October 12, 2005 | By: Aimee Nielson
LEXINGTON, Ky.

According to a yearly summary by Kentucky Farm Business Analysis specialists, cooperating beef producers received 24 percent higher returns but also faced higher costs per cow in 2004 than in 2003.

“These specialists summarize cost and return data for cow-calf operations each year,” said Kenny Burdine, University of Kentucky College of Agriculture Extension livestock marketing associate. “They did report higher returns last year. However, they also reported higher production costs, which negated some of the higher prices received.”

Burdine said the nature of the beef business is that producers are by-and-large, price takers, meaning that market conditions determine the level of calf prices. Individual producers have little control over that variable.

“But the individual producer does have some control over his or her production costs,” Burdine said.

The largest expense for cow-calf producers is feed. Farm Business Analysis records show that feed costs represent more than 40 percent of total production costs. Non-feed cash expenses such as veterinary services and hired labor and non-cash costs such as depreciation and operator labor each represent less than 30 percent of total costs per cow. Burdine said if cow-calf producers can find ways to lower these costs, they can greatly affect their bottom line.

“One problem is that many cow-calf producers just don’t know their cost of production,” he said. “They don’t keep track of their expenses and they don’t know how much money they are making each year. Without proper record keeping, a farm operator can’t know where time and money are best spent.”

Each beef cattle operation is unique and has its own cost structure. Burdine said it’s crucial for managers to keep records and understand production costs. They need to know what it actually costs to maintain a productive cow for a year and how much it costs for one calf to be raised until it’s ready for sale. 

“They need to know if they are making money at all,” Burdine emphasized. “Good managers should be able to answer these important questions, and you don’t have to have a computer to answer them. It may take more time and effort, but paper records can be just as effective as computer records.”

Burdine pointed out that regardless of what system of record keeping is used, the most important decision is simply deciding to keep records and find out what can be done to improve profitability.

 

Contact: 

Writer: Aimee Nielson 859-257-4736, ext. 267

Contact: Kenny Burdine 859-257-7272, ext. 229