Offsetting Annual Cow Production Costs
Alfredo DiCostanzo, UNL Beef Systems Extension Educator
Determining annual cost of production for cow-calf operations is not an easy task. On one hand, certain transactions are sporadic such as herbicide applications or ingredient or supplement purchases. On the other hand, cow-calf operations occur in conjunction with other operations such as row crop or forage farming. This makes it difficult to allocate costs accurately.
One thing is certain, in 2022, costs of operating a cow-calf enterprise will be greater than those of previous years. Low forage availability in owned or rented pastures, low forage yields in hay or corn fields and high feed ingredient prices will result in greater feed costs this year.
Due to these circumstances, and the expectation of better feeder calf prices, a review of the relationship between annual cost of production, calf crop and weaning weight is in order. Annual cost of production in a cow-calf operation is determined by adding all costs associated with feeding, breeding, managing, and preventing disease in the herd and prorated on a breeding (brood) cow basis. Feeding costs would include, but are not limited to, pasture, corn stalk grazing, and feeding of harvested forages in a drylot or pasture, and energy, mineral and/or protein supplements. Feeding costs including grazing pasture or corn stalks average from 50% to 70% of total costs. Overhead expenses (utilities, insurance, interest, taxes, and depreciation) average 20% of total expenses and range from 15% to 23%.
In states like Nebraska demand for feed and forage is high because Nebraska is one of the top two states for cattle on feed and ranks in the top five states for number of cows. High demand for feed and forage drives feed and feeding costs in our state. In addition, property tax rates make Nebraska cow-calf operations also rank high for overhead expenses.
Once a production cycle is completed, from conception to weaning, gross dollars derived from the sale of calves constitute the greatest source of income in a cow-calf operation. Sale of cull cows is driven by proportion of open cows at weaning. Because of timing of sales, the value of open cows is generally low and represents a loss of production capacity while demanding investment in replacements. This leaves weight of all calves sold at weaning, or after backgrounding, as the main source of income for a cow-calf operation.
Weight of all calves sold responds to calves live at weaning and their weight. The former is often referred to as calf crop and is the result of herd fertility and health. The latter is the result of genetics, nutrition, and health. If a herd of 100 cows is found to have 90 of them pregnant but only 80 bring a live calf at weaning, the calf crop for that herd is 80%. If each of the 80 calves brought to the sale at weaning weighs 550 lb, then that herd will sell only 44,000 lb or 440 lb. If the cost of operating that herd is $1,000/cow ($100,000 for the herd), then the price necessary to cover expenses (breakeven) from the sale of calves at weaning is $227.27/cwt.
Two things are apparent from this example, 1) calf crop (reproductive rate and health) dictates the proportion of calves that reaches sale date and 2) at annual cow costs of $1,000 per cow, the operation relies on high feeder calf prices to break even.
Given what we know about calf crop, annual cow cost, and weaning weight, one could determine what the breakeven prices should be for operations of various costs, crop sizes and weights. Setting up annual cow costs ranging from $800 to $1,700/cow, calf crop percentages between 60 and 100, and weaning weights between 500 and 700 lb permitted evaluation of calf prices at or above $200/cwt (prices expected in the near and short-term future).
At low annual cow costs ($800 to $1,000), each percentage change in calf crop affects calf cost $12 (a herd with 80% calf crop requires $125 more per calf to break even than one with 90% calf crop). At moderate annual cow costs ($1,100 to $1,300) each percentage change in calf crop affects calf cost $15. At higher costs ($1,400 to $1,600) this value reaches nearly $20. High-cost operations require high fertility and calf health to retain as large a calf crop at weaning as possible.
Operations with annual cow costs at or below $900/cow can break even at $200/cwt calf price with 80% or greater calf crops weighing 500 lb. On the other hand, operations with annual cow costs above $900 require 600 lb or heavier weaning weights at high calf crops to break even with $200/cwt calf prices.
Because annual cow costs in Nebraska are high, and the possibility of reducing them is slim, increasing total calf weight at sale time is the only way by which cow-calf profitability can be maintained. Focusing on nutrition of the breeding cow, particularly young cows, and on calf health to retain the maximum number of calves from birth to sale is one priority to achieve and maintain high calf crop rates. Also, using genetics for fast pre-weaning growth coupled with optimized nutrition of cows and calves would ensure that weaning weights reach maximum potential to offset annual cow production costs.
