Group Title: Economic information report
Title: Estimating cost and break-even prices for 100-cow beef herds in southwest Florida, 1976
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Permanent Link: http://ufdc.ufl.edu/UF00026497/00001
 Material Information
Title: Estimating cost and break-even prices for 100-cow beef herds in southwest Florida, 1976
Series Title: Economic information report
Alternate Title: Estimating cost and break-even prices for 100-cow beef herds ..
Physical Description: i, 7 p. : ; 28 cm.
Language: English
Creator: Otte, John A
Yelvington, John V. ( joint author )
Publisher: Food & Resource Economics Dept., Agricultural Experiment Stations, Institute of Food and Agricultural Sciences, University of Florida
Food and Resource Economics Dept., Agricultural Experiment Stations and Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville
Publication Date: 1976
Copyright Date: 1976
 Subjects
Subject: Beef cattle -- Economic aspects -- Florida   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Bibliography: p. 7.
Statement of Responsibility: John A. Otte, John V. Yelvington.
General Note: Cover title.
 Record Information
Bibliographic ID: UF00026497
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: notis - ABT0901
alephbibnum - 000304323
oclc - 03749397
lccn - 77620851

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Agricultural Sciences and should be
used only to trace the historic work of
the Institute and its staff. Current IFAS
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Electronic Data Information Source
(EDIS)

site maintained by the Florida
Cooperative Extension Service.






Copyright 2005, Board of Trustees, University
of Florida





Sc-. 0n r Econ c j fo rr n

a 7. Yegton Report 56




imati ng Cost ad BreE

ices or 10O.-Cow Beef Herds

in Southwest Florida, 1976





UM E LIBR Ry
SAPR:; |7
5 1977
.:.S Univ. of Floridaj





and Resource Economics Department
cultural Experiment Storions and Aug ust 1976
nativee Extension Service
te of Food and Agricultural Sciences
sity of Florida, Gainesville 32611




















ABSTRACT


Estimated costs and break-even prices for 100-cow beef herds:
in the Manatee-Sarasota area are presented. The format may be
used by individual growers to determine costs and calculate
break-even prices from their own individual data for..their own herds.


Key words: Beef, cows, calves, costs, budgeting, break-even.














TABLE OF CONTENTS



Page

LIST OF TABLES . . . . . . . . . . .

LIST OF FIGURES. . . . . . . . ... ..... i

INTRODUCTION . . . . . . .... . . . 1

METHOD . .... ... .. .... ... . . . . 2

SAMPLE SYSTEM . . . . . . . 2

ESTIMATING REVENUE . . . . . . . .. . .. 2

ESTIMATING COSTS .. . . . . ...... . 2

CALCULATING BREAK-EVEN PRICES. .. .. . . . .. 4

SUMMARY AND CONCLUSIONS. . . . . . . .. . 6

BIBLIOGRAPHY . . . . . . .. .. . . .... 7



LIST OF TABLES



Table

1 Estimated revenue and expenses, 100-cow herd on 300
acres of permanent pasture, Southwest Florida, 1976. 3



LIST OF FIGURES



Figure

1 Break-even price to cover cash costs . . . . 5

2 Break-even price to cover total costs. . . . . 5
i















ESTIMATING COSTS AND BREAK-EVEN PRICES FOR
100-COW BEEF HERDS IN SOUTHWEST FLORIDA, 1976


John A. Otte and John V. Yelvington


INTRODUCTION


Rising production costs, unpredictable market prices, and
tight money supplies make planning prior to producing important
to cattlemen.
In response to recent gloomy markets, many ranchers cut back
on supplemental feed, pasture fertilization, and increased stocking
rates by renting less pasture in an attempt to reduce cash costs
in the short-run. Calves from a reduced program will probably be
weaned and sold at lighter weights, thus reducing revenues.
Reducing costs by cutting feed is attractive when cash flows
are tight. However, prolonged inadequate nutrition can result in
lower conception rates and smaller calf crops. If feed cost
savings are more than offset by declines in productive potential
in the future, cost saving today may not be economical in the longer
run.
A good cost and returns estimate can be a valuable tool for a
rancher. Once costs and returns are budgeted, the grower can adjust
the budget to reflect expected impact on costs and returns of changes
in the feeding program he is considering. Calculating break-even
prices to cover cash and total costs can assist the rancher in business
planning. A costs and returns projection is valuable when a rancher



JOHN A. OTTE is an area extension economist stationed at the
Agricultural Research and Education Center, Bradenton. JOHN V. YELVINGTON
was formerly an extension livestock specialist in Sarasota County.


