Profit Is Job One For Beef Producers

Fodder for Thought

Beef producers still struggle with putting production concepts above net profit.

Published on: December 13, 2012

Recently I posed this question to beef producers in my social media circles:

If you could only know one statistic about your farm/ranch with which to make management decisions, what would it be?

I received a multitude of answers from stocking rate, rate of gain, to annual rainfall. While I agree these are important numbers to know when it comes to making management decisions, if given the choice of only one statistic with which to make the best management decisions possible and ensure my future profitability, I would not choose any of these.

That's because the aforementioned answers were given with only production in mind. The last I checked, raising cattle is not just about production. In the end it is a business. Being so, it should be run as one. That means success is dependent on a profit-oriented approach.

To ensure a profit as a beef producer, knowing your cost of production is ultimately the most important factor you need to know. Cost of production includes both annual cow cost for cow-calf operations and cost of gain for stocker and finishing operations. In addition, it is important to note that your cost of production per unit of output, such as per calf or per pound of gain, includes not only feed costs but also expenses for things such as veterinary care, transportation, and even the time and labor you expend to produce that output.

I have read multiple times that less than 10% of all cattle producers actually know their cost of production. This statement supports the case that of all the answers I received, only a few were given with profitability in mind. Even more disturbing was the fact only one of those answers was from a U.S. producer.

Why this is the case, I do not know. But I do know it is very hard to manage what you do not measure. Without knowing your cost of production, it is difficult to reduce costs and ultimately, to increase profit, as you have no idea where to begin.

A business in any other industry would not think twice about determining the cost of production for their product or service. So why are such a majority of cattle producers so indifferent to this vital information?

Production statistics will always be valuable things to consider when making management decisions. However, let us not forget that we are still running a business. In such volatile economic times as now, business savvy and a profit-oriented mindset are more valuable than ever.

In the end, when the economics of beef production become challenging, those who know their cost of production and manage to ensure a profit will be ones on top.

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  1. website content writer of topseocopywriting.com says:

    Wonderful learn, I simply handed this onto a colleague who was performing a little analysis on that. And he really purchased me lunch as a result of I discovered it for him smile So permit me to rephrase that: thank you for dinner!

  2. Anonymous says:

    Some great insights into the thinking we have going on in the livestock industry. When ever I talk to producers the conversation inevitably gets around to "All our problems would be fixed with higher prices for our product".We focus so much on production that we get blinded to what the cost is for that extra production,less weight gain can be more profitable if the cost of the extra weight gain is more than the profit on that gain.Those who think higher prices should consider the experience we have had over time where we had higher prices : we tend to use that extra income to buy things we may not need or expand our debt levels so that when lower prices come again we are locked into a higher cost base.In what I call the commodity arena price is not the main thing as we have no control over that.However we are responsible for our Costs and the cost to carry our animals from one grade to another.Knowing your costs will allow you to know which animals to sell,which animals to keep and which animals to buy.Plus throw in it could very well show if you have a costly hobby or a profitable business. Grahame Rees

  3. Anonymous says:

    Good post Jesse, I agree. Profit isn't the most important thing in farming, but it comes a close second to oxygen. All those other things important to farmers (family, the farming life) are made better by sustainable profits. There is a saying in New Zealand, you may use it too: "Production is Vanity; Profit is Sanity" Aaron Meikle