USDA Designates Washington County, Nebraska, as Primary Natural Disaster Areas
This Secretarial natural disaster designation allows the United States Department of Agriculture (USDA) Farm Service Agency (FSA) to extend much-needed emergency credit to producers recovering from natural disasters through emergency loans. Emergency loans can be used to meet various recovery needs including the replacement of essential items such as equipment or livestock, reorganization of a farming operation or the refinance of certain debts. FSA will review the loans based on the extent of losses, security available and repayment ability.
According to the U.S. Drought Monitor, these counties suffered from a drought intensity value during the growing season of 1) D2 Drought-Severe for 8 or more consecutive weeks or 2) D3 Drought-Extreme or D4 Drought-Exceptional.
Impacted Area: Nebraska
Triggering Disaster: Drought
Application Deadline: May 26, 2023
Primary Counties Eligible: Washington
Contiguous Counties Also Eligible: Nebraska: Burt, Dodge and Douglas
Iowa: Harrison and Pottawattamie
On farmers.gov, the Disaster Assistance Discovery Tool, Disaster Assistance-at-a-Glance fact sheet, and Farm Loan Discovery Tool can help you determine program or loan options. To file a Notice of Loss or to ask questions about available programs, contact your local USDA Service Center.
USDA Designates Three Iowa Counties as Primary Natural Disaster Areas
This Secretarial natural disaster designation allows the United States Department of Agriculture (USDA) Farm Service Agency (FSA) to extend much-needed emergency credit to producers recovering from natural disasters through emergency loans. Emergency loans can be used to meet various recovery needs including the replacement of essential items such as equipment or livestock, reorganization of a farming operation or the refinance of certain debts. FSA will review the loans based on the extent of losses, security available and repayment ability.
According to the U.S. Drought Monitor, these counties suffered from a drought intensity value during the growing season of 1) D2 Drought-Severe for 8 or more consecutive weeks or 2) D3 Drought-Extreme or D4 Drought-Exceptional.
Impacted Area: Iowa
Triggering Disaster: Drought
Application Deadline: May 26, 2023
Primary Counties Eligible: Harrison, Humboldt and Kossuth
Contiguous Counties Also Eligible:
Iowa: Crawford, Monona, Pottawattamie, Winnebago, Emmet, Palo Alto, Shelby, Wright, Hancock, Pocahontas and Webster
Nebraska: Burt and Washington
Minnesota: Faribault and Martin
On farmers.gov, the Disaster Assistance Discovery Tool, Disaster Assistance-at-a-Glance fact sheet, and Farm Loan Discovery Tool can help you determine program or loan options. To file a Notice of Loss or to ask questions about available programs, contact your local USDA Service Center.
Assistance Available for Nebraska Farmers and Ranchers Impacted by Wildfire
The U.S. Department of Agriculture’s Natural Resources Conservation Service (NRCS) has funding available to assist agricultural producers whose land was impacted by recent wildfires. Landowners have until May 31, 2023, to apply.
Through the Environmental Quality Incentives Program (EQIP) funding is available to help producers plan and implement conservation practices on farms and ranches impacted by natural disasters. EQIP funding is available to assist in this wildfire recovery effort by planting cover crops on impacted cropland and to defer grazing on rangeland.
“Numerous fires have impacted farmers and ranchers across Nebraska leaving ground vulnerable to erosion,” said Rob Lawson, state conservationist for NRCS. “We can assist landowners with installing conservation practices to help prevent any further damage to their agricultural land and aid in the recovery of rangeland productivity and soil health.”
Lawson encourages landowners whose agricultural operations were impacted by wildfire to visit their local NRCS field office.
“NRCS can help with recovery efforts,” Lawson said. “Our staff works one-on-one with landowners to assess the damage and develop approaches that lead to an effective recovery of the land.”
The application signup for this wildfire assistance is happening now and will run through May 31, 2023. Applications will be assessed, and even though some lands may be eligible for assistance, it is not guaranteed that all acres will receive financial assistance due to limited funding.
Interested landowners and operators should contact their local NRCS office in the USDA Service Center for applications and more information.
