November 20, 2018
The Kansas Farm Management Association (KFMA) is one of the largest farm management association programs in the country. Data derived from KFMA is very useful with respect to benchmarking and trends within the beef industry. Many of the participants represent mostly mid-size (including both diversified and full-time) operations and possess a long-standing track record enabling meaningful comparisons over time.
This week’s illustration outlines annual cow costs (both direct and indirect costs) from KFMA categorized by profit segments: low third, middle third and top third, respectively. The graph highlights differences among those groups, but also the cost trends within each group over time.
Focusing on cow costs, the 2017 analysis reveals that cow-calf operators in the top third profit group had annual cow costs of $944 versus the bottom third group that spent $1,206 per cow – a difference of $262 per cow. Also interesting to note, the top third segment has been able to contain or limit the inevitable increase in annual costs more effectively over time.
What’s especially important here, KFMA emphasizes production and selling price obviously impact profit – but the largest component in segmenting the differences among these groups are differences in cow costs. That is, the most significant difference among the groups isn’t an advantage/disadvantage in terms of weaning weight or marketing rate or selling price, etc. Rather, the overwhelming driver toward determining the bottom-line – year-in, year-out – revolves around an enterprise’s cost structure.
How do your cow costs compare to those outlined from the KFMA data? What are you biggest concerns or focus areas to reduce costs going forward? Leave your thoughts in the comments section below.
Nevil Speer serves as an industry consultant and is based in Bowling Green, KY. Contact him at [email protected].
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