Calculating a cost of production figure for cattle

An Alberta Agriculture beef specialist says cattle producers are the worst business managers in all of farming.
Christoph Weder said 97 percent of cow-calf producers have “absolutely no clue” what their cost of production is when they market their weaned calves in the fall. That’s why he is purposely provoking them by coming out with such a bold statement.
Calculating a cost of production figure is particularly important this year, heading into a fall where feeder prices are uncertain. Cattle prices have nose-dived since the discovery of BSE halted trade with Canada’s largest buyer of beef and cattle, and calf prices have been quite a bit lower so far this fall.
An average farmer would have spent about $695 per cow on feed, bedding and other costs this past year.
Assuming a 90 percent weaning rate, that makes the break-even cost for a 550 lb. calf $1.39 per pound. Some of those calves are fetching less than $1 a lb. right now.
At those prices the sale of a 550 lb. calf would result in a loss of at least $215. In a 150 cow operation, that means about $30,000 worth of red ink. The losses could actually be a lot worse than $215 a head because Weder used conservative estimates to compute his break-even figure.
Producers have two options. They can either sell their calf crop and take their lumps, hoping for better times next year, or they can hold onto their calves and background or finish the animals, hoping prices rise in the meantime. Weder encourages producers to consider the second option because with the prospect of plenty of grain this fall, feed should cost half of what it did last year. (Locally, the shortage of hay may impact this decision.)
Incorporating those lower projected feed costs, he calculated the break-even price for backgrounding a calf for 100 days at $1.06 per lb. and for finishing a calf or yearling at 87 cents a lb.
But the big potential benefit with backgrounding and finishing animals is that it delays the date by which cow-calf producers have to market their herd. Prices might have improved during that time.
Weder said backgrounding calves isn’t for everybody. Producers with heavier cattle or exotic cross calves may choose to send their animals to feedlots. And he doesn’t recommend that all cow-calf producers attempt to finish their calves because that process requires a knowledge base many do not possess.
`But retaining their calf crop is something most producers should at least consider this year.
Too many cattle producers have bought into the idea that Canada produces the best cattle in the world and they expect to be rewarded for that. He said countries such as Australia market beef of equal quality and it’s time for Canadian producers to stop focusing solely on what prices they get and start looking at the cost side of the equation.
“We’ve got to be smarter about the way we run these businesses,” said the beef specialist.
Dates to Remember
Oct. 25 – RRFA Annual Meeting and Dinner, 6:00 pm, Emo Legion

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