How Much Is a Beef Cow Worth 2019
Author(s): Greg Halich, Kenny Burdine, and Jonathan Shepherd
Published: Feb 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 judge of profitability for the upcoming year. Table 1 summarizes estimated costs for a well-managed bound-calving cowherd for 2020. Every operation is dissimilar, so producers should evaluate and alter these estimates to fit their situation. Note that in this table we are not including depreciation or interest on equipment/fencing/facilities, likewise every bit labor and state costs.
Calves are assumed to be weaned and sold at an boilerplate 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 $ane.30 per lb is used for the assay, which is actually the same price that was used last year. Weaning rate was estimated at 85%, pregnant 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 rate, average dogie revenue is $608 per cow.
Pasture maintenance costs are assumed to be relatively depression at $xx per acre, and would include only basic cash costs of pasture clipping (fuel, maintenance, repairs), and a express amount of reseeding, fertilizer, and fencing repairs. Producers who consistently utilise larger amounts of fertilizer to pasture ground would see much college pasture maintenance costs. The pasture stocking rate is assumed to be 2.0 acres per moo-cow, merely producers should carefully consider the stocking rate for their performance as this will vary greatly. Stocking rate impacts the number of grazing days and winter feeding days for the operation (i.e. high stocking rates will mean more hay feeding days), which has large implications for costs on a per cow basis.
These bound calving cows will use two.five tons of hay per 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 wintertime feeding and other miscellaneous jobs is $15, and other costs (insurance, belongings taxes, water, etc.) are $twoscore. Breeding costs are $forty per cow and should include annual depreciation of the balderdash and bull maintenance costs, spread across the number of cows he services. Marketing costs are currently around $25 per cow, merely larger operations may market cattle in larger groups and pay lower commission rates.
Convenance stock depreciation and interest are major costs that are often overlooked. They are mostly not cash costs that demand to be paid on a yearly ground, unless you have a loan on them, just they are real costs that need to be paid at some betoken. Equally an example, assume a bred heifer is valued at $1300, has eight 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 ownership bred replacement heifers, the initial heifer value is articulate. With subcontract-raised replacements, this cost should be the revenue foregone had the heifer been sold with the other calves, plus all expenses incurred (feed, convenance, pasture hire, 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/yr interest price, or a total of $117/cow/twelvemonth in combined depreciation and interest.
Note that based on the assumptions in our instance, full specified expenses per cow are $440 and revenues per moo-cow are $608. Thus, the estimated gross render is $168 per cow. At commencement glance, this positive render looks impressive, just is also misleading. A number of costs were intentionally excluded because they vary profoundly across operations. Detect that no depreciation or interest on equipment/fencing/facilities was included. Find as well that labor and land costs were besides not included. Thus, the gross return needs to be adjusted by these costs to come upwards with a true render to the farm.
Since these costs vary so much from one operation to the next, it may be helpful to pick a specific sized farm and provide estimates for these costs: a xl-moo-cow operation that is producing its own hay and has all farming operations on its ain land (fourscore acres of pasture and xxx acres of hay).
Assume this farm has on average $50K in equipment which depreciates roughly $1000 every year, or $25/cow/year in depreciation. At 4% interest, an boosted toll of $2000 in interest per year, or $50/cow/twelvemonth, 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/cow/year in involvement.
If we have 2.0 acres of pasture and .75 acres of hayground per cow, and value that at a land rent of $36/acre, that would be $100/cow/year in land rent. Assume besides that we accept determined nosotros have $100/cow/yr in labor, which would amount to $4000 total per twelvemonth for the unabridged herd.
These non-cash costs add upwardly to $350/moo-cow/yr on our example farm: $150 per cow in depreciation/interest on equipment/fencing/facilities and $200 per cow in land rent and labor. We encourage yous to approximate these for your ain operation, but the unfortunate reality is that they quickly add up on virtually farms. The $168/moo-cow/year gross render over cash costs and moo-cow depreciation does non look quite equally good now. Subsequently adjusting for these other costs, the net return (all costs included) is –$182 per moo-cow per year, or –$7280 for the forty-moo-cow subcontract.
Another way to look at this is to merely include the depreciation and involvement for equipment/fencing/facilities ($150/cow/year), and not include land and labor ($200/cow/year). In this case, the render would increase to $18/cow/twelvemonth, and would represent the farms return to land and labor. Did this subcontract really lose money on a cash basis? No, non if they are using their own labor and their land is paid for. But the farm also did not make a real turn a profit. This subcontract substantially paid the equipment/fencing/facilities depreciation and interest in full, but the cattle farmer and land effectively worked for costless.
These numbers will vary across operations, merely estimating your own toll structure is extremely important. Our judge is that compared to our example farm, in that location are far more cow-calf operations of like size with a higher price construction than at that place are operations with a lower cost structure in Kentucky. Put just, well-managed leap calving herds were likely roofing all cash costs, breeding stock depreciation/interest, and depreciation and involvement on equipment/fencing/facilities, but were non generating a return on their labor or state this last year.
Readers can use 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 country and labor, so the table shows a return to land and labor.
Equally an example, we used $1.30/lb in our base of operations scenario as the expected steer/heifer price for 2020. Given the cost structure, we used ($0 change on the left-hand side of the table), the expected return to land and labor is $18/cow/yr, just as was previously described. If a cattle farmer sold their calves for an average cost of $1.35/lb, and had a $l/cow/yr cheaper cost construction (-$50 change on the left-hand side of the tabular array), their expected render to country and management would be $92/cow/year. If another cattle farmer thought the $1.30/lb dogie price was accurate, simply had $l/cow/twelvemonth more expensive cost structure (+$50 on the left-hand side), their expected return to land and management would be -$32/cow/year. In this last instance, they had no render to their state and labor and were $32/cow/year short in roofing all their depreciation and interest expenses.
Predicting cattle prices is almost impossible given the numerous factors that affect the market. While the impact of higher feed prices on feeder cattle and dogie values is crusade for business concern, several other factors paint a more than optimistic picture for the current year. The size of the United states of america cowherd continues to shrink, which ways the 2021 calf crop will be smaller. Domestic demand is likely to improve throughout the year every bit restaurant business picks upwardly. Finally, beefiness exports showed a lot of improvement in the 4th quarter of 2020, and this trend is likely to keep into 2021.
Given that, our best guess for fall 2020 prices for that same 550 lb steer/heifer are in the $one.35-i.45/lb range. At a $1.40/lb price, and using the same price construction, the return to state and labor would at present be estimated at $65/cow/twelvemonth. This would nevertheless not fully recoup a moo-cow-calf operator for the value of their labor, and would not provide any render to land, only it would be an improvement from 2020. Put merely, profit continues to be a challenge for moo-cow-calf operations which ways that efficiency and price control will be of peachy 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 us to cancel over half of the conferences we planned to deliver last year. The expert news is that we volition be offer these in a virtual format this winter on the evenings of March 23-25. Registration, agendas, and other data can be found at the Virtual Cow-dogie Profitability Briefing webpage. Nosotros hope that you lot will join us on those evenings every bit nosotros think every cow-dogie operator in Kentucky can do good from the textile being covered.
Greg Halich is an Acquaintance 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 Direction and can be reached at jdshepherd@uky.edu or (859) 218-4395.
Writer(south) 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
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Source: https://agecon.ca.uky.edu/cow-calf-profitability-estimates-2020-and-2021-spring-calving-herd
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