U.S. cow-calf operations have seen their profitability decline in recent years, with negative returns posted in 2008 due to higher costs of production and lower calf prices. Since the early 1970’s the Livestock Marketing Information Center (LMIC) has estimated cow-calf returns over cash costs plus pasture rent for a typical Southern Plains operation. The estimated numbers are designed for market analysis purposes, thus actual cow-calf returns will vary considerably. Recent estimates for cow-calf returns were lowered some to reflect lower than expected calf prices. For 2009, as calculated by the LMIC, many cow-calf operations in 2009 will not cover their cash production costs and returns will likely be similar to 2008’s. Looking ahead, estimated cow-calf returns should be back in the black in 2010, as calf and cull cow prices rebound.

Net returns have been pressured again in 2009, as input costs remain rather high compared to historical norms while calf prices have struggled. Calf prices are forecast to be slightly higher in the fourth quarter of this year than in 2008, however for the year, calf prices will still be the lowest since 2003. Currently, the LMIC estimated return for 2009 is around a negative $20.00 per beef cow. If realized, that will be the second consecutive negative year, with the last time producers posted a negative return (prior to 2008) was in 1998.

Historically, estimated cow-calf returns vary dramatically over time. In the 36 years the LMIC has estimated cow-calf returns (including 2009); 15 years have posted negative cow-calf returns or 42 percent, with only nine of those years posted losses greater than $50 per cow.

Looking ahead, profitability is forecast to return in 2010 and 2011, however until then the economic incentive to turn strongly positive for cow-calf producers for overall U.S. cowherd growth will be delayed.