• TABLE OF CONTENTS
HIDE
 Copyright
 Title Page
 Abstract
 Table of Contents
 List of Tables
 Introduction
 Transfer of feeder cattle...
 Backgrounding budget
 Costs and returns
 Concluding remarks
 Reference






Group Title: Economic information report - Food & Resource Economics Department - 183
Title: Costs and returns from overwintering feeder cattle in North Florida
CITATION PAGE IMAGE ZOOMABLE PAGE TEXT
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00027319/00001
 Material Information
Title: Costs and returns from overwintering feeder cattle in North Florida
Series Title: Economic information report
Alternate Title: Overwintering feeder cattle in North Florida, costs and returns from
Physical Description: ii leaves, 15 p. : ; 28 cm.
Language: English
Creator: Ross, Joe A
Spreen, Thomas H
Arnade, Carlos A
Publisher: Food & Resource Economics Dept., Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville Fla
Publication Date: 1983
 Subjects
Subject: Cattle -- Feeding and feeds -- Economic aspects -- Florida   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
non-fiction   ( marcgt )
 Notes
Statement of Responsibility: Joe A. Ross, Thomas H. Spreen, Carlos A. Arnade.
General Note: Cover title.
General Note: "June 1983."
Funding: Economic information report (Gainesville, Fla.) ;
 Record Information
Bibliographic ID: UF00027319
Volume ID: VID00001
Source Institution: Marston Science Library, George A. Smathers Libraries, University of Florida
Holding Location: Florida Agricultural Experiment Station, Florida Cooperative Extension Service, Florida Department of Agriculture and Consumer Services, and the Engineering and Industrial Experiment Station; Institute for Food and Agricultural Services (IFAS), University of Florida
Rights Management: All rights reserved, Board of Trustees of the University of Florida
Resource Identifier: aleph - 001545588
oclc - 21116382
notis - AHF9110

Table of Contents
    Copyright
        Copyright
    Title Page
        Title Page
    Abstract
        Page i
    Table of Contents
        Page ii
    List of Tables
        Page ii
    Introduction
        Page 1
    Transfer of feeder cattle to backgrounding
        Page 2
    Backgrounding budget
        Page 2
        Pasture budget
            Page 2
            Page 3
            Page 4
        Pasturing budget
            Page 5
            Page 6
            Page 7
            Page 8
        Death loss, medication, salt, minerals and growth stimulants
            Page 9
        Fuel, maintenance and repairs
            Page 9
        Interests
            Page 9
        Procurement, marketing, shrink, transportation, and overhead costs
            Page 10
    Costs and returns
        Page 11
        Cost per pound of gain
            Page 11
        Total receipts
            Page 11
        Net returns
            Page 11
            Page 12
            Page 13
    Concluding remarks
        Page 14
    Reference
        Page 15
Full Text





HISTORIC NOTE


The publications in this collection do
not reflect current scientific knowledge
or recommendations. These texts
represent the historic publishing
record of the Institute for Food and
Agricultural Sciences and should be
used only to trace the historic work of
the Institute and its staff. Current IFAS
research may be found on the
Electronic Data Information Source
(EDIS)

site maintained by the Florida
Cooperative Extension Service.






Copyright 2005, Board of Trustees, University
of Florida





Joe A. Ross


Thomas H. Spreen


Economic Information
Report 183


Carlos A. Arnade





Costs and Returns from
Overwintering Feeder Cattle
in North Florida


HIf-iE LI E L r I F

JUL 0 11983
RFA.S.- Univ. of Florida


Food & Resource Economics Department
Agricultural Experiment Stations and
Cooperative Extension Service
Institute of Food and Agricultural Sciences
University of Forida, Gainesville 32611


June 1983















ABSTRACT


Florida cattle producers have the option of selling weaned calves
in the fall or cultivating temporary winter pastures and retaining
calves through the winter. Management of post-weaned calves is often
called "backgrounding" and backgrounding through the winter is referred
to as overwintering.
Annual costs and returns from overwintering weaned steer calves are
presented for the 1960 to 1982 period. The results indicate that costs
have risen dramatically and returns fluctuate wildly, especially over
the last 5 years of the analysis.

Key words: Feeder cattle, backgrounding, costs, returns, budgets.
















TABLE OF CONTENTS


Page

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

TRANSFER OF FEEDER CATTLE TO BACKGROUNDING ......................... 2
BACKGROUNDING BUDGET ............................* .................. 2
Pasture Budget ................................................ 2
Pasturing Budget .............................................. 5
Death Loss, Medication, Salt, Minerals and
Growth Stimulants ........................................... 9
Fuel, Maintenance and Repairs ............................ ....... 9
Interest ..........................*....*...................** 9
Procurement, Marketing, Shrink, Transportation,
and Overhead Costs .......................................... 10
COSTS AND RETURNS ...................................... ............ 11
Cost per Pound of Gain ........................................ 11
Total Receipts ..................................*............11
Net Returns ...................... ............................. 11

CONCLUDING REMARKS ................................................. 14
REFERENCES ......................... ...................*.......... 15


LIST OF TABLES


Table Page

1 Pasture-budget--Estimated cost of growing one acre
of rye-ryegrass ........................................... 3
2 Estimated cost for pasturing 400 pound steer calves
to 588 pounds, December to May, North Florida,
1.25 pounds average daily gain, 1960-1981 ................. 6
3 Summary of estimated costs and returns for pasturing
400 pound steer calves to 588 pounds, December to May
North Florida, 1.25 pounds average daily gain, 1960-61
to 1981-82 ................................................ 12
















