How Can I Reduce Operating Cost and Maintain a Viable Operation?

Transcription

1 How Cn I Reduce Operting Cost nd Mintin Vible Opertion? Bckground for Discussion In this discussion we re not going into the obvious cost-cutting items like buying tht new pickup or trctor, keeping new fencing to minimum, or renovting pstures. Nor will we discuss supplementing income with hunting leses, seed Findly Pte Rnge Cttle Reserch nd Eduction Center University of Florid/IFAS, On Introduction production, or sodding psturesincome sources tht cn be substntil. Before one cn reduce operting cost in cow clf enterprise, production levels nd cost inputs We re going to discuss inputs tht directly fmust be known. Wht re the totl expenses for fect clf production. Wht do they cost nd wht your cow clf enterprise? How mny cows do you effect will their reduction hve on clf production? expose to bulls nd how mny clves do you wen Also, we will discuss the effect of cost cutting on nnully? How much do you spend per cow, or per the position of the rnching enterprise, reltive to clf wened? On per-cow bsis, how much do future feeder clf prices. you spend on feed, fertilizer nd lbor? In this discussion we re going to evlute speto The strting point for reducing cost is good cific cost inputs of the top 25% nd second 25% of ccounting nd record keeping system. Although the most profitble cow clf rnches in the US tht mny smll opertions cn keep expenditures in used SPA (McGrnn nd Prker, 1996). These dt notebook, medium- to lrge-size opertions re- were for the period from 1991 to 1994, nd re quire more involved record keeping methods. One presented in Tble 1. Dt shown re out-of-pocket procedure tht ccomplishes this tsk in rther expenses for n ongoing cow clf enterprise, nd simplistic mnner is Stndrdized Performnce do not include lnd cost, interest on the cow, or Anlysis (SPA), uniform ccounting nd record similr economic entities. keeping progrm for cttlemen sponsored by the Ntionl Cttlemen s Assocition. SPA uses Similr cost figures for two typicl, profitcomputer progrm to determine cow clf costs, minded cow clf rnches in Florid re presented. nd production vribles such s clf wening These dt re for the pst two to three yers. Both weight or pounds of clf wened per cow exposed. rnches re brood cow opertions. Similr most lrger rnches, neither feeds hy. Rnch A Trining in SPA nlysis is currently sponsored is moderte-cost opertion with n ongoing psby the Florid Cttlemen s Assocition nd coordi- ture development progrm, uses moderte winter nted by Pt Pfeil. Pt cn be contcted t Crlton supplementtion progrm for the cow herd, nd hs 2 4 Rnch ner Arcdi, (941) moderte psture mintennce progrm. Rnch B is low-cost opertion with limited psture development, limited winter supplementtion of the cow herd, nd low psture mintennce progrm. Three Expenses Affecting Production The three mjor expense items tht ffect clf production re feed, grzing costs, nd lbor (Tble 13

2 Tble 1. Cow clf performnce mesures of the top 25% nd second 25% of the most profitble rnches in the US tht use SPA, nd two Florid rnches. SPA Mesure US Top 25% US 2nd 25% Florid Rnches A B Clf wening weight, lb Wening rte, % of cows exposed Lb of clf wened per cow exposed Purchsed feed cost, $/cow exposed Psture cost, $/cow exposed Fertilizer Psture mintennce Totl Lbor cost, $/cow exposed Totl cost, $/cow exposed Clf-production cost, $/cwt b b Includes minerl cost. Clf-production cost, $/cwt = (totl cost/cow exposed) (lb of clf wened/cow exposed). 1). For US producers, purchsed feed nd grzing expenses verged 48% of totl cost. The top 25% nd the second 25% of the most profitble US rnches tht use SPA spent $84 nd $102 per cow on purchsed feed, respectively. In Florid, we re fortunte to be less dependent on purchsed feed. The two Florid rnches spent $43 nd $20 per cow nnully on purchsed feed, nd this cost included purchses of minerl supplement. In Florid, grzing expenses re lower thn for most US producers. Both the top 25% nd second 25% of the more profitble US cow clf producers hd $71 per-cow grzing expense. The two Florid rnches hd $53 nd $20 per-cow grzing expense. The Esy Cost Cuts Reserch by University of Florid extension nd reserch workers hs demonstrted tht, under grzing conditions in south Florid, bhigrss will not show n economic response to phosphorus, potsh, or to ph higher thn 5.0 (Sumner et l., 1991). Both Rnches A nd B hve followed fer- tiliztion prctice of using only nitrogen on bhigrss for the pst five yers nd hve not seen reduction in forge yield. Rnch B uses nitrogen fertiliztion only on few selected pstures. Dr. Jerry Kidder discusses other low-cost psture fertiliztion lterntives in the following pper. Cutting to The Quick Any mjor reductions in supplementl feed or nitrogen fertilizer will ffect clf production. This is prticulrly true for smller rnches, which usu- lly utilize intensive mngement prctices nd Mny rnchers nd their fmilies provide most of the lbor for smll- nd medium-sized opertions; therefore, lbor costs re not problem. On lrger rnches, the permnent employee pool is probbly t the bre minimum. However, dy work for fence building nd similr tsks cn be reduced. 14

