Economics of beef cow enterprises in
east-central North Dakota

Steve Metzger
Carrington Area Farm Business Management Program
Carrington Public Schools and Carrington Research Extension Center, NDSU

Introduction
As beef producers look to the future, more emphasis will continue to be placed on the costs and returns associated with beef cow enterprises. It is important that beef producers who intend on remaining competitive and in the main stream have a thorough and accurate accounting of the actual costs and returns associated with their individual herds. There is a wide financial gap between those beef herds on the most profitable end of the spectrum and those that remain on the least profitable end. The opportunity for success with the beef cow enterprise can be greatly enhanced by knowing the true costs of production associated with the enterprise.

Procedure
Data for this study was compiled through the Carrington Area Farm Business Management Program. The beef cow herd data summarized in this report was generated from beef cow herds located in the counties of Eddy, Foster, Kidder, Sheridan, Stutsman, and Wells. The data was collected over a five year period from 1993 through 1997. The minimum number of herds involved in any one year was nineteen with a maximum of twenty-four. The minimum number of beef cows in any one year was 1,444 with a maximum of 2,262 and a total of 9,369 involved over the five year period. This study thus represents a summation of 108 individual beef cow herd enterprises over the five year period.

The beginning point of each herd analysis is January first with the conclusion at the end of December of each year. The calf weaning weights and numbers, as recorded at weaning time, effectively bring the production cycle of the beef cow herd to a close, with the only remaining source of further income being the culling of breeding stock or the inventorying of smaller calves not yet weaned.

Replacement heifers are not considered a part of the herd until January first of the year in which they are to have their first calf. They are held in a separate beef replacement heifer enterprise prior to that time. The value and quantities of feed fed to the beef herd, include those feeds fed to the cow herd and the breeding bulls, even if the bulls are fed separately from the cow herd itself. The average cow number is computed by using the actual number of cows in the beef herd at the beginning and end of each month. It must be acknowledged that although all producers are encouraged to weigh all calves at weaning, only about fifty percent of all calves are actually weighed at that time and therefore weaning weights for some beef herds are the producer's most accurate estimate and not an actual scale weight.

Results and Discussion
The average gross return per cow, as shown in table 1, was $330.62. The source of this production was an average weaning weight of 543 pounds, which translated into 493 pounds weaned per exposed female. The higher culling rate of 18 percent and the lowest pounds weaned per exposed female occurred in 1997, a year of horrific winter and spring storms. The inventory change figure of $47.51 represents the per cow loss of or change in value due to culling or death loss of breeding stock. No increase in the value of breeding stock was allowed except where actual purchases or transfers caused such an increase. Pounds of production per cow could exceed pounds weaned per female in those cases where some younger calves were left on the cows at the end of the year. Producers are encouraged to look long and hard at the pounds weaned per exposed female in their own herds. The greater the number, the less time open cows have stayed on the farm consuming feed and adding to herd expense.

Harvested forages fed averaged $124.45 and pasture costs averaged $55.58 for an average of 6.35 AUM's over the multi-year period. Grains and concentrates added another $14.34 to the annual feed bill. An average of 48 pounds of salt, minerals, vitamins and protein supplements per cow was recorded as fed for an annual cost of $8.18.

Table 1. Five year beef cow economic and production performance
(per cow basis).

Beef calves sold and/or transferred out (515 lbs) $ 381.08
Cull sales and butchered 77.92
Less purchased - 75.55
Less transferred in - 7.80
Inventory change -47.51
Total production $ 328.14
Other income 2.48
Gross Return $ 330.62
Direct Costs
Protein, vitamin, mineral (48 lbs) 8.18
Grains and concentrates 14.34
Harvested forages 124.45
Pasture or range (6.35 AUM's) 55.58
Total feed cost $ 202.55
Veterinary 13.27
Breeding fees, supplies 7.93
Fuel and repairs 13.47
Operating interest 5.88
Other direct costs (custom hire, marketing, etc.) 24.21
Total Direct Costs $ 267.31
Overhead Costs
Interest on chattel and/or real estate debt 16.00  
Depreciation of buildings and equipment 14.44  
Other overhead (utilities, labor, insurance, etc.) 22.63  
Total Overhead Costs $ 53.07
Total of all listed costs $ 320.38
Net Return $ 10.24
Cost per cwt. of production $ 62.42
Culling percentage 15.37
Calving percentage 96.45
Weaning percentage 90.84
Average weaning weight (lbs) 543
Pounds weaned per exposed female 493

The average amount for veterinary expense was $13.27 per cow with another $7.93 set aside for supplies and breeding charges. Fuel and repairs, not including those used to produce feeds, was calculated to be $12.99 per cow. Operating interest was calculated at $5.88 per cow. The per cow total of direct costs, table 2, ranged from $$253.98 in 1995 to $285.18 in 1997, with an average of $267.31.

Overhead costs averaged $53.06 per cow and fell within the annual range of $44.68 to $60.57. The total of all costs per cow ranged from an average of $302.99 to $343.63 with a five year average of $320.38. The average net return per cow ranged from an annual high of $156.15 in 1993 to a low of a minus $82.46 for an annual average in 1996. The five year average was calculated to be $10.24. The average cost of production per cwt. over the five year period was $62.42 per cwt. The highest annual cost of production was in 1997 when it was $68.65 per cwt. and the lowest was in 1993 at $57.75. 1993 is also noted for having the highest figure for pounds weaned per exposed female for the five years at 531 pounds.

Table 2. Annual economic and production figures, 1993-1997 (per cow)

Item 1993 1994 1995 1996 1997 Average
Number of herds 19 19 24 24 22 21.7
Number of cows 1444 1581 2018 2064 2262 1874
Value of calves sold or transferred out $503.27 $406.35 $ 297.86 $ 306.59 $400.68 $ 381.08
Gross return 472.66 361.17 252.00 242.43 338.98 330.62
Lbs sold or trans out 553 512 509 512 496 515
Total annual feed cost 199.04 200.82 195.31 204.11 211.15 202.55
Total direct costs 271.83 257.67 253.98 264.32 285.18 267.31
Total overhead costs 44.68 50.41 49.01 60.57 58.45 53.07
Total expenses 316.51 308.08 302.99 324.89 343.63 320.38
Cost of prod'n/cwt 57.75 60.43 59.59 63.80 68.65 62.42
Net Return 156.15 53.09 (51.00) (82.46) (4.65) 10.24
Culling percentage 13.1 17.1 13.7 14.2 18.0 15.4
Calving percentage 98.6 96.8 96.3 96.1 95.0 96.5
Weaning percentage 93.8 91.7 90.7 91.3 87.7 90.8
Average weaning wt 566 539 553 540 522 543
Lbs weaned/exposed female 531 494 502 492 458 493

It is important to note that the net return figure includes a cost of depreciation for buildings and equipment but does not include any allotment for operator labor or principal payments on existing chattel or real estate debt. The two latter items would typically be paid from the profits or net return of the enterprise. It is also important to note that the last five years represent a very low end of the ten to eleven year cattle cycle. The small average profit noted should be not be misconstrued for the average profit of the whole cattle cycle. It is important to note the costs associated with the production as they tend to remain somewhat more stable during the entire cattle cycle.

The economical efficiency of a beef cow unit is very dependent upon two items; first, the amount of production per female, as noted in pounds weaned per exposed female and secondly, the costs of production. Low costs of production may be negatively offset by low production and high costs of production may not lead to a higher level of pounds produced. It is important for each beef producer to calculate his or her cost of production on a per cwt. basis. By knowing their true costs of production, beef producers can better position themselves to take advantage of the beef cattle cycle.

 

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