TABLE OF CONTENTS


Page

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

TRANSFER OF FEEDER CATTLE TO BACKGROUNDING ......................... 2
BACKGROUNDING BUDGET ............................* .................. 2
Pasture Budget ................................................ 2
Pasturing Budget .............................................. 5
Death Loss, Medication, Salt, Minerals and
Growth Stimulants ........................................... 9
Fuel, Maintenance and Repairs ............................ ....... 9
Interest ..........................*....*...................** 9
Procurement, Marketing, Shrink, Transportation,
and Overhead Costs .......................................... 10
COSTS AND RETURNS ...................................... ............ 11
Cost per Pound of Gain ........................................ 11
Total Receipts ..................................*............11
Net Returns ...................... ............................. 11

CONCLUDING REMARKS ................................................. 14
REFERENCES ......................... ...................*.......... 15


LIST OF TABLES


Table Page

1 Pasture-budget--Estimated cost of growing one acre
of rye-ryegrass ........................................... 3
2 Estimated cost for pasturing 400 pound steer calves
to 588 pounds, December to May, North Florida,
1.25 pounds average daily gain, 1960-1981 ................. 6
3 Summary of estimated costs and returns for pasturing
400 pound steer calves to 588 pounds, December to May
North Florida, 1.25 pounds average daily gain, 1960-61
to 1981-82 ................................................ 12















COSTS AND RETURNS FROM OVERWINTERING
FEEDER CATTLE IN NORTH FLORIDA

Joe A. Ross, Thomas H. Spreen, and Carlos A. Arnade


INTRODUCTION


The predominant production system for cattle in North Florida is
for the calving season to be in the spring and to wean calves in the
fall. Despite the region's mild winters, permanent pastures are dormant
during the cold months, thus most producers choose to sell calves soon
after weaning to reduce the need to supply feedstuffs to the herd over
the winter.
Cattle producers may opt, however, to retain weaned calves over the
winter. The production of weaned calves is called "backgrounding" or
stocker cattle production. If backgrounding occurs over the winter, it
is also referred to as "overwintering."
The purpose of this paper is to report the costs and returns from

backgrounding or overwintering weaned feeder cattle in North Florida
utilizing rye-ryegrass pasture over the 1960-1982 period. Rye-ryegrass
pastures are among the most widely used source of cool season nutrition
in the area and represents a "typical" overwintering program.













JOE A. ROSS is adjunct assistant in food and resource economics.
THOMAS H. SPREEN is associate professor of food and resource eco-
nomics. CARLOS A. ARNADE is a former graduate research assistant in
food and resource economics.










TRANSFER OF FEEDER CATTLE TO BACKGROUNDING


The process of shifting weaned calves onto a backgrounding program
can take several paths. A cow-calf producer can choose not to sell
weaned feeder cattle. Another possible arrangement is that a North
Florida farmer/cattleman purchases weaned calves. These calves may come
from other North Florida producers or from cattle producers in South
Florida. A third possible arrangement is that a North Florida producer
incurs the cost of cultivating a temporary winter pasture and contracts
with another cattle producer. The weaned calves of the second producer
utilize the forage and the first producer is paid on a per pound of gain
basis. In this paper, it is assumed that the producer purchases weaned
calves to initiate the backgrounding program.


BACKGROUNDING BUDGET


Budgeting is used as a method to calculate the following back-
grounding budgets for feeder calves. Breakeven prices for a 570 pound
feeder steer are calculated from 22 years of time series data based on
the cost components of a 1979 North Florida pasture budget (Gunter et
al., 1979). It is assumed that the calf to be pastured starts the
backgrounding period in December weighing 400 pounds, and weighs 588
pounds in May. The 150 day grazing period allows for a 1.25 pound
average daily gain. With a 3 percent shrink on the 588 pound feeder
animal, the actual pay weight is 570 pounds.
In the analysis, Kansas City prices are chosen as a proxy to repre-
sent the 400 to 570 pound Florida feeder prices. A 50 mile hauling
charge and a marketing charge are also incorporated into the budget.


Pasture Budget


A major component of the overall budget is the actual cost of
investment in pasture. This is itemized in Table 1 and called the
pasture budget. The pasture budget is calculated on a per acre basis
and is a modification of the work of Gunter et al. (1979), who estimated










TRANSFER OF FEEDER CATTLE TO BACKGROUNDING


The process of shifting weaned calves onto a backgrounding program
can take several paths. A cow-calf producer can choose not to sell
weaned feeder cattle. Another possible arrangement is that a North
Florida farmer/cattleman purchases weaned calves. These calves may come
from other North Florida producers or from cattle producers in South
Florida. A third possible arrangement is that a North Florida producer
incurs the cost of cultivating a temporary winter pasture and contracts
with another cattle producer. The weaned calves of the second producer
utilize the forage and the first producer is paid on a per pound of gain
basis. In this paper, it is assumed that the producer purchases weaned
calves to initiate the backgrounding program.


