | jdshepherd@uky.edu
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Source: https://agecon.ca.uky.edu/cow-calf-profitability-estimates-2020-and-2021-spring-calving-herd
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