Show me the money
This study by Whitney Bowman, Dustin L. Pendell Ph.D. and Kevin L. Herbel can be found at the Kansas State University AgManager.info website. Review and summary by Aaron Berger, Nebraska Extension Educator.
Whitney Bowman together with Dr. Dustin Pendell and Kevin Herbel recently published a paper that highlighted the differences between 71 different producers with cow-calf enterprises that are part of the Kansas Farm Management Association. The paper examined both returns over variable costs and returns over total costs in 2014-2018. The authors broke out participants in the study into three groups of high-, medium- and low-profit producers. Here are differences that stood out between producers from the data when looking at returns over total costs.
Differences in costs between operations significantly outweighed revenue differences. High-profit operations spent $259.93 less per cow than low-profit operations in this study.
High-profit operations generated more revenue per cow, $152.32, than low profit operations.
Major differences in costs between high profit and low profit herds were found in feed expense. High-profit herds spent a total of $418.66 per cow on grazed and harvested feed, while low-profit herds spent $543.92. This is a difference of $125.26 per cow!
Labor, depreciation, machinery and interest expenses were all lower on a per cow basis for the high-profit operations than the low-profit operations. High-profit producers spent on average $100.95 less on these items than low-profit producers.
High-profit operations generated on average an annual positive net return to management of $60.53 per cow, while low-profit operations had a negative return of -$351.72 to management over the five year period.
The Kansas Farm Management Association cow-calf enterprise data provides insights into the differences between high-, medium- and low profit producers. Participants in the data set have the necessary production and financial records to know what their production costs are and then can use that information to make management decisions to improve profitability. In this data set, producers who aggressively controlled costs while producing more pounds of calf to sell per cow than their competitors were the most profitable. Good production with cost control differentiated the most profitable producers from those that were the least profitable.
A one page sample budget titled Estimated Annual Cow Costs for Nebraska 2019 is a tool that can be used to help producers to begin to estimate what their own cow costs are. Good accounting and record keeping can help producers track their costs and know their cost of production.
For producers interested in learning more about this topic, a Unit Cost of Production Workshop is scheduled for February 5 & 6 at the Cedar Creek Church which is in the Burwell area. For more information contact Aaron Berger at 308-235-3122.
Interviews with the authors of BeefWatch newsletter articles become available throughout the month of publication and are accessible at https://go.unl.edu/podcast.