Rising feed and fuel costs continue to drive cow-calf production costs higher, says North Dakota State University beef cattle specialist Greg Lardy, PhD. An extremely difficult winter in North Dakota and elsewhere has only added to the cost escalation that has occurred over the past 10 years or more, Lardy says. This escalation in costs has recently been magnified by the rapid escalation in feed and energy costs.
Data compiled by the North Dakota Farm Business Management program indicate a steady increase in both feed costs and total costs in cow herds across the state. From 2003 to 2008, feed cost per cow increased from $234 to $288 while total costs increased from $361 to $454 per cow.
There has been a steady escalation in feed costs over the last five years, Lardy says.
“These trends in increased total costs have been with us for some time and are certainly not all related to increases in the cost of feed," Lardy said. "Other costs such as labor, fuel and miscellaneous inputs have also increased over this time period. In fact, fuel costs have increased by over twofold in this time period as well.”
Someone, he adds, has to pay for the fuel to get the feeder calves you produce to a feedlot. In the past this was a relatively small cost in the overall picture, but with higher fuel costs, feedlots will pay less for feeder calves due to increased transportation costs. The further you are from feedlot country, the larger the impact on your operation. Expect lower bids on feeder cattle in remote areas located considerable distances from major feeding areas.
Lardy stresses that the key to managing through these cost increases is the ability to measure your cost of production.
“There is no way to know which costs to cut if you aren’t measuring all of the cost categories for your ranch," Lardy said. "History tells us that this business follows logical economic principles over the long term. That means that high-cost producers exit the business, while well-managed operations with lower production costs find creative methods to make money, even under very trying economic conditions. I would encourage each of you to work at measuring your cow production costs and then to manage those costs effectively.”