1







borrows money.
This paper presents a budget for a. 100-cow herd in Southwest Florida
and shows how break-even prices can be calculated.


"METHOD


The data presented here were developed by surveying growers and
colleagues and from previously published sources. The assumptions made
for the particular example represent a relatively small ranch with top man-
agement but no pasture irrigation. The cost estimating format is designed
to be applicable to any ranch situation. A rancher should substitute his
own data, add or delete practices, and develop his own costs for his own
ranch.


SAMPLE SYSTEM


A 100-cow herd with four bulls on 300 acres of improved permanent
pasture is used to demonstrate the calculation of production costs and
returns. An 85 percent calf crop is assumed. Calves will be sold in the
fall at 400 to 475 pounds. A 15 percent cow cull rate is used with heifer
calves saved as replacements.
The calf crop percentages and the weaning weights are both high in
this study. Our intent is to show what can be achieved with top manage-
ment, good cows, and a good ranch.


ESTIMATING REVENUE


Section I of Table 1 shows estimated total revenue from the cow-calf
operation. This is calculated by first determining what livestock will be
sold from the operation during the year. The number of cattle, multiplied
by weight, and the product multiplied by price gives revenue for the sale
of each type of stock.


ESTIMATING COSTS


Costs are tied to management practices. The first procedure is to
list all steps in the production process. Next is to identify the







Table l.--Estimated revenue and expenses, 100-cow herd on 300 acres of permanent pasture, Scuthwest Florida,
1976


1tem Description Quantity Price Total Your
ranch

Revenue
Cows Cull--850 lb. @ $24/cwt. 13 hd, $204.00 $2,652
Heifers 2 yr. old--893 lb. @ $30/cwt. (sold in Sept.) 4 hd, 267,00 1,072
Calves 85% calf crop
Heifers 400 lb. @ $34/cwt. (sold in Oct.-Nov.) 23 hd, 136.00 3,128
Steers 475 lb. @ $40/cwt. (sold in Oct.-Nov.) 43 hd. 190,00 8,170
Total revenue $15,022

Cash expenses
Fertilizer 400 lb./A., 10-10-10, custom applied 300 A. 17.00 5,100
50 lb. Y or 150 am.onium nitrate/A. 300 A. 10.883 3,262
Lime, S20/A. every 4 yrs. 300 A. 5,00 1,500
SuppTFlc ntal feed 16% fcrzified molsasss 4 lb./AU/day,
fed 120 days 32.64 T.. 65,00 3,122 _
Minerals 40 lb./AU/yr., average 135 AU 2,72 T, 170.00 462
Vet. supplies Medicine, vaccine & insecticide 450 _
Fertility testing 4 hd, 15,00 60
Misc. practices Dragging & moving pastures, feeding hay,
checking fences & cattle 700
Repairs Building & fences 200
"Taxes Personal property on livestock 100 hd, .50 50
Interest On operating capital, 7 mos, @ 10% $13,906 .0583 811
Tocal cash expenses $14,717

Fixed costs
Bull depreciation 4 hd. 140.00 560
Buildings, machinery, etc. 596
Land taxes 300 A. 2,70 810
Total fixed costs $1,966
Total expenses $16,683


price estimates are net selling prices. Gross prices are reduced by 3.5% auction charge and 4.0% shrin!-
and hauling charges.

b$5.00/A./yr.

CNo purchased hay; assume hay cut off part of the 200 acres.






4

supplies needed per acre or per cow to carry out each practice. Third,
calculate total cost by multiplying the input requirement per acre or
per cow times input price times the number of acres or cows.
The cash costs shown in Section II of Table 1 are obtained from a
yearly production plan, following the procedure outlined above. For
example, using the fertilizer program from this budget, the first step
is to determine application rates. On established bahiagrass pasture,
400 pounds per acre of 10-10-10 at $85 per ton will be applied on 300
acres during June. An additional 50 pounds per acre of nitrogen will
be applied as 150 pounds of ammonium nitrate per acre during September
at $145 per ton. Liming costs are estimated at $20 per acre once every
four years. This cost is allocated over each calf crop at the rate of
$5 per acre per year. The total annual lime and fertilizer cost is
estimated at $9,862. Other cash costs can be calculated in the same
manner as this example.


