Do you know what it costs you to keep a cow for a year? Very few producers actually do. Research has shown that what typically separates profitable producers from unprofitable ones is their cost of production, in particular — feed costs. While weaning weights and pregnancy percentages are all important, the producers who can achieve these while also keeping their costs down are the ones who remain profitable year in and year out. The easiest way to lower your costs is to graze more days. Every day that cattle can be harvesting their own feed rather than you feeding them from a hay bale or a feed sack is one more day you can be making money. Stockpiling fescue for winter grazing is the easiest way to do this. So take some time this winter and calculate what it’s costing you to keep a cow during the year. See if there might be some ways to manage your forages better and cut your costs of production.
Most producers use their tax forms to gauge whether or not they are making money. But cash accounting and your schedule F tell you very little about the profitability of your business. Cash accounting leaves out important variables such as inventory differences, changes in net worth, capital assets purchased or sold, etc. A schedule F might show huge losses but it didn’t take into account you saved half your heifers this year or purchased a new piece of machinery. The only way to accurately evaluate how your business is doing is to do a balance sheet. It will show you if your net worth is increasing or decreasing. Visit www.ozarksfn.com for a link to a website with an excel spreadsheet that will make completing your balance sheet easier. It even allows you to include the numbers from your schedule F and it will calculate the financial ratios lenders use to analyze your business.
Another area to watch and help plan for profits and losses is in price patterns. All commodities, whether they are livestock or crops, usually follow seasonal price patterns throughout the year. A little planning about when to market your commodity can make a big difference in the price you receive. For instance, the price of lightweight feeder calves usually drops hard after Sept. 15. Why? Because of supply and demand — the market is flooded with young calves at that time. There’s no guarantee that prices will always follow their usual seasonal pattern, sometimes outside forces influence the market, but factoring these patterns into your planning can have huge returns.
There are a few areas of spending where every dollar you spend makes you $25 in return. Identifying these areas and targeting resources is well worth your time. For instance, with fertilizer prices that have risen significantly the last couple of years, spending $12 – $15 on a soil test may save you thousands of dollars. It will ensure you are investing your fertilizer dollar where it will give you the biggest bang for the buck. Similarly, spending $12 – $15 on a hay test will make sure you are only supplementing your livestock where it is needed and in the correct nutrients.
Wesley Tucker is a University of Missouri Extension Agriculture Business Specialist and Cow/Calf Producer.
