Does Grazing Lower My Cost of Production?

Kenny BurdineUniversity of Kentucky

Economic Nature of the Cow-calf Business

Only sector of livestock market that is not a margin business� Costs, productivity, overall price level

Cyclical in nature� Multi-year periods of profit and loss

Wide range of production costs� Production cost are crucial to

profitability

What does it cost to maintain a cow for

one year?

KY Auction Prices500 to 600 lb steers (Med /Large #1)

70

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140Ja

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1995-2004 2005 2006

Where are the costs? Feed

� Purchased concentrates and hay� Home grown feeds

Non-feed cash costs� Vet, fuel oil, repairs, hired labor, etc

Non-feed non-cash costs� Depreciation, unpaid labor, non-

cash interest

KFBM Records (1996-2003)

NON-FEED CASH, $117.13

FEED, $213.38

NON-FEED NON-CASH, $145.25 30%

45%

25%

Breaking Down Feed Costs

Home grown feed is the single biggest cost for most cow-calf operations!!

Home Grown, $177.38

Purchased Concentrate,

$30.63 Purchased Hay / Other,

$5.38

Home-grown Feed? Hay production

� Seed, fertilizer, labor, machinery, depreciation, and interest

Pasture Maintenance� Renovation, fertilizer, machinery

Both require significant time and financial resources

Hay Production

What is the most economically efficient

forage harvesting machine on your farm?

Hay in the cow-calf operation

Hay is an expensive feed on cost basis Primary winter feed for the cow-calf operation There is always loss / additional costs

associated with feeding hay� Cutting� Harvest� Storage � Feeding� Labor

Hay Production Costs Variable Costs

� Seed, fertilizer, hired labor, etc.

Non-cash costs� Depreciation, Interest, etc.

Operator labor

Hay Dependency(2006 Survey)

87% fed more than 3 rolls of hay per animal during winter

61% fed more than 4 rolls of hay per animal during winter

62% fed hay 120 days or more 82% fed hay 100 days or more

A Basic Cow-Calf Scenario 200 acres Grass / legume hay fed annually 3 ton per acre yield Equipment

� 2 tractors (25%)� 2 wagons (50%)� Mower, rake, tedder, baler (100%)� No truck!!

3 hours of family labor per acre @ $10 / hr.

Hay Production Cost Calculator

Estimates hay production cost User inputs

� All variable costs of production (seed, fertilizer, fuel, hired labor)

� All equipment used in hay enterprise� Other fixed costs

Calculator will estimate hay production costs on a per ton basis

This can be compared to market price of hay in your area

Breaking Down the Costs Variable cost (seed, fert, fuel)

- $141 per acre Family labor (3 hours / acre @ $10 / hr)

-$30 per acre Interest on Investment (6% / yr.)

-$5 per acre Depreciation on Investment

-$16 per acre Variable cost per ton - $46.87 Total cost per ton - $64.07

Hay versus Pasture 1200 lb cow consumes 25 lbs DM

per day through winter (31 lbs hay AFB) (NRC)

= 1.86 tons over 120 days (winter feeding)

At $64.07 per ton, that is a cost of $119 to winter cows on hay

About $0.99 per day

Pasture Maintenance Budget

Annual Pasture Maintenance Budget

EXPECTED COSTS Quantity Unit Price / Unit Freq. of App. Annual CostLime 2 tons $15.00 Every 3 years $10.00Nitrogen 20 lbs $0.55 Annually $11.00Phosphate 30 lbs $0.35 Annually $10.50Potash 50 lbs $0.25 Annually $12.50Legume Seed 12 lbs $3.00 Every 3 years $12.00Herbicide 0 quarts $0.00 Annually $0.00Machinery Charge 1 n / a $5.00 Annually $5.00Other 0 units $0.00 Annually $0.00Other 0 units $0.00 Annually $0.00

TOTAL COST $61.00

University of Kentucky, College of Agriculture, Cooperative Extension Service

Return to Intro Page

Hay versus pasture Assuming renovated pastures

� $61 per acre pasture maintenance� $122 per cow (2 acres per cow)

If we graze 240 days per year:� $0.51 per grazing day, compared to � $0.99 per day on produced hay

Increasing Grazing Days For every grazing month, we save

$14.40 per cow

If we can increase our grazing season by 60 days per year, we save $28.80 per cow

This equates to more than $5 per cwt on a 500 calf!!!

Stockpiling Fescue Common way to increase grazing days Cost per day likely higher than grazing

average, but less than stored feed Key Considerations

� Nitrogen costs� Timing of application� Time forage is unavailable

Cost per day on Stockpiled Fescue

$0.45 $0.50 $0.55

20 : 1

$0.80 $0.89 $0.98

25 : 1

$0.64 $0.71 $0.79

30 : 1

$054 $0.59 $0.65

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Cost per lb of Nitrogen

More Information

Kenny Burdine(859) 257-7273

kburdine@uky.edu

www.uky.edu/ag/agecon/burdine.php

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