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Priorities First:
Identifying Management Priorities in the Commercial Cow-Calf
Business by Tom Field, Ph.D., Fort Collins, Colo., and sponsored
by the American Angus AssociationSM, is the first comprehensive
effort to prioritize management and economic issues for cow-calf
producers. (A detailed summary can be found at
www.angus.org
or contact the American Angus Association to obtain a printed copy
of Priorities First.) Dissecting a portion of the Priorities First
research findings provides an important perspective on the issue
of controlling production costs. When the survey was conducted, a
cost control question was included with five of the fifteen
management categories. The survey simply asked how important it
was to maintain below industry average costs within individual
aspects of the operation. The category “Harvested Forages and
Supplemental Feeds” carried some important results, which parallel
industry findings
Survey respondents
believed strongly that harvested forage and supplemental feed
costs must be monitored. This area was identified as the most
critical cost-control point of the five surveyed. However, overall
survey results identified herd nutrition as the highest-ranking
management priority for cow-calf producers. Respondents are
precisely committed to satisfying the cowherd’s nutritional needs.
Yet there was a large difference in how the survey prioritized
pasture and range management versus where it ranked harvested
forages and supplemental feeds. The message is clear that herd
nutritional needs should be met through grazing. Harvested forages
and other supplemental feedstuffs should be secondarily used with
a critical eye on costs
An analysis of 19
university cow-calf budgets supports the Priorities First
findings. The analysis detailed both pasture cost per cow and
hay/supplemental costs per cow. Of the five budgets with the
lowest pasture percentage of total feed costs (average 25%), the
total feed cost per cow averaged $255. In comparison, the five
budgets with the highest pasture percentage of total feed costs
(average 57%), the total feed cost per cow averaged only $218.
Thus, a 32% increase in pasture percentage resulted in a cost
savings of $37 per cow.
Cattle-Fax research has
demonstrated the lowest-cost, most profitable cow-calf producers
actually spent more than low-profit producers in three areas:
pasture maintenance, herd health and bull genetics. Research also
indicated that extending the number of months cows spent grazing
(while proportionally reducing time consuming harvested feeds)
could lower annual feed costs. On April 13, 2007, Cattle-Fax
released additional data on operating returns. According to their
data, during the 1980-2006 timeframe, the top one-third of
producers generated $24.1 billion in revenue or $89.19 per head on
a cash cost basis. The lower one-third of producers generated a
net loss of $9 billion and showed a loss of $29.56 per head. The
middle one-third of producers was essentially in a breakeven
business generating a small per head profit. The one note-worthy
difference between profitable and unprofitable producers was lower
cow costs.
In 2002, Oklahoma State
University’s (OSU) Cooperative Extension Service (Doye et al.
2002. Oklahoma Cooperative Extension Service, What We Are Learning
From Standardized Performance Analysis (SPA) Data. F-231) released
an analysis supporting the Cattle-Fax data. The OSU data was based
on cow-calf SPA information and compared the average financial and
production statistics for low-and high-cost producers in Texas,
Oklahoma, and New Mexico. Data was sorted by net income ($/cow).
Producers with the highest net income were labeled Top 25% (high
income), followed by Second 25%, Third 25%, and finally Low 25%
(low income). While the complete study revealed a wealth of
financial and cost information, the relevance of the data to
Priorities First is clear. High-income producers average cost of
production was $320 per cow compared with $556 per cow for
low-income producers. High-income producers have less invested per
cow in all asset categories: current assets (e.g. cash and
supplies), breeding livestock, machinery and equipment, and real
estate. The high-income producers’ average cost of production was
$80 per hundredweight compared with $159 per hundredweight for
low-income producers.
The American Angus
Association is the world’s largest beef breed organization,
providing programs and services to thousands of commercial
producers and more than 34,000 members nationwide. Its
headquarters are in Saint Joseph, Mo. For more information go to
www.angus.org.
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