CALCULATING BREAK-EVEN PRICES


Break-even price determination is an elementary tool which is bene-
ficial in cattle business planning. A break-even price is determined
simply by dividing production costs by the amount of production obtained
for that cost.
The process is a little more complex when applied to cow-calf
operations because both calves and culls are sold. The primary
objective is to determine what price must be obtained for calves to
maintain a viable cow-calf enterprise. Figure 1 shows how to calculate
break-even price to cover the cash costs in Table 1. Culls are sold more
or less as a by-product to upgrade the herd and maintain.calf production
levels. Cash costs are reduced by the amount of cull revenue to obtain
"net" calf cash costs. "Net" calf costs are then divided by pounds of
calves produced to obtain break-even prices for the calves. This approach
assumes culls will be sold at their break-even prices.
Calves must average $37.14 per hundredweight to cover cash costs.
If heifers are selling for $35, steers will have to bring a little better
than $38 for the steers to break even. These prices are a bit lower than
those projected for fall.





5



Step 1. Determine weight of calves sold.
Type No. Weight Total weight

Heifers 23 400 lb. 9,200 lb.
Steers 43 475 lb. 20,425 lb.
29,b25 lb.

Step 2. Reduce total cash costs by amount of cull revenue.
Total cash costs cull revenue = "net" calf cash costs
$14,717 $3,724 = $10,993
Step 3. Divide cost by production.
"Net' calf cash costs = $10,993 = $37.14 per cwt.

Wt. of calves produced 296 cwt.


Figure 1.--Break-even price to cover cash costs






The breakeven price necessary to cover total costs shown is in
Figure 2. The breakeven price to cover total costs of $43.78 per
hundred weight is above the calf prices projected for fall. If costs
do not decrease or revenues increase, little expansion or upgrading
of facilities will occur.





Step 1. Determine weight of calves sold.
Type No. Weight Total weight
Heifers 23 400 lb 9,200 lb.
Steers 43 475 Ib 20,425 lb.
29,625 lb.
Step 2. Reduce total cash and fixed costs by cull revenue.
Total cash and fixed costs cull revenue = "net" calf total cash and
fixed costs
$16,683 $3,724 = $12,959
Step 3. Divide cost by production.
"Net" calf cash and fixed costs = $12,959 = $43.78 per cwt.
Wt. of calves produced 296 cwt.


Figure 2.-- Break-even price to cover total costs





6

The above costs include a charge for operating capital (7 months
at 10 percent), but not fur. the operator's labor. There is no charge
for management, or interest on the capital tied up in cows and land in
these break-even price calculations.
If cows are valued at $204 per head and bulls at $500 per head,
total investment in breeding stock is $22,400. An additional $1,120
revenue is needed to give a 5 percent return on this investment. If
the operator includes $20 per cow for his time devoted to taking care
of the cows, another $2,000 is added to revenue required to break even.
These costs increase th, break--even price $10.54 per hundredweight
to $54.32 per hundredweight, This is before any return on investment
in land is calculated.
Following this procedure a rancher can estimate costs for other
feeding programs such as native palmetto range or irrigated clover
pasture. Income estimates will change due to changes in weaning
weights and calf crop-: obtained from different feeding methods. Break-
even prices can be calculated for each program. The rancher can use
estimated break-even .pRrires to aid in choosing or developing.production
methods.


SUIiMMARY AND CONCLUSIONS


Ranchers can estimate cow herd costs by systematically listing man-
agement practices, inputs required to carry out each practice, and
determining cost for each practice. Comparing break-even prices cal-
culated from budgets for alternative growing methods can assist the
rancher in adjusting his feeding program to increase profit potential.















BIBLIOGRAPHY


[1] Anderson, C. L. and T. S. Hipp. Requirements and Returns for
1000-Cow Beef Herds on Flatwood Soils in Florida. Univ.
of Fla. Coop. Ext. Serv. Cir. 385, Apr. 1974.

[2] Holt, John. "Requirements and Returns of Beef Cattle Herds of
Various Sizes," Univ. of Fla. Food & Resource Economics
Dept. paper presented at Banker-Cattlemen Day at Panama
City, Fla., Feb. 19, 1976.

[3] Southern Extension Beef Cattle Task Force. Southern Beef Systems:
Management and Marketing Options. No. 2. Gainesville: Univ.
of Fla. Coop. Ext. Serv., Spring/Fall 1976.




































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