Funds Available to Help Restore and Protect Rangeland
Through the U.S. Department of Agriculture’s (USDA) Natural Resources Conservation Service (NRCS), Nebraska producers have funding opportunities to help address the spread of invasive woody vegetation on rangeland. Landowners interested in receiving funding should apply at their local NRCS field office by Nov. 18, 2022.
With funding through the Environmental Quality Incentives Program (EQIP), farmers can adopt management practices that help treat the spread of Eastern redcedar trees and other invasive woody vegetation on rangeland.
NRCS is targeting funding to address this natural resource concern through its Nebraska Great Plains Grassland Initiative (GPGI). The initiative is part of the NRCS Working Lands for Wildlife (WLFW) framework to conserve grassland regions in the Great Plains.
Management practices eligible for financial assistance through the GPGI include brush management, prescribed grazing, grazing deferment, prescribed burning, and more. NRCS is focusing this funding on farms and ranches in the Sandhills, Loess Canyons, southwest mixed-grass prairies, and Verdigris-Bazile creek watershed (see map).
The landowner-driven Great Plains Grassland Initiative strives to provide producers the tools necessary to create and maintain grasslands free of Eastern redcedar and other invasive woody species. Additional funding may also be available from partner organizations to help further reduce the cost to producers.
According to NRCS, removing Eastern redcedar at lower densities before they take over the rangeland is more cost-effective for the producer, conserves and restores forage production, reduces wildfire risk, and protects wildlife habitat.
Jeff Nichols, state rangeland management specialist for NRCS Nebraska said, “Nearly eight million acres of Nebraska’s most intact grasslands are estimated to be at risk to future woody encroachment. This is bad news for the ranchers. In 2019 more than 419,000 tons of range production was lost in Nebraska to woody encroachment.
“Woody plant encroachment puts pressure on working rangelands by decreasing livestock production and increasing wildfire risk as well as harming grasslands and the animals living there.”
Individuals interested in applying for conservation funds may do so at any time, but applications need to be submitted by Nov. 18 to be considered for this year’s funding.
For more information about conservation programs and other assistance available, call your local NRCS field office or visit www.ne.nrcs.usda.gov.
NE Corn Board to Meet
The Nebraska Corn Board will hold its next meeting November 21 - 22, 2022, at The Cornhusker Marriott, 333 South 13th Street in Lincoln, Nebraska. The Nebraska Corn Board will undertake strategic planning with the Nebraska Corn Growers Association on the afternoon of November 21 through the morning of November 22. The board will then address regular board business on the afternoon of November 22.
The meeting is open to the public and will provide an opportunity for public discussion. A copy of the agenda is available by writing to the Nebraska Corn Board, 245 Fallbrook Blvd. Suite 204, Lincoln, NE 68521, sending an email to renee.tichota@nebraska.gov or by calling 402-471-2676.
Introductory RUSLE2 Soil Loss and Iowa Phosphorus Workshop Planned in December
A Dec. 13 workshop will provide an opportunity for producers to learn more about the Revised Universal Soil Loss Equation 2 (RUSLE2), as well as the Iowa Phosphorus Index. The workshop will be held in Altoona and is a collaborative effort between the Iowa Department of Natural Resources, the United States Department of Agriculture and Iowa State University Extension and Outreach. Registration is $200, and a Windows compatible computer with a USB port and Microsoft Excel Software is required.
The RUSLE2 equation is a tool stakeholders can use to calculate soil loss for a given field and is necessary for determining the Iowa Phosphorus Index.
The morning portion of the workshop will focus on installing software programs, performing dominant critical area determinations, and operating RUSLE2. The afternoon session will include discussions on ephemeral gully and classical gully erosion and the Iowa Phosphorus Index, which can be used in IDNR manure management plans and open feedlot nutrient management plans.
The workshop will be taught by Kapil Arora, field agricultural engineer with Iowa State University Extension and Outreach; Dan Andersen, associate professor of agricultural and biosystems engineering and extension agriculture engineering specialist at Iowa State University; Don Carrington, United States Department of Agriculture-NRCS and Jeremy Klatt, Iowa Department of Natural Resources.
This workshop qualifies for 6 Certified Crop Advisor (CCA) Credits (5SW, 1NM) and 3 Professional Development Hours (PDH). Participation certificates will be provided upon completion of the workshop.
