By Scott Clawson, Oklahoma State University Extension

Cattle prices in 2023 and 2024 have ranged from good to great, depending on whether you see the glass half empty or half full. Adding to this, feed grains have been getting progressively cheaper since the start of 2023.  And finally, Oklahoma has put together two productive hay seasons back-to-back. Cheaper feed and hay along with strong calf and cull prices all pave the way for some profitable years (keeping our fingers crossed that the drought conditions are short lived). Yet as I have traveled to talk to livestock groups across the state, it hasn’t felt as rosy as one would have thought. A phrase I hear repeatedly is that it costs more to do business than it ever has. That is something we can all agree on; it seems to cost more to do everything these days. If we subtract these earlier mentioned issues from the profit math, that leaves overhead expenses as a likely culprit for the less than rosy outlook.    

Overhead has been explained in many ways. I like to describe it as all the things needed to take care of the cattle, that don’t go into the cattle. For example, a bale of hay is not overhead. But all the things it took to get the bale in front of the cow likely is. The tractor, baler, rake, truck, hay bed, repairs, labor, etc. are all part of our overhead expense. Costs that fall into the overhead category tend to not follow a normal “commodity trend.”  More specifically, when we enter drought and hay supplies are already tight, we can expect hay prices to climb. We expect hay prices to stay high until we have a good hay growing season and adequate supply returns. Most overhead items don’t behave like this. They tend to have a slow but steady increase in cost over time, which is corrosive to profit margins. 

Don’t get me wrong, there is a degree of overhead required to care for the cowherd. That will vary among ranches based on goals, labor and resource availability. Minimizing overhead costs is difficult. Just be aware that the decisions made to repair, replace or upgrade these assets will impact profitability for many years. As the cost of items needed to do business continues to increase, be especially diligent in stretching each dollar a little further.