BACKGROUNDING BUDGET


Budgeting is used as a method to calculate the following back-
grounding budgets for feeder calves. Breakeven prices for a 570 pound
feeder steer are calculated from 22 years of time series data based on
the cost components of a 1979 North Florida pasture budget (Gunter et
al., 1979). It is assumed that the calf to be pastured starts the
backgrounding period in December weighing 400 pounds, and weighs 588
pounds in May. The 150 day grazing period allows for a 1.25 pound
average daily gain. With a 3 percent shrink on the 588 pound feeder
animal, the actual pay weight is 570 pounds.
In the analysis, Kansas City prices are chosen as a proxy to repre-
sent the 400 to 570 pound Florida feeder prices. A 50 mile hauling
charge and a marketing charge are also incorporated into the budget.


Pasture Budget


A major component of the overall budget is the actual cost of
investment in pasture. This is itemized in Table 1 and called the
pasture budget. The pasture budget is calculated on a per acre basis
and is a modification of the work of Gunter et al. (1979), who estimated










TRANSFER OF FEEDER CATTLE TO BACKGROUNDING


The process of shifting weaned calves onto a backgrounding program
can take several paths. A cow-calf producer can choose not to sell
weaned feeder cattle. Another possible arrangement is that a North
Florida farmer/cattleman purchases weaned calves. These calves may come
from other North Florida producers or from cattle producers in South
Florida. A third possible arrangement is that a North Florida producer
incurs the cost of cultivating a temporary winter pasture and contracts
with another cattle producer. The weaned calves of the second producer
utilize the forage and the first producer is paid on a per pound of gain
basis. In this paper, it is assumed that the producer purchases weaned
calves to initiate the backgrounding program.


BACKGROUNDING BUDGET


Budgeting is used as a method to calculate the following back-
grounding budgets for feeder calves. Breakeven prices for a 570 pound
feeder steer are calculated from 22 years of time series data based on
the cost components of a 1979 North Florida pasture budget (Gunter et
al., 1979). It is assumed that the calf to be pastured starts the
backgrounding period in December weighing 400 pounds, and weighs 588
pounds in May. The 150 day grazing period allows for a 1.25 pound
average daily gain. With a 3 percent shrink on the 588 pound feeder
animal, the actual pay weight is 570 pounds.
In the analysis, Kansas City prices are chosen as a proxy to repre-
sent the 400 to 570 pound Florida feeder prices. A 50 mile hauling
charge and a marketing charge are also incorporated into the budget.


Pasture Budget


A major component of the overall budget is the actual cost of
investment in pasture. This is itemized in Table 1 and called the
pasture budget. The pasture budget is calculated on a per acre basis
and is a modification of the work of Gunter et al. (1979), who estimated








Table 1.--Pasture budget--Estimated cost of growing one acre of rye-ryegrass, North Florida, 1960-1981

Item Quantity 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970

------------------ ----------Dollars -------------

Rye seed 1 bu 3.90 4.05 4.05 4.15 4.10 3.80 3.80 4.04 4.11 5.45 5.55
Rye-grass seedb 15 Ibs 1.50 1.38 1.50 1.38 1.54 1.33 1.35 1.35 1.57 1.80 1.95
Limec 1/3 ton 3.00 3.00 2.83 2.80 2.83 3.00 3.00 3.00 3.00 2.73 2.73
Fertilizer 5-10-15C 7 cwt 15.40 15.40 15.40 15.40 15.92 15.57 16.10 16.89 16.17 15.05 16.15
Nitrogenc 25 lbs 3.05 2.97 3.17 3.13 2.98 2.96 2.48 2.82 2.65 2.39 2.29
Fixed cost machined 2.35 2.31 2.30 2.30 2.30 2.33 2.40 2.40 2.47 2.56 2.70
Labor .8 hrs .67 .69 .70 .72 .73 .78 .84 .93 .98 1.08 1.16
Machineryf 1.46 1.44 1.44 1.44 1.44 1.54 1.51 1.51 1.54 1.59 1.59
Total 31.33 31.24 31.42 31.32 31.84 31.31 31.48 32.94 33.29 32.65 33.98







Item Quantity 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981

------------------- --------------------Dollars------

Rye seed 1 bu 5.30 5.55 6.75 6.75 7.52 7.25 7.50 7.00 7.50 8.10 9.93
Rye-grass seed 15 lbs 1.95 1.91 2.10 2.25 2.28 2.35 2.55 2.72 2.85 3.07 3.28
Limec 1/3 ton 3.00 1.76 3.16 4.83 5.00 4.33 5.16 5.30 5.80 6.00 7.97
Fertilizer 5-10-15C 7 cwt 17.46 17.76 18.63 23.80 36.75 34.84 33.72 33.11 34.42 45.50 52.15
Nitrogenc 25 Ibs 2.27 2.42 2.62 4.33 7.25 5.73 5.53 5.57 5.50 6.05 6.85
Fixed cost machined 2.73 2.73 2.92 3.87 5.50 5.75 5.85 6.08 6.72 7.84 8.18
Labor .8 hrs 1.22 1.29 1.40 1.55 1.74 1.90 2.05 2.19 2.40 2.59 2.63
Machineryf 1.67 1.70 1.82 2.41 3.97 3.78 3.65 3 .79 4.19 4.99 5.28
Total 35.57 36.12 39.06 49.79 70.01 65.93 66.01 65.76 69.38 84.14 96.77
Continued










