The economic returns to beef cow-calf producers vary considerably over time as indicated in (Figure 1) Not only is there a wide range of profitability from year to year Kansas Farm Management data show there is a huge variability between producers within the same year. A review of the 2012 to 2016 Kansas Farm Management Association summary of data from cow-calf enterprises provides insight to all cow calf producers on the areas to focus on to remain economically viable into the future.
For example, over the last 42 years there has been an average $233 difference in net returns per cow, between the good (top 1/3) and the bad (bottom 1/3) years. This is a large amount of variability, but unfortunately this risk is difficult to manage because much of it is due to factors and conditions that are typically beyond the control of individual producers. However, what is much more important is that the variability across producers at a point in time is much larger than the variability over time. In other words, even in the “good years” some producers are losing money and even in the “bad years” some producers are making money. This is an important point to make because it indicates there are management changes producers can make to seek to improve their operations.
This analysis suggests that while both price and weight of calves do impact profit, they are much less important in explaining differences between producers than costs. In the data analyzed here, economies of size exist such that larger operations tend to have lower costs and hence are more profitable than smaller operations. However, it is important to point out that being a large operation does not guarantee low costs and high profits, as a number of mid-sized to smaller operations were cost competitive. Operations that have higher labor allocation in the cowherd enterprise, relative to crop enterprises, tended to have lower costs and be more profitable. The factor that is important regarding profit and cost differences between producers is how well they manage their non-pasture feed costs. Producers that had a lower percentage of their total costs as non-pasture feed had significantly lower costs and hence significantly higher profits.