Traditionally, income would be seen as a positive influence and expenses a negative in beef herds.
In the cow business, opportunity exists on both sides of the profit equation.
Product value may be increased and product expenses decreased, so let's set a goal to increase product sales by $100 per cow and lower expenses by $100 per cow.
Any producer can participate. However, struggling producers must participate.
Why? The cow business must compete with other food businesses. Current levels of bottom-line income are positive but could increase, particularly for the average cow-calf producer. Positive net returns in the cow business generally are discussed based on a per-cow concept.
Keep in mind, the actual net return over direct and overhead expenses per cow should be divided by the number of acres of land used to support the cow.
Depending on the location of the cow herd, the amount of pasture, grass, hay and cropland utilized to support the cow will vary. However, the return per acre will be significantly lower than the net return per cow, regardless of where the operation resides.
For example, in southwestern North Dakota, if a producer stocks early spring, cool-season pasture at one acre per cow, followed by summer pasture at 2.5 acres per cow for five months, and then requires three acres to produce enough winter forage for the remaining six months, 16.5 acres are needed to support the cow.
Before anyone points out the difference between cows and animal units, let's keep this discussion on a per-cow basis and realize that acres, cows and stocking rate need to be properly evaluated to be applied to the appropriate grazing systems.
The bottom line: If the cow has averaged an annual net return over direct and overhead expenses of $90 for the last six years, the cow is returning $5.45 per acre of land utilized in this example. By increasing sales by $100 and decreasing expenses by $100, the returns per acre would triple. The tripling effect may be what is needed to keep cattle on land where there are other options.
Are these real possibilities? Well, returning to records provided by the North Dakota Farm Management Program (NDFM, http://www.ndfarmmanagement.com) that are available on the FINBIN site (http://www.finbin.umn.edu/) from the Center for Farm Financial Management at the University of Minnesota, the answer is yes and the goal is achievable.
If we look at the spread between those producers who are the top 40 percent in net return per cow versus those who are the lower 40 percent, we can get a feel for how much some producers are leaving on the table at the end of the day.