This fact sheet is intended to be a guide used to make production decisions, determine potential returns, and prepare business and marketing plans

Curtis, Kynda

Knudsen, Trevor

DigitalCommons@USU

1   December 2016                                                                                                        AppliedEconomics/2016-03pr  Northern Utah Grass-Fed Beef Production Costs and Returns, 2016  Kynda Curtis, Professor and Extension Specialist, Department of Applied Economics Trevor Knudsen, Graduate Research Assistant, Department of Applied Economics   Introduction Sample costs and returns to raise grass-fed beef cattle for direct-to-consumer sales on small- scale operations in Northern Utah are presented in this publication. This publication is intended to be a guide used to make production decisions, determine potential returns, and prepare business and marketing plans. The practices described are not the recommendations of Utah State University, but rather the production practices and materials considered typical as determined by 2016 producer survey results. Costs, materials, and practices are not applicable to all situations as management and production practices vary among ranchers in the region.   Ranch Description Ranch The representative ranch consists of 5 acres of land leased annually at $1,100/acre (Realtor.com, 2016). The ranch leases an additional 10 acres of improved pasture land for weaned calf grazing from April to December at $200/head (Neibergs and Nelson, 2009).  Livestock  The livestock inventory consists of 12 cows and one bull. The weaned calf crop is 10, of which 5 are steers and 5 are heifers (92% calving rate and 9% death loss). Fall calving (mid-October) is practiced on the ranch. Calves are weaned in the spring and are put on improved pasture in mid-April at approximately 450 pounds. Calves (8) are slaughtered and prepared for customers in late December at a final live weight of 950 pounds along with two cull breeding cows of 1,200 pounds each. Two of the heifer calves are retained and placed with breeding stock.   Production Practices Feed The forage base for the ranch consists of spring, summer, and fall grazing (April to November) on federal land/leased pasture for breeding livestock at $150/head annually (Neibergs and Nelson, 2009). Winter feed (December to March) for breeding livestock and calves consists of alfalfa and grass hay at $288/head annually ($120/ton premium alfalfa; USDA-AMS, 2016a), where calves consume on average at a 25% calf to cow ratio. Weaned calves are fed on improved pasture from April to December at a rate of $200/head. Alfalfa pasture provides an ADG of 2 pounds per calf (Ringwall, 2012). Salt and mineral supplements are provided during the year at $250/ton.  Veterinary/Medical  Total annual veterinary costs for breeding and weaned livestock are $35 per head (Neibergs and Nelson, 2009).   Marketing  Calves are marketed through direct market channels such as farmers markets, CSA programs, and individual ranch websites. Cull animals are marketed through wholesale channels. Annual marketing costs including website development, market fees, and transportation costs are calculated at $100 per animal sold.  2  Labor  Labor includes one owner/manager who is paid out of net returns to the operation.  Livestock Pricing  Livestock pricing for grass-fed beef sold through direct markets averaged $550/cwt for a dressed steer or heifer (USDA-AMS, 2016). As dressed weight is 63% (iGrow, 2013) of live weight at slaughter, a dressed weight of 600 pounds was used to calculate the $3.60/pound live animal price for calves (see Table 1). Grass-fed cull cows were valued at $2,400 each or $2.00/pound wholesale in 2016 (USDA-AMSb, 2016). Registered Angus bulls sold for $3,500 on average in 2016 (RanchWorldAds, 2016). All livestock is sold live and any processing fees would need to be paid by the buyer or added to the costs provided.  Ranch Investments Cash Overhead  Cash overhead consists of various cash expenses paid out during the year. These costs include property taxes, interest, office expenses, liability and property insurance, accounting/legal costs, as well as investment/machinery repairs (see Table 2).        Property Taxes. Property taxes in Utah differ across counties. For the purposes of this publication, property taxes on buildings are calculated at 1 percent of the average asset value of the property.  