Many times, it seems like the content written for articles of this nature are focused on the larger producer – the folks with several hundred head of cows, stocker calves, etc. We tend to address those producers who need to buy much of their supplies, be it feed, fertilizer or anything else, in truckload quantities or simply larger volumes that often come with associated discounts, freight advantages and so on. The thing is, much of the beef cattle production in the U.S. takes place on much smaller operations where this kind of volume is difficult to manage. And as important as it is for the larger producer to manage his costs, it is equally important for the smaller operators.
How do we categorize a “smaller” cattle producer? Generally, we simply consider the number of animals (cows) an operation has. The USDA has reported that, on average, the typical cow herd in the U.S. is around 44 head of breeding cows. There are an estimated 647,000 beef cattle operations in the U.S., with 88% of these farms running fewer than 100 head. The smaller farms make up a very significant amount of the cattle produced.
Many of the smaller operations purchase most, if not all, of their inputs from the local feed store. Recognize that feed stores are retail operations and their profits are driven by the margins they add to the various products they sell. This is not meant to disparage feed stores by any means, but only to point out that there is another layer of margin present on inputs purchased in this manner.
What can the smaller producer do to better manage the costs required for a typical cattle operation? Let’s discuss some strategies.
Managing costs
Least cost is not always best cost. Often, when producers go in search of the “best” deal on something, they end up buying a product where something is compromised. Take, for instance, feeds or supplements. When shopping for different feeds or supplements, if you come across something that is significantly less than comparable product prices, the first question to ask is “Why?” There has to be a reason for the lower cost, especially in this economy. For feeds and supplements, most commonly, a lower price point is generated because something has been compromised. This can include nutrient levels or ingredient types lower in quality or digestibility. On occasion, you will run across someone who is making that product and is simply not charging as much profit margin. The concern here is that if they are not marking their costs up enough to cover their overhead and make at least some money, their company is likely not long for the world. So if something is substantially less expensive than comparable products, always ask “Why?”
The same is true if you run across something that is significantly higher in price. Is the manufacturer or retailer simply adding more margin? Are they adding a lot of bells and whistles that may not be needed but give the impression of more value? This is often called “tag dressing” and is actually quite common.
So as a producer, large or small, to begin evaluating and improving the management of your costs, there are several steps to be taken. These include:
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Evaluate purchases. In a given production year, you normally buy a variety of items for operational management, including:
- Feed (protein supplements, minerals, creep or grower/developer feeds, etc.)
- Forages
- Fertilizer
- Fuel
- Herbicides/pesticides
- Animal health products (vaccines, antibiotics, dewormers, eartags, implants, etc.)
- Fly control
- Labor for working cattle, fencing, tractor operation, etc., additionally, machine hire such as spraying, fertilizer applications, hay cutting/baling/hauling
- Trucking/hauling/transportation
- Consider common added expenses you may incur:
- Repairs to equipment, facilities, fences, vehicles
- Veterinary expenses
- What, if any, capital improvements or major purchases do you need to make?
- Fences
- Equipment acquisition, replacement, upgrades
- Facilities in general
- Replacement cattle
- What are your other expenses?
- Leases
- Insurance
- Taxes
- Interest on loans
- Sales costs or commissions
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Set up a detailed calendar that identifies when you spend money on what. For example:
- Mineral is used year-round, so you have that expense every month.
- Protein supplements may only be fed from October through March.
- Cattle processing products may only be needed in the spring and/or fall.
- Fertilizer may be needed periodically through the growing months but will depend on your forage program.
- Hay production costs generally come in mid- to late spring, summertime and early fall.
- Quantify how much of various inputs you will need. Consider the number of animals you have or project to have and their estimated consumption or usage rate.
For instance, to look at your mineral use, take your number of head and multiply this by 0.25 pound (typical daily mineral intake) and multiply this by 365 days, since it is recommended to supplement mineral year-round. As an example, if you have 60 animals (including bulls), this would be (60 × 0.25) × 365 = 5,475 pounds of mineral.
Add to this the mineral consumed by calves. At about 60 to 90 days, calves will start visiting the mineral feeder. Overall, until weaning, they will eat about 50% of what the cow eats – about 0.125 pound per day. If you wean at 7 months, calculate for 210 days. Next, calculate the number of calves based on your average conception to weaning rate. Let’s call this 90% (54 head). With these numbers, you are looking at (54 × 0.125) × 210 days = 1,417 pounds.
Finally, if you have any weaned heifers or bulls on hand, these need to be added in. Let’s say an added 15 head of these that are on hand year-round. They will consume the full amount: (15 × 0.25) × 365 = 1,369 pounds. Your total estimated amount of mineral used annually would be 5,475 + 1,417 + 1,369 = 8,261 pounds. On a monthly basis, this would be 688 pounds per month – 13.77 bags, which we’ll round to 15 bags per month. A pallet would last about three months. In a lot of cases, a pallet of mineral might be purchased for a lower amount than just by the bag at a feed store.
Forage usage can be estimated in the same manner. A mature cow will eat around 35 pounds of dry hay per head per day, depending on the size of your cows. Also consider your hay feeding methods. Feeding round bales with no protection allows for a considerable amount of waste. Hay rings reduce this waste, and other methods can improve this even more. On average though, you can estimate 15% to 20% waste for hay fed in good round bale feeders.
You can do this with each input, estimating the amount you would need for your sized cow herd over subsequent months or the entire year. If you have records from previous years, this can be a helpful reference. This gives you basic numbers to plan with while recognizing this can change because of weather conditions, etc.
Look at your storage situation
You can purchase larger amounts of a given input, but you need to be sure to have good storage. For instance, bagged feed, minerals and tubs need to have a cool, dry storage area. If you are looking to possibly use bulk feeds or commodities, you will need either a feed bin or a commodity bay or barn where feed can be unloaded into and stored.
For things like vaccines and antibiotics, you’ll need a good refrigerator that can handle the larger amounts of these products and consistently keep them cold.
Test your soils and forage
Soil tests help to determine the best fertilization to optimize pasture and forage production. To understand what your pastures or forages provide, take samples periodically and have a forage analysis run so you know how pastures and forages need to be supplemented. This can help you buy what you actually need and not what you think you need.
Shop your inputs
Once you have an idea of the items above, evaluate and compare suppliers, whether they are feed stores, manufacturers or distributors. Look for specials and sales. Animal health product distributors can be cost-effective sources of vaccines and other related products.
Conclusions
The biggest thing here is the need for extensive evaluation, planning and recordkeeping. Become more aware of what products are available on the market and what companies can offer various types of support. Being a smaller producer does not mean you need to accept your production costs are going to be higher. Your goal should be to keep your expenses at the most optimal level possible.
