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Does Grazing Lower My Cost of Production?. Kenny Burdine University of Kentucky. Economic Nature of the Cow-calf Business. Only sector of livestock market that is not a margin business Costs, productivity, overall price level Cyclical in nature Multi-year periods of profit and loss

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Does Grazing Lower My Cost of Production?

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Does grazing lower my cost of production l.jpg

Does Grazing Lower My Cost of Production?

Kenny Burdine

University of Kentucky


Economic nature of the cow calf business l.jpg

Economic Nature of the Cow-calf Business

  • Only sector of livestock market that is not a margin business

    • Costs, productivity, overall price level

  • Cyclical in nature

    • Multi-year periods of profit and loss

  • Wide range of production costs

    • Production cost are crucial to profitability


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What does it cost to maintain a cow for one year?


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KY Auction Prices500 to 600 lb steers (Med /Large #1)


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Where are the costs?

  • Feed

    • Purchased concentrates and hay

    • Home grown feeds

  • Non-feed cash costs

    • Vet, fuel oil, repairs, hired labor, etc

  • Non-feed non-cash costs

    • Depreciation, unpaid labor, non-cash interest


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KFBM Records (1996-2003)

30%

45%

25%


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Breaking Down Feed Costs

Home grown feed is the single biggest cost for most cow-calf operations!!


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Home-grown Feed?

  • Hay production

    • Seed, fertilizer, labor, machinery, depreciation, and interest

  • Pasture Maintenance

    • Renovation, fertilizer, machinery

  • Both require significant time and financial resources


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Hay Production

What is the most economically efficient forage harvesting machine on your farm?


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Hay in the cow-calf operation

  • Hay is an expensive feed on cost basis

  • Primary winter feed for the cow-calf operation

  • There is always loss / additional costs associated with feeding hay

    • Cutting

    • Harvest

    • Storage

    • Feeding

    • Labor


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Hay Production Costs

  • Variable Costs

    • Seed, fertilizer, hired labor, etc.

  • Non-cash costs

    • Depreciation, Interest, etc.

  • Operator labor


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Hay Dependency(2006 Survey)

  • 87% fed more than 3 rolls of hay per animal during winter

  • 61% fed more than 4 rolls of hay per animal during winter

  • 62% fed hay 120 days or more

  • 82% fed hay 100 days or more


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A Basic Cow-Calf Scenario

  • 200 acres Grass / legume hay fed annually

  • 3 ton per acre yield

  • Equipment

    • 2 tractors (25%)

    • 2 wagons (50%)

    • Mower, rake, tedder, baler (100%)

    • No truck!!

  • 3 hours of family labor per acre @ $10 / hr.


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Hay Production Cost Calculator

  • Estimates hay production cost

  • User inputs

    • All variable costs of production (seed, fertilizer, fuel, hired labor)

    • All equipment used in hay enterprise

    • Other fixed costs

  • Calculator will estimate hay production costs on a per ton basis

  • This can be compared to market price of hay in your area


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Breaking Down the Costs

  • Variable cost (seed, fert, fuel)

    - $141 per acre

  • Family labor (3 hours / acre @ $10 / hr)

    -$30 per acre

  • Interest on Investment (6% / yr.)

    -$5 per acre

  • Depreciation on Investment

    -$16 per acre

  • Variable cost per ton - $46.87

  • Total cost per ton - $64.07


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Hay versus Pasture

  • 1200 lb cow consumes 25 lbs DM per day through winter (31 lbs hay AFB) (NRC)

    = 1.86 tons over 120 days (winter feeding)

  • At $64.07 per ton, that is a cost of $119 to winter cows on hay

  • About $0.99 per day


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Pasture Maintenance Budget


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Hay versus pasture

  • Assuming renovated pastures

    • $61 per acre pasture maintenance

    • $122 per cow (2 acres per cow)

  • If we graze 240 days per year:

    • $0.51 per grazing day, compared to

    • $0.99 per day on produced hay


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Increasing Grazing Days

  • For every grazing month, we save $14.40 per cow

  • If we can increase our grazing season by 60 days per year, we save $28.80 per cow

  • This equates to more than $5 per cwt on a 500 calf!!!


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Stockpiling Fescue

  • Common way to increase grazing days

  • Cost per day likely higher than grazing average, but less than stored feed

  • Key Considerations

    • Nitrogen costs

    • Timing of application

    • Time forage is unavailable


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Cost per day on Stockpiled Fescue

Cost per lb of Nitrogen

Lbs of DM per lb of N


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More Information

Kenny Burdine

(859) 257-7273

kburdine@uky.edu

www.uky.edu/ag/agecon/burdine.php

-> click on publications


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