Table l.--Pasture budget--Estimated cost of growing one acre of rye-ryegrass, North Florida, 1960-1981 (Concluded)

Rye seed prices from 1979 were used as a base in calculating a series of prices based on a national
seed price index [U.S. Department of Agriculture. Agricultural Prices].
bFlorida ryegrass seed data from 1960-1973, 1976 and 1979 were used. A national seed price index was
used to calculate intermittent years (U.S. Department of Agriculture. Agricultural Prices].
cFlorida or SE (when Florida data were not available). Data for nitrogen, non-nitrogen fertilizer, and
lime prices were on a per ton basis. Fourth and first quarter data were used [U.S. Department of Agricul-
ture. Agricultural Prices].
dThe fixed cost of machinery was deflated by a farm supply index with 1979 as the base year [U.S.
Department of Agriculture. Agricultural Prices].
eLabor prices from the 1979 budget were used in calculating a series from a national farm labor index
[U.S. Department of Agriculture. Agricultural Prices].
fMachinery costs from 1979 were deflated by a farm motor supply index [U.S. Department of Agriculture.
Agricultural Prices].









input costs for a rye-ryegrass-clover budget. In this study clover is
removed from the budget and adjusted to reflect the estimated cost of
growing one acre of rye-ryegrass pasture.
The pasture budget is integrated into the total budget. Note that
analysis of the total budget without a breakdown of the pasture budget
could lead to inaccuracies since such items as labor are included in
both budgets.


Pasturing Budget


The overall budget for raising a calf from 400 to 588 pounds is
called the pasturing budget (Table 2). The pasture budget, and the
opportunity cost of retaining ownership or purchasing the 400 pound calf
for backgrounding purposes are the largest components of the pasturing
budget.
The pasturing budget is calculated on a per head basis. Assuming
constant returns to scale, the budget remains valid for all size opera-
tions. The first section of the budget lists the "cash costs" and shows
a total for these costs. Included are all the costs which are incurred
whether the cattle were raised or purchased.
The single largest item is the purchase cost or the opportunity
cost foregone by retaining ownership of the calf at weaning. Procure-
ment and marketing costs are also cash costs which may be incurred by
some producers but not all. These costs are listed separately in the
second section of the budget. Other cash expenses include the pasture
cost which was shown in Table 1. This includes all the costs associated
with growing one acre of pasture. In this analysis it is estimated that
it would require 0.6 acre of rye-ryegrass pasture to background a calf
from December to May.
Least cost combinations of hay and corn are not calculated, but
instead it is assumed that either all hay or all corn is used. The 1979
budget (Gunter et al.) assumes an average daily gain of 1.25 pounds per
day and calls for 200 pounds of hay supplement but not corn. However,
prices of hay and corn oscillate over the 22 year period. Reflecting a
producer's flexibility in purchasing inputs and a desire to limit cost,









Table 2.--Estimated cost for pasturing 400 pound steer calves to 588 pounds, December to May, North Florida, 1.25 pounds
average daily gain, 1960-1981


t i Q 1960- 1961- 1962- 1963- 1964- 1965- 1966- 1967- 1968- 1969- 1970-
Ct im Q y 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971

l- - - - -


Stocker calfa
Pastureb
Cornc

Hayd
Death losses
Medicationf
Fuel, repairsg
Interest


Total cash costs


Procurement
Marketing]
Transportation
Overhead


400 Ibs
0.6 ac
2.35 bu
200 Ibs
1%




variable


105.48
18.80


2.85
1.05
2.36
2.04
4.01


111.44
18.74
2.65


1.11
2.36
2.04
3.81


121.96
18.85
2.65


1.22
2.40
2.04
3.95


108.96
18.80
2.98


1.09
2.40
2.10
3.58


U-JILaLL Lc - -
91.44 104.44 120.00 118.88 125.08
19.10 18.78 18.88 19.76 19.97
2.87 2.94 3.10 3.12 2.70


0.91
2.40
2.10
3.20


1.04
2.40
2.10
3.61


1.20
2.40
2.16
4.23


1.19
2.44
2.16
4.48


136.67 142.15 153.07 139.91 122.02 135.31 151.97 152.03 158.30 176.86 186.26


11/2 %


0.77
2.24
0.35
0.74


0.80
2.26
0.35
0.75


0.85
2.25
0.35
0.76


0.80
1.88
0.36
0.77


0.71
2.13
0.36
0.76


0.77
2.40
0.36
0.77


0.86
2.30
0.37
0.80


0.85
2.49
0.37
0.81


Total costs


140.77 146.31 157.28 143.72 125.98 139.61 156.30 156.25 163.33 182.05 191.52


Continued


142.52
19.59
3.14


1.43
2.40
2.22
5.56


149.80
20.38


3.18
1.50
2.40
2.28
6.72


1.25
2.44
2.16
4.70


0.89
2.95
0.37
0.82


0.97
2.99
0.38
0.85


1.02
2.95
0.40
0.89









Table 2.--Estimated cost for pasturing 400 pound steer calves to 588 pounds, December to May, North Florida, 1.25 pounds
average daily gain, 1960-1981 (Continued)

1971- 1972- 1973- 1974- 1975- 1976- 1977- 1978- 1979- 1980- 1981-
Cost item Quantity 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982

