Property taxes don’t mind if your cows are black or white or red. Ranches must have fences, pickups and equipment, regardless of what the calves weigh at weaning.
“Fixed cost doesn’t care whether you’ve got 400 cows, 200 cows, 60 cows or 2 cows. It’s going to be the same,” says Stan Bevers, Texas A & M University beef economist. “The only way to drive down the impact is to get more cows.”
As the industry anxiously awaits a drought reversal and herd rebuilding, many experts say now is the time to analyze overall carrying expenses.
“One of the problems that we run into is that guys don’t calculate their cow costs, so things get out of perspective,” says Jim McGrann, emeritus ranch management economist at Texas A & M. “They will try to save in areas where it’s not going to make that big of a difference.”
McGrann implemented the management program know as Standardized Performance Analysis (SPA) in the 1990s, to help producers benchmark their herd against others. Bevers now manages that program, which shows an average annual cost of $590.85 for a cow in 2012.
“I started in 1989. Then, the average cost was about a dollar per day, so we haven’t quite doubled, but it’s getting close,” he says.
Each year, he adds, the largest components are labor, management, depreciation and feed.
It’s important to keep vehicle and equipment cots in check, McGrann says. “But everything else is more of a question of execution of a good plan and watching how they spend their money.”
A key is keeping a focus on reproduction.
“Cost control is more closely related to making sure they don’t hurt reproduction,” he says. “For example, if they don’t feed right, they are going to hurt reproduction. If they don’t get high calf crops relative to their exposed females, they can never have a low cost operation.”
Scott Brown, University of Missouri ag economist, points to a tool developed by colleague Brent Carpenter that is designed to help determine what one could pay for a female.
“Losing a calf in one of her first three or four years reduces what you should pay for her by more than $600,” he says, noting that predictable calving-ease genetics may provide some risk protection.
“If you’re not a cost-effective producer, you’re not going to be in business regardless,” Brown says. “But many of those costs you don’t have much control over because of your cow choice. I think there is a lot more gain to be had on the revenue side than the expense side.”