Wednesday, March 16, 2011

Adjusting Today's Prices

Nearly everyone is happy about record high cattle prices. A lot of investors are looking at cattle as a "good investment" right now. However when you really look at input costs, you are receiving less for calves today than you were in the late 1970's

In 1979, I worked for a rancher who sold his calves for $125cwt. At the time, a new four wheel drive pickup was about $10,000 and a "high paid" cowboy made $500 a month and beef. Day work was expensive at $50 a day. Hay was roughly $45 a ton and gas was well under $2 per gallon.

Today's calves are bringing roughly $58 per cwt more, less than a 50% increase. Many cowboys are now starting out at $1,500 a month, or three times higher. Day labor has doubled at $100 a day. That four wheel drive pickup now costs $40,000, or four times as much. Hay costs over a $100 a ton (more than double) and gas is getting close to $4 a gallon and in many places, diesel is already over $4 a gallon (again, doubled). This does not take into account not only higher land prices, but higher property taxes as well. This means, after figuring input costs, your cattle are actually worth less than they were in 1979. If cattle were even keeping up with labor costs, today's calves should be bringing $3.75 cwt.

I can think of a number of things that 90% of cattle operations today could do to lower input costs. Most of these ranches could do to increase stocking capacity and the total pounds of cattle shipped from their ranch while lowering input costs. What are you doing to increase the efficiency of your cattle operation without increasing your input costs?

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