3 push limited resources to the mximum. Field re- ous feeder clf prices, rnging from $40 per cwt to serch hs shown tht reducing nitrogen fertiliz- $110 per cwt. For discussion purposes we ssume tion from 60 lb per cre to zero will reduce totl ll wened steer nd heifer clves re sold s feedbhigrss yield 20% (Sumner et l., 1991). Sup- ers. Wht these figures show is tht the profitbility plementtion reserch hs shown tht reducing of moderte-cost cow clf enterprise, compred winter supplementtion from 3 lb TDN per hed, to low-cost enterprise, is relted to feeder clf dily, to zero will reduce clf production per cow prices. When feeder clf prices re high, the mod- 15% or more (Chpmn et l., 1965; Pte et l., erte-cost rnching opertion is more profitble. 1985). A good estimte is tht eliminting both Thus, most investments tht result in incresed clf nitrogen fertiliztion nd supplementtion in n production re worthwhile. When feeder clf prices lredy intensively mnged cow clf opertion re low, the low-cost rnching opertion is more will reduce clf production 30 to 40%. profitble. Remining Vible With Reduced Input The solution to remining vible, while cutting supplementl feed nd nitrogen fertilizer, is to reduce stocking rte. Attempting to mintin the sme number of cows will result in disster. Reducing herd size is necessry nd cn probbly be ccomplished to some degree by culling old nd low-producing brood cows. Let s go bck to Tble 1 nd study the two Florid rnches. Rnch A hs 36 lb higher wening weight nd n 8% higher clf wening percentge thn Rnch B. But, Rnch A purchsed $20 more feed, $16 more fertilizer, nd put $17 more into psture mintennce, per cow, thn Rnch B. These higher input items were responsible for the 69 pounds more clf wened, per cow exposed, on Rnch A (393 lb) thn on Rnch B (324 lb), but they were lso responsible for the $52 higher cost, per cow, for Rnch A ($238) thn for Rnch B ($186). The totl clf-production cost for Rnch A ws $60 per cwt of clf produced, compred to $57 per cwt of clf produced on Rnch B. However, cost per cwt of clf produced does not present the whole story. The Rest of the Story Similr decisions need to be mde reltive to fertilizer pplictions. Apply fertilizer to pstures tht will be grzed by young cttle nd(or) pply fertilizer to grsses tht will give the best response. These grsses include pngolgrss, strgrss, he- mrthri, nd bermudgrss. In Tble 2, we hve used the production nd cost per cow informtion from Tble 1 to compre the profitbility of Rnch A nd Rnch B for vri- It is simple to go from moderte-cost to low-cost cow clf opertion when clf prices re low; just cull the cow herd to n cceptble stocking rte nd spend less money on feed nd fertilizer. The hrd prt is to position your opertion, reltive to mngement level nd cow stocking rte, such tht it will be most profitble when feeder clf prices return to higher level. It tkes severl yers to rebuild brood cow herd with good replcement heifers. Before decisions re mde to reduce input nd stocking rte, the long-term vibility of the beef industry must be tken into ccount. Tht is, wht will be the price of feeder clves in future yers? Mngement Chnges Tht Improve Efficiency A short-term decision tht will ssist in cost cutting is to mnge the cow herd ccording to ge. If only limited quntity of supplementl feed cn be purchsed, it should be provided to younger cttle, especilly first-clf heifers nd second-clf cows. 15

4 strgrss, hemrthri, nd bermudgrss. Even when cutting costs, rnchers should consider pro- viding good mngement prctices to younger ct- tle, especilly first-clf heifers nd second-clf cows. Now is the time to mke mngement chng- es tht will be beneficil over the long term, such s shorter breeding seson. If you re currently wening nd mrketing clves once nnully with 120-dy or longer breeding seson, considertion should be given to shortening the breeding seson. Lte-clving cows will continue to clve lte for mny yers. A shorter breeding seson will increse verge clf wening weight nd clf uniformity. Rnches tht mintin good supplementtion nd psture grzing progrm should be ble to mnge 90-dy breeding seson. Summry In summry, rnches tht cut cost by reducing supplementl feeding nd fertiliztion need to mke djustments in stocking rtes. Cull old nd lowproducing cows first. Improve fertiliztion efficiency by pplying only nitrogen to bhigrss in Februry or erly Mrch. Give priority to fertilizing grsses tht respond best, such s pngolgrss, References Chpmn, H.L., Jr., R.W. Kidder, M. Koger, J.R. Crockett, nd W.K. McPherson Blckstrp molsses for beef cows. Florid Agric. Exp. St. Bull McGrnn, J., nd J. Prker Cow clf SPA shows gret opportunities for improvements. IRM-SPA Hndbook. SPA- 10. Texs Agric. Extension Service, Texs A&M University. Pte, F.M., J.R. Crockett, nd J.D. Phillips Effect of clf wening ge nd cow supplementtion on cow productivity. J. Animl Sci. 61: Sumner, S., W. Wde, J. Selph, J. Southwell, V. Hoge, P. Hogue, E. Jennings, P. Miller, nd T. Sewright Fertiliztion of estblished bhigrss psture in Florid. Florid Agric. Exp. St. Circ Tble 2. Profitbility of moderte-input (A) nd low-input (B) Florid rnch t different feeder clf prices. Net return, $/cow b Feeder clf price, $/cwt Rnch A Rnch B SPA Mesure Rnch A Rnch B Clf wening weight, lb Clf wening rte, % of cows exposed Lb of clf wened per cow exposed Cwt of clf sold/cow exposed c Totl cost, $/cow exposed b c Feeder clf price would be n verge for heifers nd steers Net return, $/cow = [(feeder clf price, $/cwt) (cwt of clf sold/cow exposed)]! (totl cost/cow exposed, $). Cwt of clf sold/cow exposed = [(lb of clf wened/cow exposed)! (3% pencil shrink)] 100 lb. 16

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