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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?

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

  • Wide range of production costs

    • Production cost are crucial to profitability


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


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


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


KFBM Records (1996-2003)

30%

45%

25%


Breaking Down Feed Costs

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


Home-grown Feed?

  • Hay production

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

  • Pasture Maintenance

    • Renovation, fertilizer, machinery

  • Both require significant time and financial resources


Hay Production

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


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


Hay Production Costs

  • Variable Costs

    • Seed, fertilizer, hired labor, etc.

  • Non-cash costs

    • Depreciation, Interest, etc.

  • Operator labor


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


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.


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


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


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


Pasture Maintenance Budget


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


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!!!


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


Cost per day on Stockpiled Fescue

Cost per lb of Nitrogen

Lbs of DM per lb of N


More Information

Kenny Burdine

(859) 257-7273

kburdine@uky.edu

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

-> click on publications


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