How Much Are Beef Calves Selling for
Writer(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-calf profitability for a spring calving herd that sold weaned calves in the autumn of 2020 and provide an gauge of profitability for the upcoming year. Table i summarizes estimated costs for a well-managed jump-calving cowherd for 2020. Every functioning is different, so producers should evaluate and modify these estimates to fit their situation. Note that in this table nosotros are not including depreciation or interest on equipment/fencing/facilities, as well equally labor and land 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'southward and heifers in the low $120'southward, on a land average ground. Therefore, a steer / heifer average price of $1.30 per lb is used for the analysis, which is actually the same price that was used last year. Weaning rate was estimated at 85%, meaning that it is expected that a calf will exist weaned and sold from 85% of the cows that were exposed to the bull. Based on these assumptions and adjusted for the weaning rate, boilerplate calf acquirement is $608 per cow.
Pasture maintenance costs are assumed to be relatively low at $twenty per acre, and would include only basic 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 ground would encounter much higher pasture maintenance costs. The pasture stocking rate is assumed to exist 2.0 acres per cow, but producers should carefully consider the stocking rate for their operation as this volition 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 moo-cow footing.
These spring calving cows will utilize two.5 tons of hay per cow, and the estimated cash toll of making this hay (fuel, maintenance, repairs, supplies, fertilizer, etc.) is $35 per ton. Mineral toll is $35 per cow, veterinary / medicine costs $25, trucking costs $xv, machinery cash costs for winter feeding and other miscellaneous jobs is $15, and other costs (insurance, property taxes, water, etc.) are $xl. Breeding costs are $40 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 by and large non cash costs that need to exist paid on a yearly basis, unless you have a loan on them, but they are real costs that need to be paid at some bespeak. Equally an example, assume a bred heifer is valued at $1300, has eight productive years, and has a choose cow value of $600. The boilerplate yearly depreciation is calculated every bit follows:
$1300 bred heifer value
–$600 choose-cow value
$700 total depreciation
$700 depreciation / 8 productive years = $88 cow depreciation per year. The bodily depreciation will vary beyond farms. When ownership bred replacement heifers, the initial heifer value is clear. With farm-raised replacements, this toll should be the revenue foregone had the heifer been sold with the other calves, plus all expenses incurred (feed, convenance, pasture rent, etc.) to reach the same reproductive stage as a purchased bred heifer. At an boilerplate value of $950 (halfway between bred heifer and cull value) over her lifespan on your farm, and assuming a 3% interest rate results in a $29/cow/year interest cost, or a full of $117/cow/yr in combined depreciation and interest.
Note that based on the assumptions in our example, total specified expenses per cow are $440 and revenues per moo-cow are $608. Thus, the estimated gross return is $168 per moo-cow. At first glance, this positive return looks impressive, just is also misleading. A number of costs were intentionally excluded because they vary profoundly beyond operations. Notice that no depreciation or interest on equipment/fencing/facilities was included. Find also that labor and land costs were too not included. Thus, the gross return needs to exist adjusted by these costs to come up upward with a true return to the farm.
Since these costs vary so much from i functioning to the next, it may be helpful to choice a specific sized subcontract and provide estimates for these costs: a 40-cow operation that is producing its own hay and has all farming operations on its own land (80 acres of pasture and 30 acres of hay).
Assume this subcontract has on boilerplate $50K in equipment which depreciates roughly $1000 every year, or $25/cow/year in depreciation. At 4% interest, an additional price of $2000 in involvement per year, or $50/cow/year, would be 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 amount to $l/moo-cow/twelvemonth in depreciation and $25/cow/year in interest.
If we have 2.0 acres of pasture and .75 acres of hayground per cow, and value that at a land hire of $36/acre, that would be $100/cow/twelvemonth in land rent. Presume also that we take adamant we have $100/cow/twelvemonth in labor, which would amount to $4000 total per yr for the entire herd.
These non-cash costs add upwardly to $350/moo-cow/year on our case farm: $150 per cow in depreciation/interest on equipment/fencing/facilities and $200 per cow in country rent and labor. We encourage you to estimate these for your own functioning, but the unfortunate reality is that they speedily add together up on most farms. The $168/cow/yr gross return over cash costs and cow depreciation does not look quite as good now. After adjusting for these other costs, the net return (all costs included) is –$182 per moo-cow per year, or –$7280 for the 40-cow farm.