Registration will be limited to 30 participants and is $200 before Dec. 8, and $225 thereafter. The workshop will be held at the ISU Extension and Outreach Polk County Office, located at 1625 Adventureland Drive, Suite A, Altoona.
Lunch and refreshments are included in registration fees, as well as workshop materials. To register, visit https://go.iastate.edu/YOLBPR. For more information, contact Kapil Arora at pbtiger@iastate.edu or view the brochure at https://iastate.app.box.com/s/umoj2ugjiinzkwmdlnt1exefgh1dazz5.
AMS Announces Plans to Amend the U.S. Standards for Soybeans
The U.S. Department of Agriculture (USDA) Agricultural Marketing Service (AMS) today announced that the Federal Grain and Inspection Service (FGIS) will publish a proposed rule seeking public comment on a proposal to make changes to the U.S. Standards for Soybeans.
Under the authority of the U.S. Grain Standards Act (USGSA), USDA established the soybean standards to help in the marketing of soybeans. “Soybeans of Other Colors” (SBOC) has served as a grading factor for determining soybean quality. USDA has recently received numerous requests from representatives of US soybean producers and grain traders to remove SBOC, as a grade-determining factor for describing the quality for soybeans (e.g., U.S. No 1 Yellow soybeans, U.S. No. 2 Yellow Soybeans, etc.).
In response to these requests for changes to the soybean standard, USDA will implement notice and comment rulemaking, as required by USGSA, to receive comments from the public regarding whether SBOC should be considered an informational factor that does not impact soybean grade determinations.
Historically, SBOC levels are low, rarely impacting the grade of soybeans. For the past two years, the soybean industry has experienced an increased presence of SBOC. At the request of the Grain Inspection Advisory Committee (GIAC), FGIS conducted a study to evaluate whether the presence of SBOC had an impact on the quality of soybean protein and oil. The study found no significant differences in official protein or oil content. The study is available for review on the AMS-FGIS SBOC resource page.
DMC Pays Again in September
NMPF Newsletter
The September margin under the Dairy Margin Coverage program was $8.62/cwt, up by $0.54/cwt from the August margin and generating a payment of $0.88/cwt for Tier 1 coverage at the $9.50/cwt level under the program.
The September U.S. average all-milk price rose $0.10/cwt from August. The DMC feed cost formula produced a $0.45/cwt lower feed cost for the month, due almost entirely to lower soybean meal and corn prices (numbers don’t add exactly due to rounding).
Together, the September payment and the August one for $1.42/cwt will return more to producers enrolled for $9.50.cwt Tier 1 coverage than their annual premium payments. Current forecasts indicate that, of the remaining three months in 2022, additional margin coverage payments are most likely to occur in December.
USDA’s Farm Service Agency opened enrollment for both calendar year 2023 DMC and for Supplemental DMC on Oct. 17. The deadline to enroll is Dec. 9, 2022.
October CWT-Assisted Dairy Export Sales Totaled 5.1 Million Pounds
CWT member cooperatives secured 39 contracts in October, adding five million pounds of American-type cheeses and 77,000 pounds of cream cheese to CWT-assisted sales in 2022. In milk equivalent, this is equal to 47 million pounds of milk on a milkfat basis. These products will go to customers in Asia, Central America, Europe and Middle East-North Africa, and will be shipped from October through April 2022.
CWT-assisted 2022 dairy product sales contracts year-to-date total 86.1 million pounds of American-type cheese, 657,000 pounds of butter, 7.6 million pounds of cream cheese and 30.3 million pounds of whole milk powder. This brings the total milk equivalent for the year to 1.090 billion pounds on a milkfat basis.
Exporting dairy products is critical to the viability of dairy farmers and their cooperatives across the country. Whether or not a cooperative is actively engaged in exporting cheese, butter, anhydrous milkfat, cream cheese, or whole milk powder, moving products into world markets is essential. CWT provides a means to move domestic dairy products to overseas markets by helping to overcome U.S. dairy’s trade disadvantages.