- - - - Dollar cost per head - - -

Stocker calfa 400 Ibs 161.32 195.84 238.24 120.24 143.28 155.28 178.00 293.12 388.44 337.04 273.52
Pastureb 0.6 ac 21.34 21.67 23.43 29.87 42.01 39.56 39.60 39.45 41.62 50.48 58.06
Cornc 2.35 bu 3.17 3.12 5.10
Hayd 200 Ibs 4.00 5.40 5.50 5.00 5.50 5.30 5.30 6.80
Death losses 1% 1.61 1.96 2.38 1.20 1.43 1.55 1.78 2.93 3.88 3.37 2.74
Medicationf 2.40 2.48 2.56 2.92 3.92 3.88 3.84 3.60 4.00 3.92 4.28
Fuel, repairsg 2.34 2.34 2.52 3.48 3.84 4.08 4.38 4.62 6.00 8.22 9.30
Interest variable 5.83 6.65 9.21 6.41 7.42 7.19 7.64 12.85 20.07 21.37 22.17


Total cash costs 198.01 234.06 282.34 169.52 207.40 216.54 240.34 362.07 469.71 429.70 376.87


Procurementi 1.09 1.26 1.49 1.01 1.17 1.26 1.41 2.02 2.65 2.66 2.47
Marketingj 11/2% 3.45 4.59 3.40 2.96 3.75 3.51 4.95 7.42 6.02 6.04 5.68
Transportation 0.41 0.41 0.44 0.60 0.67 0.71 0.76 0.80 1.04 1.42 1.61
OverheadI 0.93 0.98 1.18 1.34 1.47 1.56 1.61 1.75 2.00 2.22 2.40


Total costs 203.89 241.30 288.85 175.43 214.46 223.58 249.07 374.06 481.42 442.04 389.03

aKansas City prices were chosen as a proxy for Florida cattle prices. Stocker calf prices are for good
and choice grades prior to 1980, and medium frame No. 1 Steer calves thereafter. Price data were for 300-
550 lb. steer calves prior to 1972, and for 400-500 lb. calves thereafter [U.S. Department of Agriculture,
Livestock and Meat Statistics, various issues].
Continued








Table 2.--Estimated cost for pasturing 400 pound steer calves to 588 pounds, December to May, North Florida,
1.25 pounds average daily gain, 1960-1981 (Concluded)

bThe pasture budget calculated on a per acre basis differs from Gunter et al. (1979) rye-ryegrass-
clover budget by the costs of clover seed. We assume removing clover from the budget does not affect fer-
tilizer needs. Time series or indices on components of the 1979 budget were used to calculate pasture cost
for the 20 year period.
CTime series of Florida and Georgia fourth and first quarter corn prices were used. Prices were listed
on a per bushel basis [U.S. Department of Agriculture. Agricultural Prices, various issues].
dFrom time series of Florida and Georgia first and fourth quarter hay prices received by farmers. This
can be justified by noting that producers would either grow their own hay, where cost is an opportunity
cost, or buy directly from other producers. Prices were listed on a per ton basis [U.S. Department of
Agriculture. Agricultural Prices, various issues].
eDeath loss costs are calculated as 1 percent of the price of the stocker calf.
fMedication, minerals, salt, and growth stimulant costs were indexed from the 1979 base year using an
estimated cost of $4.00 per head and a production index of Agricultural Chemicals [U.S. Department of
Agriculture. Agricultural Prices, Annual Summary, 1981].
gFuel, maintenance, and repairs. Costs were indexed from the 1979 base year, and an estimated cost of
$6.00 per head using the Fuels and Energy Index [U.S. Department of Agriculture. Agricultural Prices,
Annual Summary, 1981].
hInterest was calculated on the cash costs which included the stocker calf, pasture, corn or hay, death
loss, medication, etc., and fuel and repairs. Interest was added on to get the total cash costs. Interest
was calculated for 5 months, using the Production Credit Associations average cost of loans, 1960-1980, and
for 1981, a 15 percent interest rate was used [U.S. Department of Agriculture. Agricultural Statistics,
1981, 1972].
iProcurement costs included an order buying fee of 1/2 percent of the purchase price and transportation
costs for a 50 mile haul based on the 1978 base year price of $0.55 per head and indexed using a Fuels and
Energy Index [U.S. Department of Agriculture. Agricultural Prices, various issues].
3Marketing charges were assumed to be 1 /2 percent of the sale price to cover the auction charge.
kTransportation costs to market were indexed from the 1978 base year price of $0.80 per head and
adjusted annually using a Fuels and Energy Index [U.S. Department of Agriculture. Agricultural Prices].
Overhead costs include depreciation, interest on investment, taxes, insurance, etc. A base price of
$2.00 per head in 1979 was used with a production index (all commodities) to adjust annually [U.S. Depart-
ment of Agriculture. Agricultural Statistics, 1981, 1972].











corn is substituted for hay whenever the former is cheaper. After
adjusting for dry matter content of the two feeds, the digestible energy
requirement met by the quantity of hay in the 1979 budget is translated
to the amount of corn required by the budget shown. The relative prices
of the required amounts of the two inputs determine whether hay or corn
is used.


Death Loss, Medication, Salt, Minerals and Growth Stimulants


The death loss is estimated at 1 percent of the 400 pound stocker
calf price. It is assumed that this expense occurs at the beginning of
the period. Other cash expenses include veterinary and medication, salt
and minerals, and a growth stimulant. Costs for these items are esti-
mated at $4.00 per head in 1979 and adjusted annually for the other
years, using an index for prices paid by farmers.