Another way to wait at this is to but include the depreciation and involvement for equipment/fencing/facilities ($150/cow/year), and not include state and labor ($200/moo-cow/year). In this case, the return would increment to $18/cow/year, and would represent the farms return to land and labor. Did this subcontract actually lose money on a cash basis? No, not if they are using their ain labor and their country is paid for. But the farm as well did not make a real profit. This farm substantially paid the equipment/fencing/facilities depreciation and interest in full, simply the cattle farmer and land effectively worked for gratuitous.
These numbers will vary across operations, just estimating your own cost structure is extremely of import. Our guess is that compared to our example subcontract, in that location are far more than cow-dogie operations of similar size with a college cost structure than there are operations with a lower cost structure in Kentucky. Put just, well-managed leap calving herds were likely covering all cash costs, breeding stock depreciation/involvement, and depreciation and interest on equipment/fencing/facilities, but were non generating a return on their labor or land this last year.
Readers tin can use Table two to change the analysis based on their cost construction and expected calf prices, for 2020 and time to come years. It uses all costs except for land and labor, then the table shows a return to country and labor.
As an example, we used $1.xxx/lb in our base scenario as the expected steer/heifer price for 2020. Given the cost structure, we used ($0 change on the left-manus side of the table), the expected return to land and labor is $18/cow/year, but as was previously described. If a cattle farmer sold their calves for an average price of $ane.35/lb, and had a $l/cow/year cheaper toll structure (-$fifty alter on the left-hand side of the tabular array), their expected render to land and direction would be $92/cow/year. If another cattle farmer thought the $i.30/lb dogie cost was accurate, but had $l/cow/year more expensive price structure (+$50 on the left-hand side), their expected return to land and direction would be -$32/cow/year. In this last example, they had no return to their land and labor and were $32/cow/year brusque in covering all their depreciation and interest expenses.
Predicting cattle prices is nearly impossible given the numerous factors that impact the market. While the impact of college feed prices on feeder cattle and calf values is cause for concern, several other factors paint a more optimistic picture for the electric current yr. The size of the U.s. cowherd continues to shrink, which means the 2021 calf crop volition be smaller. Domestic need is likely to better throughout the yr as eating house business picks upward. Finally, beef exports showed a lot of improvement in the fourth quarter of 2020, and this tendency is probable to continue into 2021.
Given that, our best judge for fall 2020 prices for that same 550 lb steer/heifer are in the $1.35-1.45/lb range. At a $i.forty/lb cost, and using the same cost construction, the return to country and labor would at present be estimated at $65/cow/yr. This would yet not fully compensate a cow-calf operator for the value of their labor, and would not provide whatsoever return to land, but it would be an comeback from 2020. Put just, profit continues to be a claiming for cow-calf operations which means that efficiency and cost control volition exist of great importance once again.
Reducing and managing costs was one of the main focuses of the Cow-Calf Profitability Conferences that were held during the winter of 2019-2020. Unfortunately, COVID-nineteen forced us to abolish over one-half of the conferences we planned to evangelize last year. The good news is that nosotros will be offering these in a virtual format this winter on the evenings of March 23-25. Registration, agendas, and other information can exist found at the Virtual Cow-calf Profitability Briefing webpage. We hope that you volition bring together us on those evenings as we recollect every cow-calf operator in Kentucky tin can do good from the fabric being covered.
Greg Halich is an Associate Extension Professor in Farm Management Economics for both cattle and grain production and tin 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 be reached at kburdine@uky.edu or 859-257-7273. Jonathan Shepherd is an Extension Specialist in Farm Management and tin be reached at jdshepherd@uky.edu or (859) 218-4395.
Writer(southward) Contact Information:
Greg Halich | Associate Extension Professor | greg.halich@uky.edu
Dr. Kenny Burdine | Associate Extension Professor | kburdine@uky.edu
Jonathan Shepherd | Extension Specialist | jdshepherd@uky.edu
Source: https://agecon.ca.uky.edu/cow-calf-profitability-estimates-2020-and-2021-spring-calving-herd#:~:text=Calves%20are%20assumed%20to%20be,on%20a%20state%20average%20basis.
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