In an Industry Where Variability Abounds, Keeping Your Pencil Sharp Might Make All the DifferenceFri, 12 Jan 2018 10:26:20 CST
There’s a tremendous amount of difference between beef cow herds and how they are managed from operation to operation. Dustin Pendell, an agricultural economist based out of Kansas State University, has compiled a study of differences he has observed and says one thing is for certain - there is a lot of variability in the cost and the profit levels of cow herds.
“You take a look back to 1975, there’s a lot of variability across those years. In fact, we looked at last year and we had some on average, some of your largest losses on a per head basis,” Pendell said. “If you go back to 2014, that was a record year for returns. Just in that three or four-year span, you’ve had returns going from $225/head all the way down to -$300/head.”
Pendell attributes the cattle cycle in part for contributing to variability, but also mentions certain things that are out of the control of producers, like interest rates. Like in 2014, Pendell says we are seeing expansion continue in the US cow herd. As supplies grow larger over time, he says prices are likely to come down again. All things considered, Pendell says producers must pay attention to two things: their revenue and expenses. Those that keep their pencils sharp will make all the difference in determining if an operation can be categorized as a high-profit or a low-profit operation. For instance, managing the hay you feed your cattle a bit more tightly, could help to conserve your operation’s financial resources a little more, translating into more profitability.
“If you look at the 2016 data, looking at your top third most profitable operations - on average - their gross income is roughly a little over a $1000/head. Compare that to the bottom third, it’s a little over $900/head. So, a difference of about 15 percent or $136/head,” he approximated. “One of the largest expenses; one of the largest differences come from your feed, your non-pasture feed expenses.”
Listen to Pendell break down the differences of profitability between high and low profit operations as illustrated in his recent study on the matter, with Radio Oklahoma Ag Network Farm Director Ron Hays, on today’s Beef Buzz.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
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