Fuel, Maintenance and Repairs


Costs for fuel, maintenance and repairs, for both the cultivation
of winter pasture and for the winter feeding period, are calculated.
Estimated costs in 1979 are $6.00 per head. This cost is adjusted
annually for other years using a fuel index (U.S. Dept. of Agriculture).


Interest


Interest is calculated on all the'cash costs incurred by a producer
with home grown calves. Cash costs are totaled, and interest is cal-
culated for the five month period based on the actual Production Credit

Association average cost of loans for each year in the analysis. This
cost is then added to the cash cost which is shown -as the total cash


costs.











corn is substituted for hay whenever the former is cheaper. After
adjusting for dry matter content of the two feeds, the digestible energy
requirement met by the quantity of hay in the 1979 budget is translated
to the amount of corn required by the budget shown. The relative prices
of the required amounts of the two inputs determine whether hay or corn
is used.


Death Loss, Medication, Salt, Minerals and Growth Stimulants


The death loss is estimated at 1 percent of the 400 pound stocker
calf price. It is assumed that this expense occurs at the beginning of
the period. Other cash expenses include veterinary and medication, salt
and minerals, and a growth stimulant. Costs for these items are esti-
mated at $4.00 per head in 1979 and adjusted annually for the other
years, using an index for prices paid by farmers.


Fuel, Maintenance and Repairs


Costs for fuel, maintenance and repairs, for both the cultivation
of winter pasture and for the winter feeding period, are calculated.
Estimated costs in 1979 are $6.00 per head. This cost is adjusted
annually for other years using a fuel index (U.S. Dept. of Agriculture).


Interest


Interest is calculated on all the'cash costs incurred by a producer
with home grown calves. Cash costs are totaled, and interest is cal-
culated for the five month period based on the actual Production Credit

Association average cost of loans for each year in the analysis. This
cost is then added to the cash cost which is shown -as the total cash


costs.











corn is substituted for hay whenever the former is cheaper. After
adjusting for dry matter content of the two feeds, the digestible energy
requirement met by the quantity of hay in the 1979 budget is translated
to the amount of corn required by the budget shown. The relative prices
of the required amounts of the two inputs determine whether hay or corn
is used.


Death Loss, Medication, Salt, Minerals and Growth Stimulants


The death loss is estimated at 1 percent of the 400 pound stocker
calf price. It is assumed that this expense occurs at the beginning of
the period. Other cash expenses include veterinary and medication, salt
and minerals, and a growth stimulant. Costs for these items are esti-
mated at $4.00 per head in 1979 and adjusted annually for the other
years, using an index for prices paid by farmers.


Fuel, Maintenance and Repairs


Costs for fuel, maintenance and repairs, for both the cultivation
of winter pasture and for the winter feeding period, are calculated.
Estimated costs in 1979 are $6.00 per head. This cost is adjusted
annually for other years using a fuel index (U.S. Dept. of Agriculture).


Interest


Interest is calculated on all the'cash costs incurred by a producer
with home grown calves. Cash costs are totaled, and interest is cal-
culated for the five month period based on the actual Production Credit

Association average cost of loans for each year in the analysis. This
cost is then added to the cash cost which is shown -as the total cash


costs.












Procurement, Marketing, Shrink, Transportation, and Overhead Costs


Procurement, marketing and transportation costs are also cash
costs, but they are not always applicable to all producers. A farmer
with home grown calves would not incur procurement costs nor is it
likely that a producer would incur an auction marketing charge or trans-
portation cost if the cattle were sold directly from the farm. Cattle
sold directly off the farm may incur a pencil shrink, which is a weight
discount agreement between buyer and seller. In the analysis a 3 per-
cent shrink is calculated on the 588 pound steers, resulting in a sale
weight of 570 pounds, thus reflecting equivalent sale value for pro-
ducers selling either direct or through an auction barn.
Procurement costs are estimated for producers who purchase
calves. These costs include an order buyer fee of 0.5 percent of the
purchase price, and transportation costs for a 50 mile haul. A cost for
shrinkage is not considered relevant on the purchase price due to the
short haul. Shrinkage costs are usually incurred by the seller if
animals are bought directly, and if bought through an auction barn, most
of the shrinkage has already occurred by the time of purchase.
A marketing charge of 1.5 percent of the total receipts is calcu-
lated for producers who sell calves that they have backgrounded through
an auction barn. This charge is constant for all years and the amount
differed among years based upon the price received.
Transportation costs for a 50 mile haul are calculated both at the
time of purchase and at sale time following the backgrounding period.
Costs in 1978 were $0.55 per head at time of purchase, and $0.80 per
head when sold (Holt et al., 1978). These costs are adjusted annually,
using a fuel index to reflect the change in transportation costs over
the 22 year period.
Depreciation, taxes, insurance, and interest on the facilities and
equipment used in the enterprise are included as overhead costs.








COSTS AND RETURNS


Cost per Pound of Gain


Table 3 summarizes the estimated net returns of a backgrounding
program in North Florida. Total costs are obtained from Table 2 and
include both cash and non-cash costs. Cost per pound of gain is calcul-
ated using total cash costs, less price, and dividing by the 170 pound
gain.


