Cow costs have increased about $260 per cow since 2007 while land values increased $320 per acre. That’s roughly a $1-to-$1 run over time.

Nevil Speer

May 17, 2018

2 Min Read
Cow costs and pasture values

Last week’s Industry At A Glance zeroed in on historical cow-calf returns. Ignoring the anomalies of 2013-2015, the average annual return since 1990 is approximately $30 per head. The Livestock Marketing Information Center (LMIC) in Denver, Colo., is currently estimating an average of about $15 per cow over the course of 2018.  

And as noted last week, there’s huge variation across operations. Nevertheless, the underlying premise is that large returns are hard to come by in the cow-calf business. In other words, cash flow is often tight for many cow-calf enterprises.  

That said, for many operations the primary source of wealth (not cash flow) is the general rise of land values over time. That fact underscores the importance of the inheritance tax – another issue for another day.

With all that in mind, this week’s illustration provides an overview of recent land values (per USDA) and operating cow costs (per LMIC). The data are reflective of the post ethanol era mandate.  

There are many potential interpretations around the data. However, it’s important to remember that land values do play an important role in the overall economic assessment of an operation.  


May-2018-LMIC-land-prices.png

But interestingly enough, cow costs have increased about $260 per cow since 2007. Simultaneously, land values have increased $320 per acre. That’s roughly a $1-to-$1 run over time. Conversely, cow costs represented about 53% of pasture value in 2007; that’s since jumped to 60%.  

Related:Industry At A Glance: Land Prices Continue To Pressure Cattle Production

How do you perceive the data? Is land value keeping up with cow costs? Or are cow costs outrunning land values? Do you keep a watch on general land values when it comes to assessing how you manage your costs year over year? Leave your thoughts in the comments section below.

Speer serves as an industry consultant and is based in Bowling Green, Ky. Contact him at [email protected]

About the Author(s)

Nevil Speer

Nevil Speer serves as an industry consultant and is based in Bowling Green, KY.

Nevil Speer has extensive experience and involvement with the livestock and food industry including various service and consultation projects spanning such issues as market competition, business and economic implications of agroterrorism, animal identification, assessment of price risk and market volatility on the producer segment, and usage of antibiotics in animal agriculture.
 
Dr. Speer writes about many aspects regarding agriculture and the food industry with regular contribution to BEEF and Feedstuffs.  He’s also written several influential industry white papers dealing with issues such as changing business dynamics in the beef complex, producer decision-making, and country-of-origin labeling.
 
He serves as a member of the Board of Directors for the National Institute for Animal Agriculture.
 
Dr. Speer holds both a PhD in Animal Science and a Master’s degree in Business Administration.

Contact him at [email protected].

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