Attention beef cattle producers: Noble Foundation agricultural economist Steve Swigert has a question for you – how do you compare with your competitors?

No, he's not talking about chicken or pork producers, he's talking about the other cow-calf producers in your area, in your state, in the United States and even in foreign countries. These all are your competitors, striving to produce cattle more valuable in the market and at a lower cost.

"As we head into a lower cattle market, operations that produce heavier, higher-quality and healthier cattle will have an advantage in the market," Swigert says.

These traits are valuable when the market is very good – as it has been in the last couple of years – but they will be especially important as supplies of cattle increase and buyers have more cattle to choose from. "Another factor that will drive this value is your documentation of these traits and performance," Swigert says. "This information will be needed, will have a value to the subsequent owner of your cattle and may allow you to participate in some type of marketing alliance in the future."

Swigert adds that it will be equally important to evaluate all of operating costs. "You might not be the lowest-cost producer, but you need to make sure each dollar spent is appropriate, and you are getting a good return for each of those dollars," he says "Because, ultimately, your cows have to pay all of your costs, or they come out of your pocket."

Figure 1 shows the average returns to cow-calf producers in the last couple of years have been more than $100/cow. Notice the average returns in 1994 through 1996 averaged about -$50/cow. While there might not be a return to the prices that generated those negative returns, it is possible. What is more important to note is that the high-return producers were profitable in 23 out of the last 25 years. It is equally important to note that the low-return producers were only profitable a couple of years out of the last 25.

How do producers determine where they stand? By calculating their operation's profitability using basic financial tools – first, by developing a cash accounting system using a tool such as Quicken or Quickbooks to provide income and expense information as the basic data for preparing financial statements and to meet tax reporting needs.

However, information prepared for tax purposes does not measure the profitability of a business. Additional information from a balance sheet/financial statement and a depreciation schedule must be added to determine profitability.

This information should be addressed in each operation. Too many operations have only had tax-based information from which to make decisions – or no information at all.

"If you are not comfortable in the preparation of this information, get some assistance," Swigert says. If the Noble Foundation's Ag Division can be of any help, please call the Ag Helpline at (580) 224-6500.

Steve Swigert is an agricultural economist in the Agricultural Division of the Noble Foundation.

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	Figure (pdf, 240k):
	Figure cutline:	Average Cow-Calf Returns 1980-2007 (Cattle-Fax)

News Release Issued: May 3, 2006

The Samuel Roberts Noble Foundation, Inc. (www.noble.org), headquartered in Ardmore, Okla., is a nonprofit organization conducting agricultural, forage improvement and plant biology research; assisting farmers and ranchers through educational and consultative agricultural programs; and providing grants to nonprofit charitable, educational and health organizations.