Costs and Profitability Outlook for 2006 Curt Lacy Extension Economist-Livestock University of Georgia

Costs and Profitability Outlook for 2006

Curt LacyExtension Economist-LivestockUniversity of Georgia

COW-CALF RETURNS AND CATTLE INVENTORY

U.S., Annual

-100

-50

0

50

100

150

1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

$ Per Cow

90

100

110

120

130

140

Mil. Head

Cow-Calf Returns Cattle Inventory Jan 1

C-P-6707/27/05

Department of Agricultural & Applied Economics

Fertilizer Prices – 1997-2005

$0

$50

$100

$150

$200

$250

$300

$350

1997

1998

1999

2000

2001

2002

2003

2004

2005

$/

ton

Nitrogen (AN) Phosphorous (DAP) Potash (Muriate)

A.N. prices have increased 46% since 2002


Impact of Changes in Nitrogen and Potash on Hay Fertilizer Costs Per Acre*

Nitrogen 0.15$ 0.20$ 0.25$ 0.30$ 0.30$ 117.00$ 126.00$ 135.00$ 144.00$ 0.40$ 141.00$ 150.00$ 159.00$ 168.00$ 0.45$ 153.00$ 162.00$ 171.00$ 180.00$ 0.50$ 165.00$ 174.00$ 183.00$ 192.00$ 0.60$ 189.00$ 198.00$ 207.00$ 216.00$

Potash

*Excludes all other costs


Impact of Changes in Nitrogen and Potash on Hay Fertilizer Costs Per Ton*

Nitrogen 3.00 5.00 7.000.30$ 43.80$ 26.28$ 18.77$ 0.40$ 51.80$ 31.08$ 22.20$ 0.45$ 55.80$ 33.48$ 23.91$ 0.50$ 59.80$ 35.88$ 25.63$ 0.60$ 67.80$ 40.68$ 29.06$

Yield (Tons/Acre)



Fuel Prices – 1997-2005

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

1997

1998

1999

2000

2001

2002

2003

2004

2005

$/

Gallo

n

Diesel (bulk)

Diesel prices are up 104% since 2002


Impact of Fuel & Fertilizer Prices on Cost of Production

$20

$30

$40

$50

$60

$70

$80

$90

2002 2005

500# Calf ($/ Cwt.) Hay ($/ ton)


Impact of Fuel Costs on Hay Costs Per Acre*

0

10

20

30

40

50

60

70

80

90

$/

Acr

e

1 2 3

Cuttings/ Year

$1.50 $1.75 $2.00 $2.25 $2.50


Replacement Heifer Development Costs

Item Unit Cost/unit Quantity Item cost

Heifer cwt. 100.00$ 5.5 550.00$

Winter Pasture ac 135.00$ 0.67 90.00$

Coastal Pasture ac 140.00$ 0.67 93.80$

Other Pasture ac -$ 0.67 -$

Hay ton 65.00$ 1.65 107.25$

Feed - Developing Heifer lbs 0.05$ 540 27.00$

Feed - Pregnant Heifer lbs 0.05$ 300 15.00$

Feed - 1st Calf Heifer lbs -$ -$

Other Feed lbs -$ -$

Mineral hd 18.20$ 1 18.20$

Ear Tags hd 2.80$ 1 2.80$

Vet & Med - Vaccinations hd 6.12$ 1 6.12$

Vet & Med - Preg check hd 3.00$ 1 3.00$

Labor hrs 9.00$ 1.5 13.50$

Total Variable Costs hd 926.67$

Interest hd 7.00% 463.34$ 32.43$

Bull Costs hd 19.20$ 1.00$ 19.20$

Non-breeders percent 15.00% 959.10$ 143.87$

Total Costs of Retaining Heifers hd 1,122.17$

Adjustment for cull heifer sales hd 85.00$ 800 102.00$

Total net costs for retaining heifer 1,020.17$

Heifer Development Budget


Replacement Female Considerations

Current economic value = -$218.77 Breakeven purchase price = $801.40 Years to breakeven = 7


Expected Profits and Breakeven Prices

Item Net Returns (Total)

Net Returns

($/weaned Calf)

Breakeven($/Cwt.)

Variable Costs

$6,495.64 $76.42 $85.41

Total Costs -$8,352.60 -$98.27 $116.55


Now What? Where can you increase profits? Increase conception rates Decrease Variable Costs

What is your hay cost Where do you store your hay? Do you have alternative fertilizer sources Legumes Soil ph

Decrease Fixed Costs – Equipment & Females Cull unproductive cows Purchase hay? Custom hiring hay Can you do custom work? Increasing herd size lease cows instead of raising heifers


Good News-Bad News Most cow-calf producers should be able to

cover their cash expenses for the next few years

Cost of production for beef cattle producers has risen considerably in the last 2-3 years

Fuel & fertilizer prices alone have risen from 46%-105%

Many will not be able to cover all expenses Producers should focus on increasing

weaning %, culling unproductive cows and reducing fertilizer and fuel needs

Documents

Costs and Profitability Outlook for 2006 Curt Lacy Extension Economist-Livestock University of Georgia