No doubt, every farming operation manages their production with the idea of returns being greater than the costs. But to manage this effectively, and to truly know what your bottom dollar will be, it’s essential to establish and maintain an accurate budget sheet for your farm.
According to AgEBB (Agricultural Electronic Bulletin Board maintained by the University of Missouri Extension) beef cow/calf budgets for calves sold in 2008 should include several factors. The main elements of the budget are the costs for summer pasture (if you’re renting it), hay and forage, grain, protein and minerals, labor costs, veterinary services, medicines and supplies, marketing your animals, utilities and machinery costs, livestock facility repairs, cow replacement costs, bull or A.I. charges, and miscellaneous expenses including professional fees (accounting, etc) and operating interest.
Your all-inclusive budget may not need each of these parts, or you may have other expenses not listed, but either way, it’s important to account for all aspects of your operation so that you can be sure you’re budgeting accurately.
One aspect of cost-return budgets that many livestock producers are concerned with is stretching their pastures into longer in the season and being able to sustain more animals on the same number of acres. Dr. Gordon Carriker, an agriculture business specialist for the University of Missouri Extension in Ozark, Mo., said that “Installing a Management Intensive Grazing (MIG) system is the best method for a producer to sustain more animals on the same amount of land. One part of a good MIG system includes incorporating warm-season grasses on 20 to 30 percent of the acreage so when fescue is not producing during the hot summer months, cattle can be eating high quality forage.” Also, intensive grazing should include establishing legumes as that will increase the quality of the forage and may reduce the need for nitrogen fertilizer.
As far as increasing the bottom dollar profit with your cattle herd, Carriker suggested knowing the overall costs of production and thinking like a business manager. He added, “Accurately tracking costs of inputs, by using computer software or paper and pencil, a producer should be able to identify potential cost-saving points in his operation. In a conventional cow-calf or backgrounding operation, purchased feed is a good point to look at because it typically is one of, if not the, largest costs.” Carriker included that, “if a producer typically sells his calves in the fall, he is selling when the cattle price cycle is typically at its lowest point during the year. Holding onto those calves for 60 to 90 more days and putting another 100 pounds or so on them on stockpiled fescue and selling in January or February typically will result in additional profit.”
Finally, a producer should realize that budgets are enterprise specific, meaning if you have spring calves, fall calves and do some backgrounding, you will need three different budgets for each of those. Carriker said, “A budget covers the enterprise production period (a cow-calf enterprise runs longer than one year, a backgrounding enterprise runs less than one year) to help evaluate the profitability of the enterprise and its contribution to the entire operation.”
