Practices Associated with Profitable Cow-Calf Herds

Livestock Update, May 1998

Practices used by profitable beef cow/calf producers were examined when results of the USDA's National Animal Health Monitoring System (NAHMS) were compared for beef cattle producers who both participated in the NAHMS 1993 Cow/Calf Health and Productivity Audit (CHAPA) and who also completed a Standardized Performance Analysis (SPA). Insights into what practices contributed to profitability or the lack thereof may be helpful to many producers. Listed below were the important conclusion drawn.

1. Optimum Production. Operations with positive returns showed a general trend toward optimum production rather than maximum production. For example, these operations weaned slightly fewer pounds per exposed cow than negative-return operations (422 lbs vs. 428 lbs.). This implies that the negative-return producers were spending more to obtain a few extra pounds than what those pounds were worth in the market place.

2. Increased Efficiency. With no advantage in productivity, positive-return operations achieved their high returns through increased efficiency, cost containment, and receiving better market prices. An example of better efficiency is average age of first calving for replacement heifers. Three-quarters of the positive-return operations had their replacement heifers calving at 24 months compared to one-half of the negative-return operations.

3. Attention to Price. Positive-return producers paid more attention to price when buying or selling their animals. Positive-return producers were more likely to use price as the most important factor for determining when to sell their calves than negative-return operators (31% vs 5%). And as a result, positive-return operators received slightly higher average prices for their calves ($87.97/cwt vs $86.90/cwt). As a selection criteria for bulls, price was more important to positive-return operators than to negative-return operators. Being more price conscious did not mean they sought the lowest price bull, rather they may have been after the most cost-effective bull.

4. Feed Costs. Positive-return producers kept costs down by not feeding expensive feeds. Fewer fed corn silage (8% vs 18%), grain (89% vs 27%), or creep feed (15% vs 29%) than negative-return operations.

5. Capital Invested per Cow. The biggest cost savings came from the amount of capital invested per cow. The investment value for negative-return operations for $1841 more per cow ($3,870 vs $2,029) than for positive return operations. This additional investment at a relatively low capital charge of 6% would result in an extra cost of weaned calves of almost $26.00/cwt. Eighty percent of the difference in investment was attributable to real estate value. Given the market value of their land and buildings, negative-return producers were not producing enough beef per acre to make the land pay for itself.

6. Debt per Cow. In terms of debt per cow, negative-return producers owed $530, $255 more than positive-return producers. At 10% interest, this debt differential would have resulted in $6.42/cwt less revenue in the pockets of negative-return producers.

7. Computerized Record Keeping. To help keep track of their operations, positive-return operators were twice as likely to use some type of computerized record keeping system as negative-return operators. Other management factors associated with positive-return operations were the use of special pastures for calving (46% vs 27% ) and use of three or more breeds (62% vs 27%).

8. Veterinarian's Advise Producers with a positive net return were more likely to seek a veterinarian's advice in making health and management decisions, especially in deciding when to deworm cattle.

The number of breeding cows per operation was similar, 167 for the positive-net return herds and 162 for the negative-net return herds. This fact suggests that size, in and of itself, is not the major factor in determining profitability. Instead, the ability to manage the size herd one currently has will determine economic success. For this study the most Important management factor was keeping costs under control, especially investment per cow.

The details of this report as well as a number of reports from the NAHMS survey are available on the internet at http://www.aphis.usda.gov/vs/ceah/ncahs/nahms/