What would you say if someone told you that 40 percent of the cow-calf producers are struggling to justify being in the beef business? After all, the cattle business is a great business and currently humming along through great times.
If that is true, why is the industry not expanding? Good question and certainly a relevant one.
We can speculate on the many reasons why the cattle numbers are what they are.
In anticipation of this spring's summaries of agricultural enterprises provided by the North Dakota Farm Management Program (NDFM) (http://www.ndfarmmanagement.com), I have been reviewing previous numbers. Data also are available on the FINBIN website at http://www.finbin.umn.edu/ and come from the Center for Farm Financial Management at the University of Minnesota.
With the increasing competition for land and competing crops, the big question is: Why run cattle? Returns from crop enterprises are good, and many will say they enjoy the more structured time crop operations offer, especially the time off that is not always available for those who engage in livestock operations.
If one reviews net returns per cow, and without going too far back in time, cattle producers certainly have had positive net returns. From 2006 through 2011, cattle producers who were enrolled in the NDFM program generally have had positive net returns over direct and overhead expenses.
The actual net return values were $182 in 2011, $111 in 2010, minus $13 in 2009, $12 in 2008, $98 in 2007 and $105 in 2006. It will be interesting to see where these numbers are for 2012, but one would speculate that the industry had positive net returns over direct and overhead expenses.
Are these numbers high enough to keep producers in business? Yes, but let's look at those producers who were at the lower end of net returns, which are those producers who were in the lower 40 percent bracket.
This group was in the black in 2011 and 2006, but lost money in 2010, 2009, 2008 and 2007. The actual net returns over direct and overhead expenses were a positive $76 per cow in 2011, minus $3 in 2010, minus $120 in 2009, minus $91 in 2008, minus $6 in 2007 and a positive $18 in 2006.
The long and short of it is that this group of cattle producers has had to find some other enterprise to pay for an average of $21 per year, per cow for direct and overhead expenses because the cow could not pay her costs. That may not seem like much, but also what was lost was the opportunity to do something that may have made more money on the same land.