After attending the recent annual Cattle Fax Outlook Session, there is no mistake that we are back in a 10-year beef cattle cycle. Most importantly, there are a few years still ahead of declining profitability in the cow-calf sector. There will be years ahead that Low Return Producers could lose money on their cow herd, while High Return Producers will likely still be above water.
Low Return Vs. High Return Producers
So, what differentiates Low Return Producers form High Return Producers? Let’s recall a little history with these classifications over the years. At one time these two classes were called Low Cost (input) Producers (thought to be synonymous with high return) and High Cost (input) Producers (thought to be synonymous with low return). Those of us in the Allied Beef Industry, were quick to point out, for example, if one producer invested an extra $45 per head on a nutritional program, that actually returned $100 in value, he/she may be viewed as a Higher Cost Producer, when in fact it was a wise decision, as it increased their average returns per head. Thus, now the emphasis on Low Return versus High Return Producers.
Does spending less work sometimes?
Without a doubt, it is possible to increase your returns on an investment by spending less, but we need to be careful where we cut those dollars. Also, some producers may have quite a bit more debt per cow than others, so they will appear to have a lower return if you factor that debt into the equation.
Where not to cut corners
Still, some management differences (that you can change in any year) do exist between Low Return Producers and High Return Producers. High Return Producers generally do not cut corners on Animal Health Programs, Genetics or on their Nutrition Programs. While the percent of calves weaned slightly favors the High Return Producers, the pounds of calf weaned per cow exposed, greatly favors the High Return Producer. High Return Producers are more efficient, and sometimes that means you need to spend a little more in the right areas, to get a lot more in return.
There’s a slogan that goes, “You cannot starve the profit out of a cow”. As profitability in the cow-calf sector declines in the years ahead, some may choose to test that old slogan. Whether calves are worth $700 or $1,700, spending $45 to get $100 back makes sense, and it probably makes the most sense when calves are worth $700.
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