Total Receipts


Total receipts reflect the value a producer would receive when
marketing his animals. Second quarter Kansas City prices for 600-700
pound medium frame No. I steers are used.1,2 The price received at sale

time is the observed price the following spring after purchasing calves
in the fall. Thus, if calves are purchased in the fall of 1981, the
price received is based on the second quarter price in 1982 when the
same calves are actually marketed. Per head prices over the 1961 to
1982 period are shown in Table 3.


Net Returns


In the analysis, no charge for land, management, and labor is
included; thus net returns, as shown in Table 3, represent returns to
land, management, and labor. This value reflects the net return that a
producer would earn for backgrounding calves using his land resources,
time and labor, and management skills.





1Kansas City prices are used because the Florida price time series
for both classes of feeder cattle possess gaps.

2Choice grade prices are used prior to 1980 when the feeder cattle
grading system changed.








COSTS AND RETURNS


Cost per Pound of Gain


Table 3 summarizes the estimated net returns of a backgrounding
program in North Florida. Total costs are obtained from Table 2 and
include both cash and non-cash costs. Cost per pound of gain is calcul-
ated using total cash costs, less price, and dividing by the 170 pound
gain.


Total Receipts


Total receipts reflect the value a producer would receive when
marketing his animals. Second quarter Kansas City prices for 600-700
pound medium frame No. I steers are used.1,2 The price received at sale

time is the observed price the following spring after purchasing calves
in the fall. Thus, if calves are purchased in the fall of 1981, the
price received is based on the second quarter price in 1982 when the
same calves are actually marketed. Per head prices over the 1961 to
1982 period are shown in Table 3.


Net Returns


In the analysis, no charge for land, management, and labor is
included; thus net returns, as shown in Table 3, represent returns to
land, management, and labor. This value reflects the net return that a
producer would earn for backgrounding calves using his land resources,
time and labor, and management skills.





1Kansas City prices are used because the Florida price time series
for both classes of feeder cattle possess gaps.

2Choice grade prices are used prior to 1980 when the feeder cattle
grading system changed.








COSTS AND RETURNS


Cost per Pound of Gain


Table 3 summarizes the estimated net returns of a backgrounding
program in North Florida. Total costs are obtained from Table 2 and
include both cash and non-cash costs. Cost per pound of gain is calcul-
ated using total cash costs, less price, and dividing by the 170 pound
gain.


Total Receipts


Total receipts reflect the value a producer would receive when
marketing his animals. Second quarter Kansas City prices for 600-700
pound medium frame No. I steers are used.1,2 The price received at sale

time is the observed price the following spring after purchasing calves
in the fall. Thus, if calves are purchased in the fall of 1981, the
price received is based on the second quarter price in 1982 when the
same calves are actually marketed. Per head prices over the 1961 to
1982 period are shown in Table 3.


Net Returns


In the analysis, no charge for land, management, and labor is
included; thus net returns, as shown in Table 3, represent returns to
land, management, and labor. This value reflects the net return that a
producer would earn for backgrounding calves using his land resources,
time and labor, and management skills.





1Kansas City prices are used because the Florida price time series
for both classes of feeder cattle possess gaps.

2Choice grade prices are used prior to 1980 when the feeder cattle
grading system changed.








COSTS AND RETURNS


Cost per Pound of Gain


Table 3 summarizes the estimated net returns of a backgrounding
program in North Florida. Total costs are obtained from Table 2 and
include both cash and non-cash costs. Cost per pound of gain is calcul-
ated using total cash costs, less price, and dividing by the 170 pound
gain.


Total Receipts


Total receipts reflect the value a producer would receive when
marketing his animals. Second quarter Kansas City prices for 600-700
pound medium frame No. I steers are used.1,2 The price received at sale

time is the observed price the following spring after purchasing calves
in the fall. Thus, if calves are purchased in the fall of 1981, the
price received is based on the second quarter price in 1982 when the
same calves are actually marketed. Per head prices over the 1961 to
1982 period are shown in Table 3.


Net Returns


In the analysis, no charge for land, management, and labor is
included; thus net returns, as shown in Table 3, represent returns to
land, management, and labor. This value reflects the net return that a
producer would earn for backgrounding calves using his land resources,
time and labor, and management skills.





1Kansas City prices are used because the Florida price time series
for both classes of feeder cattle possess gaps.

2Choice grade prices are used prior to 1980 when the feeder cattle
grading system changed.














Table 3.--Summary of estimated costs and returns for pasturing 400 pound steer calves to 588 pounds, December to May,
North Florida, 1.25 pounds average daily gain, 1960-61 to 1981-82


Cost item


Quantity


Total costs

Cost per pound
of gain

Total receiptsa

Return to land, labor
and management

Labor chargeb 2 hrs

Net return to land
and management


1960- 1961- 1962- 1963- 1964- 1965- 1966- 1967-
1961 1962 1963 1964 1965 1966 1967 1968