Property taxes on land should be taken into consideration, but are not included here.  Insurance. Insurance on ranch investments vary, depending on the assets included and the amount of coverage. Property insurance provides coverage for property loss at .666 percent of the average asset value. Liability and crop insurance covers accidents and crop loss on the 5-acre ranch at an annual cost of $250.    Fuel and Lube. The fuel and lube for machinery and vehicles is estimated at $2,000 annually for the 5-acre ranch.      Maintenance. Annual repairs on all ranch investments or capital recovery items that require maintenance are calculated at 2 percent of the average asset value for buildings, improvements, and equipment and 7 percent of the average asset value for machinery and vehicles.   Office & Travel. Office and travel costs are estimated at $1,000 for an average year for the 5-acre ranch. These expenses include office supplies ($200), telephone/internet service ($600), and educational workshops ($200).   Accounting & Legal. Annual accounting and legal costs are estimated at $450 for an average year for the 5-acre ranch (Cook Martin Poulson, P.C., 2016).  Interest on Retained Livestock. Annual costs of retaining breeding livestock are calculated at 5% of the animal’s sales value. Pasture-fed breeding heifers in 2016 were valued at $2,400 each wholesale (USDA-AMS, 2016b). Two of the ten heifers are replaced annually and bulls every 5 years.    Capital Recovery  Capital recovery costs are the annual depreciation (opportunity cost) of all ranch investments. Capital recovery costs are calculated using straight line depreciation. All equipment listed is new unless otherwise noted. For used machinery, the price is calculated as one-half of the new purchase price and useful life is two-thirds that of new machinery (Painter, 2011). The pasture feeding equipment required, as well as costs and useful life, were taken from Neibergs and Nelson (2009).  Salvage Value  Salvage value is 10 percent of the purchase price for equipment and machinery, which is an estimate of the remaining value of an investment at the end of its useful life. The salvage value for bulls is one-half the purchase price.   Average Asset Value Computation  Purchase Price + Salvage Value( )2  Straight Line Depreciation Computation  Purchase Price - Salvage Value( )Useful Life   References Cook Martin Poulson, P.C. 2016. Personal communication. 10 October 2016. iGrow (SDSU Extension). 2013. How Much Meat Can You Expect from a Fed Steer? Online at: http://igrow.org/livestock/beef/how-much-meat-can-you-expect-from-a-fed-steer/. 3  Neibergs, J.S. and D.D. Nelson. 2009. Estimated Costs and Returns for a 150-head Cow-Calf to Grass-finished Beef Production System in the Channelled Scablands Range Area of East-Central Washington, 2008. Washington State University Extension Farm Business Management Report EM010. Online at: http://pubs.wsu.edu/ItemDetail.aspx?ProductID=14007 Painter, K. 2011. The Costs of Owning and Operating Farm Machinery in the Pacific Northwest: 2011. A Pacific Northwest Publication #346. Online at: http://www.cals.uidaho.edu/edComm/pdf/PNW/PNW0346/PNW0346.html. RanchWorldAds. 2016. Cattle for Sale, Utah. Online at: http://www.ranchworldads.com/cattle-for-sale/utah.php. Realtor.com. 2016. Land for Sale/Lease, Tremonton, Utah. Online at: http://www.realtor.com/realestateandhomes-search/Tremonton_UT/type-land. Ringwall, K. 2012. BeefTalk: 2 Pounds of Average Daily Gain Equals Grass Beef. Online at: https://www.ag.ndsu.edu/news/columns/beeftalk/beeftalk-2-pounds-of-average-daily-gain-equals-grass-beef USDA-AMS. 2016a. National Hay, Feed & Seed Weekly Summary, October 14, 2016. Online at: https://www.ams.usda.gov/mnreports/lswfeedseed.pdf. USDA-AMS. 2016b. National Monthly Grass Fed Beef Report, November 25, 2016. Online at:  https://www.ams.usda.gov/mnreports/lsmngfbeef.pdf.  __________________________________________________________________________________  Utah State University is committed to providing an environment free from harassment and other forms of illegal discrimination based on race, color, religion, sex, national origin, age (40 and older), disability, and veteran’s status. USU’s policy also prohibits discrimination on the basis of sexual orientation in employment and academic related practices and decisions. Utah State University employees and students cannot, because of race, color, religion, sex, national origin, age, disability, or veteran’s status, refuse to hire; discharge; promote; demote; terminate; discriminate in compensation; or discriminate regarding terms, privileges, or conditions of employment, against any person otherwise qualified. Employees and students also cannot discriminate in the classroom, residence halls, or in on/off campus, USU-sponsored events and activities. This publication is issued in furtherance of Cooperative Extension work, acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture, Kenneth L. White, Vice President for Extension and Agriculture, Utah State University.                         