Benchmarking Your Herd to Improve Profitability
March 2017
Benchmarking your herd can be an important tool to look at your cost and revenues compared to other beef producers. Producers can look at where their expenses are high compared to other similar cow/calf producers. Benchmarking can give you better feedback the more similar the operation. Once you have identified your high costs category or reduced revenues, form a strategy to overcome the challenge.
Questions that you might ask yourself are:
- Can I change price?
- Can I change quantity? (i.e. pounds)
- If I change quantity, will it increase costs?
The following tables represent Nebraska and South Dakota feed costs per cow taken from 34 farms in 2015.
Remember the simple equation for profit equals total revenue minus total costs. When we look at costs, feed costs are the largest costs that we deal with (Table 1).
| Top 35% Profit | Avg. all Farms | Bottom 20% Profit | $ Difference | % Difference | |
|---|---|---|---|---|---|
| Pasture Costs | $181.71 | $232.31 | $236.38 | -$54.67 | 30% |
| Protein & Minerals | $30.35 | $29.41 | $2.00 | +$28.35 | 93% |
| Hay, Alfalfa & Grass | $113.31 | $165.33 | $151.69 | -$38.38 | 34% |
| Other Feeds | $64.43 | $80.96 | $138.01 | -$73.58 | 114% |
| Total Feed Costs | $389.80 | $508.01 | $528.08 | -$138.28 | 35% |
Other costs that have significance for beef cow/calf operations are repairs, veterinary expenses, breeding fees, and total direct expenses (Table 2).
| Top 35% Profit | Avg. all Farms | Bottom 20% Profit | $ Difference | % Difference | |
|---|---|---|---|---|---|
| Veterinary Expenses | $18.87 | $31.02 | $38.58 | -$19.71 | 104% |
| Breeding Fees | $8.19 | $9.17 | $9.91 | -$1.72 | 21% |
| Repairs | $46.69 | $57.04 | $119.13 | -$72.44 | 155% |
| Total Direct Costs | $528.63 | $672.09 | $829.36 | -$300.73 | 57% |
| Return Over Direct Expenses | $220.45 | $162.32 | -$133.15 | +$353.60 | 160% |
Overhead expenses can also have an effect on profitability. These would include building and machinery depreciation, hired labor, property taxes, farm insurance, interest and miscellaneous (Table 3).
| Top 35% Profit | Avg. all Farms | Bottom 20% Profit | $ Difference | % Difference | |
|---|---|---|---|---|---|
| Hired Labor | $2.45 | $14.67 | $26.40 | -$23.95 | 977% |
| Property Taxes | $10.24 | $14.89 | $38.62 | -$28.38 | 277% |
| Farm Insurance | $8.77 | $15.26 | $28.25 | -$19.48 | 222% |
| Interest | $11.88 | $20.49 | $55.67 | -$43.79 | 368% |
| Depreciation | $40.49 | $60.00 | $115.60 | -$75.11 | 186% |
| Total Overhead Expenses | $109.14 | $151.94 | $297.87 | -$188.73 | 173% |
| Total Dir. & Overhead Expenses | $637.11 | $824.03 | $1127.22 | -$490.11 | 77% |
Table 4 contains cost of production per hundred weight (cwt) of calf produced as well as some of the production parameters for the different profitability groups.
| Top 35% Profit | Avg. all Farms | Bottom 20% Profit | Difference | % Difference | |
|---|---|---|---|---|---|
| Total Direct Expenses per Unit | $79.18 cwt | $114.89 cwt | $125.36 cwt | -$46.18 cwt | 58% |
| Total Direct & Overhead Expenses | $95.53 cwt | $140.87 cwt | $170.38 cwt | $74.85 cwt | 78% |
| With Labor & Management | $175.73 | $183.05 | $222.15 | $46.42 cwt | 26% |
| Labor Hours per Unit | 3.92 | 4.73 | 7.23 | -3.31 | 7.23% |
| Avg. Wt. Beef Calves Sold | 628 lbs | 624 lbs | 598 lbs | -30 lbs | 4.78% |
| Culling % | 12.8% | 15.4% | 32.3% | -19.5% | 152% |
| Lbs Weaned per Exposed Female | 471 lbs | 473 lbs | 510 lbs | 39 lbs | 8.28% |
| Avg. Price per Cwt | $204.43 cwt | $214.86 cwt | $202.35 cwt | -$1.98 cwt | 1% |
| Cull Sales | $188.87 | $231.32 | $520.86 | +$331.99 | 176% |
| Gross Margin | $749.08 | $834.41 | $696.21 | -$52.87 | 7.06% |
| Replacement Costs | $72.64 | $130.33 | $191.78 | -$119.14 | 164% |
Cost control is the key to profitability of a cow/calf operation. In some cases you may want to spend more; an example would be protein and minerals. The low profit producers spent the least amount in this area. The cow’s nutrient requirements must be met in order for adequate reproductive performance. The low profitability group had a higher culling rate. Notice the high profitability producers spent less on most costs and received a higher price per hundred weight than the low profitability producers.
This data was generated from the FINBIN data at the University of Minnesota. If you are interested in collecting data for your operation, the Nebraska Farm Business, Inc. is looking for more beef herds to enroll. They may be reached by phone at (402) 464-6324. You may also calculate your cost using the Cow-Calf Cost Cow-Q-Lator.
Reference
Randy Saner, Nebraska Extension Educator
University of Nebraska–Lincoln
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