- - - -Dollar cost per head -

140.77 146.31 157.28 143.72 125.98 139.61 156.30 156.25


0.18

149.51


0.18 0.18 0.18 0.18 0.18 0.19

150.42 150.08 125.46 141.93 160.17 153.44


8.74 4.11

1.68 1.72


-7.20 -18.26

1.76 1.82


15.95

1.84


20.56

1.94


-2.86

2.10


7.06 2.39 -8.96 -20.08 14.11 18.62 -4.96


0.20

165.76


9.51

2.32


1968- 1969-
1969 1970



163.33 182.05


0.20 0.20

196.76 199.39


33.43 17.34

2.46 2.70


1970-
1971



191.52


0.21

196.65


5.13

2.90


7.19 30.97 14.64 2.23

Continued


I


I


~


- I ---~-~-----











Table 3.--Summary of estimated costs and returns for pasturing 400 pound steer calves to 588 pounds, December to May,
North Florida, 1.25 pounds average daily gain, 1960-61 to 1981-82 (Concluded)

1971- 1972- 1973- 1974- 1975- 1976- 1977- 1978- 1979- 1980- 1981-
Cost item Quantity 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982

- - - - Dollar Cost per Head - - - - -
Total costs 203.89 241.30 288.85 175.43 214.46 223.58 249.07 374.06 481.42 442.04 389.03

Cost per pound
of gain 0.22 0.23 0.26 0.29 0.38 0.36 0.37 0.41 0.48 0.55 0.61

Total receipts 229.71 306.32 226.86 197.62 250.17 234.27 330.16 494.42 401.45 402.42 378.94

Return to land, labor
and management 25.82 65.02 -61.99 22.19 35.71 10.69 81.09 120.36 -79.97 -39.62 -10.09

Laborb 2 hrs 3.04 3.22 3.50 3.88 4.34 4.74 5.48 6.00 6.48 6.48 6.57

Net return to land
and management 22.78 61.80 -65.49 18.31 31.37 5.95 75.61 114.36 -86.45 -46.10 -16.66

aActual receipts represent the price received for a 570 lb. steer calf which includes a 3 percent shrink based on
second quarter Kansas City prices for 600-700 lb. medium frame No. 1 feeder steers (MF1) [U.S. Department of
Agriculture. Livestock and Meat Statistics, various issues].
bLabor costs were indexed from the 1979 base year. The index was a national farm wage rate index [U.S. Department
of Agriculture. Agricultural Prices].








On the other hand, if labor is hired, or an opportunity cost can be
attached to his time, labor can be treated as an expense. In the anal-
ysis, a two hour labor charge is deducted leaving a residual return to
land and management. It should be noted that the net returns computed
include procurement costs, marketing charges, and transportation
costs. These expenses may not be incurred by a producer with home-grown
calves. Thus the net returns may be greater than those shown in Table 3
for producers who retain ownership of their own calves for backgrounding
purposes.


CONCLUDING REMARKS


This study provides a summary of the costs and returns from over-
wintering feeder cattle in North Florida for the 22 year period 1960-
1982. A budget is presented for a backgrounding period which lasts from
December 1 to May 1. A separate budget to estimate the cost of growing
one acre of rye-ryegrass pasture for pasturing 400 pound steer calves to
588 pounds, with an average daily gain of 1.25 pounds, is included.
The average net return to land, management, and labor over the 22
year period for backgrounding a calf is $11.62 per head. This repre-
sents the net return to a producer for land, management, and labor that
he has put into the enterprise. When a charge for labor is included,
the average net return to land and management is $8.13 per head.
This study indicates that there is great variation in net
returns. The standard deviation of return to land, management, and
labor over the study period is $43.35 per head. The coefficient of
variation3 is quite large at 3.73. These statistics imply that a cattle
producer could expect that, with a probability of 95 percent, net return
per head would lie between $-75.08 and $98.32.4 The two most profitable





3Coefficient of variation is the standard deviation divided by the
mean.

4Assuming net returns are approximately normally distributed.









years are 1978-79 ($120.36) and 1977-78 ($81.09). The most unprofitable
year is 1979-dU ($-79.97), the year following the most profitable
year. The second most unprofitable year is 1973-74 ($-61.99), the
period of the great collapse of the cattle market after price controls
were removed from retail beef.
The single largest item affecting net returns is the margin between
the purchase price and the sale price. Even small variations in the
purchase or sale prices can have a great impact on the profit margins
and net return.
The increased cost of other inputs in the last decade has also
increased the volatility of net returns. Spiraling energy costs after
1973 have increased fertilizer costs greatly, thereby increasing the
production cost of improved winter pasture. Higher fuel costs have also
increased production and transportation costs. Higher interest rates
since 1979 have also increased the cost of borrowed capital. These
higher input, prices have increased estimated cost per pound gain from
$0.23 in 1972-73 to $0.61 in 1981-82, an increase of 265 percent.





REFERENCES


Gunter, D., J. Holt, J. Simpson, and G. Westberry. 1979. "Florida Beef
Systems: Management and Marketing Options." Food and Resource
Econ. Dept., Univ. of Fla., Gainesville.

Holt, J., D. Gunter, and Jim Simpson. 1978. "Florida Beef Systems:
Management and Marketing Options." Food and Resource Econ. Dept.,
Univ. of Fla.

Simpson, J., and F.S. Baker, Jr. Structural and Operational
Characteristics of the Florida Cattle Feeding Industry. Univ. of
Fla. Coop. Ext. Svc. Cir. 493.

U.S. Dept. of Agriculture. 1960-1982. Agricultural Prices.

1981, 1972. Agricultural Statistics. Washington, D.C.


. 1960-1982. Livestock and Meat Statistics.




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