MERCARIS COMMODITY OUTLOOK: Volatility to Persist as Markets Adjust to Shifting Trade, Acreage and Prices
The 2022/23 marketing year is expected to be another period of volatile prices for U.S. organic markets. Following two years of increasing prices, the U.S. organic soybean harvest is expected to set records during Fall 2022. The result of this occurrence is expected to be bearish price pressure for organic soybeans into the first half of 2022/23 and a significant reduction in imports over the second half of the marketing year as discussed in the Fall 2022 Mercaris Commodity Outlook.
While organic soybean prices are expected to fluctuate, organic corn looks to remain steady for the foreseeable future.
“We estimated 2022/23 began with large carryover stocks of organic corn. However, U.S. organic corn production is expected to decline this fall, largely offsetting these carryover stocks and keeping prices supported through harvest,” says Ryan Koory, Vice President of Economics with Mercaris. “Furthermore, the outlook for U.S. organic corn imports is expected to be bullish for prices as supply issues in Argentina, Canada and the Black Sea region reduce U.S. imports of organic whole and cracked corn. As a result, Mercaris anticipates bullish support for U.S. organic corn prices will persist through the Spring 2023 and into the fall.”
Improving organic spring wheat yields over 2022 are expected to add to total U.S. organic wheat supplies. Despite this improvement, 2022/23 production is expected to remain below 2020/21 levels, keeping supplies generally tight and bullish support under prices. Additionally, growing conditions for much of the U.S. High Plains have remained dry through 2022 leading to mixed wheat quality, elevated protein levels and an uncertain 2023/24 organic winter wheat crop outlook.
“With bullish price expectations for organic corn as well as organic wheat and an outlook of weaker prices for organic soybeans, Mercaris projects Spring 2023 will see an oscillation of U.S. organic acreage away from organic soybeans,” says Koory. “Mercaris projects U.S. organic soybean area could decline by as much as 25 percent over 2023/24. Half of these acres are expected to rotate into organic corn with organic spring wheat area expanding slightly as well.”
With these acreage shifts and import expectations, Mercaris projects prices for organic corn and wheat will move lower over the last half of 2023, while organic soybean prices find support. However, this outlook is heavily dependent upon no additional trade disruptions developing over the coming year and U.S. weather patterns facilitating more typical growing conditions.
The information above is summarized from the Fall 2022 Mercaris Commodity Outlook. To find more details and information on other organic and non-GMO markets, visit www.mercaris.com.
2023 Commodity Classic Offers Wide Range of Unique Tours in Orlando Area
Attendees at the 2023 Commodity Classic in Orlando can make their experience even more memorable by signing up for one or more of the fascinating, family-friendly tours available during the event. These optional tours provide the opportunity to discover more about the history, attractions, and culture of the Orlando area — and this year’s tour schedule is packed with local delights:
Learn how NASA supports agriculture from space to seeds on the NASA Agricultural Tour
A Day at the Beach offers sandy beaches, fresh seafood, and the unique shops of New Smyrna Beach
Enjoy an oyster tasting and the craft of oyster farming on the Indian River Oyster Company Paddle Tour
Your journey awaits at the Kennedy Space Center Tour, Florida’s gateway to space
Look for manatees, cypress forests, and alligators on the Blue Spring State Park St. Johns River Cruise
A tour to Beck Citrus Farm and Southern Hill Farm showcases Florida’s unique agricultural landscape; FREE to Commodity Classic attendees on a first-come basis. This tour is sponsored by The Mosaic Company and The Nature Conservancy.
Commodity Classic is also offering special pricing on tickets to favorite Orlando-area theme parks such as Walt Disney World®, SeaWorld®, and Universal® Orlando. Optional tours and local attractions are a great way for families to make the most of their time in Orlando and to have one-of-a-kind experiences that can’t be found anywhere else.
Visit CommodityClassic.com for complete details, theme park tickets, and to register for Orlando tours. Theme park tickets and tour fees vary and are not included with convention registration.
Tours may also be reserved via phone at 504-524-0188. Space is limited and tours are available on a first-come basis. The deadline to pre-register for tours is Monday, February 6, 2023. Tour registrations are refundable only if canceled by that date. Onsite registration in Orlando will be accommodated subject to space availability.
Established in 1996, Commodity Classic is presented annually by the American Soybean Association, National Corn Growers Association, National Association of Wheat Growers, National Sorghum Producers, and the Association of Equipment Manufacturers.
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