Cost of air-powered post pounder: 1 calf
If you have been listening at all during coffee time at the local café, you already know that times are good for cattle producers. The talk of 80-cent cull cows, 550-pound heifers selling for more than $800, and 600-pound steer calves bringing more than $1,000 per head has locals choking over their morning coffee and donuts.
While at the coffee table, you should always remember that old saying about “not counting the chickens before they hatch.” The season to sell calves is all too far away, and so far it appears that Mother Nature will be the biggest foe.
With prices strong, you need to know what it costs to raise a pound of beef — and how much you need to sell that pound of beef for to make a profit. After taking a Bud Williams marketing class, the term “break profit” comes to mind instead of “break even.”
You need to know what the sale price should be to match all costs and put money in your pocket.
• Know the sale price you need to match costs and make a profit.
• Measure purchases against the number of calves you plan to sell.
• Remember Grandpa’s theory about the difference between want and need.
In 2010, the North Dakota Farm Management beef averages show that the middle 40%- to 60%-profit ranches sold beef for an average of $118 per hundredweight. When looking at today’s markets, it could be assumed that prices will be better than that. This same group also spent close to $465 per cow on expenses before paying themselves a wage, for a $102 profit per cow after depreciation.
After a $58 labor and management charge per cow, that profit goes down to $44. Figure a 100-head cow herd, and this rancher will take an additional $4,400 proudly to the bank. So, you may be wondering, how can cattlemen even survive on a $102-per-cow net return? A tremendous amount of work goes into making a $10,200 profit on 100 head of cow-calf pairs.
When looking at sell prices for calves in 2011, you must not only look at the value of the calf crop, but you must also look at the cost to get that calf from womb to weaning, where that calf is for sale or going to a backgrounding operation.
Within reason, you already know the important information to run a basic cash flow budget by the time cows hit the green grass. You know your calving death loss, and you can estimate further losses to weaning based on historic performance. Cost of the pasture should be known. Branding supplies, vet costs, breeding fees, etc., can be plugged in the equation.
Also, go to www.ndfarmmanagement.com to download the 2010 regional or state averages reports in PDF format to help fill in the overheads and other numbers that may slip your mind. This step will give you a good starting point to ensure profitability after the sale in 2011.
Another important number you should know is the number of calves that will be sold. Why is this number important? I like to look at it as a good way to control expense. Throughout the course of the season, it becomes too easy to let judgment slide and make unwise purchases. After you run your budgets and you predict a total gross dollar value for your calves, use this number to scrutinize every purchase.
If you think your average calf this fall will be worth $800, then this is a basic number to measure purchases against and help decide if it is worth it or not. New tractor, swather, baler and aluminum trailer payments decrease the calf crop quickly over the course of the year.
For example, purchasing that new stock trailer with a $4,000 annual payment takes an additional five calves before interest, license, insurance, depreciation and maintenance. Can you afford to lose those extra five to six calves out of the operation?
The approach to these concepts is to challenge you to push your herd from $100 profit per cow to $200 profit and beyond. The best way to get there is by continuing to be a good steward, being aware of market prices to lock in a profitable selling price, and scrutinizing all purchases based on need and priority.
It goes back to Grandpa’s old theory of the difference between want and need. Turns out, that air-powered post pounder might have to wait until next year.
Anderson is a North Dakota Farm Business Management instructor at the Ernie French Research Extension Center & Williston State College, Williston, N.D. Contact him at 701-774-4315, or email Beau.D.Anderson@wsc.nodak.edu.
This article published in the June, 2011 edition of DAKOTA FARMER.
All rights reserved. Copyright Farm Progress Cos. 2011.