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You need to watch the trends in annual cow costs, market prices to stay profitable.
March 17, 2016
There exists a lot of variability around cow-calf maintenance cost estimates. It’s challenging to get precise numbers for any number of reasons (that’s an entire column unto itself). But in the face of expansion, understanding the trends is critical.
Accordingly, this week’s illustration highlights the Livestock Marketing Information Center’s estimated average annual cow costs. Those costs were running around $400 per cow just 15 years ago. However, during the past several years, producer costs have surged sharply higher and now average nearly $900 per head per year. That represents a 225% increase or nearly 5.6% annually in the past 15 years.
While markets have been favorable, costs have also escalated. And therein enters the challenge as larger supplies begin to pressure markets. As such, profitability will likely be dramatically squeezed in the years to come, unless costs decline proportionally. That’s where watching the trend is important.
What’s your cost structure look like? Are these numbers in line with your true costs? How will you adjust to softer markets and lower prices in the years to come? Is there sufficient room in your operation to significantly adjust your cost structure to accommodate lower markets? If not, what will that mean for the pending expansion during the next several years?
Leave your thoughts in the comments section below.
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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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