4  Table 1. Northern Utah Grass-Fed Beef Production Costs and Returns, 10 Head   Description Weight Per AnimalUnit of MeasureTotal Units Price/Cost Per Unit  Total Value  Value/Cost Per Head Sold GROSS INCOMECull Cows 1200.00 Pounds 2.00 2.00$         4,800.00$     2,400.00$     Cull Bulls 1500.00 Pounds 0.00 -$           -$             -$             Heifer Calves 950.00 Pounds 3.00 3.60$         10,260.00$   3,420.00$     Steer Calves 950.00 Pounds 5.00 3.60$         17,100.00$   3,420.00$     TOTAL INCOME 32,160.00$   3,216.00$     OPERATING COSTSImproved Pasture April to December: Weaned Calves Head 10.00 200.00$      2,000.00$     200.00$        Summer Pasture/Range April to November: Breeding Livestock Head 13.00 150.00$      1,950.00$     195.00$        Winter Feed (Alfalfa) November to March Head 15.50 288.00$      4,464.00$     446.40$        Land Lease Acre 5.00 1,100.00$   5,500.00$     550.00$        Veterinary/Medical Head 23.00 35.00$       805.00$       80.50$         Marketing Head 10.00 100.00$      1,000.00$     100.00$        Salt & Minerals Ton 1.00 250.00$      250.00$       25.00$         Maintenance Annual 1.00 954.25$      954.25$       95.43$         Fuel & Lube Annual 1.00 2,000.00$   2,000.00$     200.00$        Utilities Annual 1.00 500.00$      500.00$       50.00$         Miscellaneous Head 23.00 5.00$         115.00$       11.50$         TOTAL OPERATING COSTS 19,538.25$   1,953.83$     INCOME ABOVE OPERATING COSTS 12,621.75$   1,262.18$     OWNERSHIP COSTSCapital Recovery (Depreciation):     Buildings, Improvements, & Equipment Annual 1.00 780.00$      780.00$       78.00$              Machinery & Vehicles Annual 1.00 2,055.00$   2,055.00$     205.50$             Purchased Livestock (Bulls) Annual 1.00 350.00$      350.00$       35.00$         Cash Overhead:    Liability Insurance Annual 1.00 250.00$      250.00$       25.00$             Office & Travel Annual 1.00 1,000.00$   1,000.00$     100.00$            Accounting & Legal Fees Annual 1.00 450.00$      450.00$       45.00$             Interest on Retained Livestock Annual 1.00 1,200.00$   1,200.00$     120.00$            Annual Investment Insurance Annual 1.00 120.88$      120.88$       12.09$             Annual Investment Taxes Annual 1.00 -$           -$             -$             TOTAL OWNERSHIP COSTS 6,205.88$     620.59$        TOTAL COSTS 25,744.13$   2,574.41$     NET PROJECTED RETURNS 6,415.87$     641.59$        5  Table 2. Ranch Investment Summary    DescriptionPurchase PriceLivestock Share (%)Revised Purchase PriceUseful Life (yrs)Salvage ValueAnnual Capital RecoveryAnnual InsuranceAnnual TaxesAnnual RepairsBuildings, Improvements, & EquipmentPortable Fencing 2,500.00$      100% 2,500.00$      15 250.00$        150.00$     9.16$        -$             27.50$       Portable Corrals/Chutes 6,000.00$      100% 6,000.00$      15 600.00$        360.00$     21.98$      -$             66.00$       Watering Facilities 2,000.00$      100% 2,000.00$      10 200.00$        180.00$     7.33$        -$             22.00$       Tools/Equipment 1,000.00$      100% 1,000.00$      10 100.00$        90.00$       3.66$        -$             11.00$       Sub Total 11,500.00$    NA 11,500.00$    NA 1,150.00$     780.00$     42.12$      -$             126.50$     Machinery & VehiclesCase Skip Loader (used) 20,000.00$    10% 2,000.00$      10 200.00$        180.00$     7.33$        -$             77.00$       3/4 Ton Pickup 40,000.00$    10% 4,000.00$      8 400.00$        450.00$     14.65$      -$             154.00$     Livestock Trailer (used) 10,000.00$    100% 10,000.00$    10 1,000.00$     900.00$     36.63$      -$             385.00$     Flatbed Trailer (used) 5,000.00$      100% 5,000.00$      10 500.00$        450.00$     18.32$      -$             192.50$     4-Wheeler (used) 5,000.00$      10% 500.00$         6 50.00$          75.00$       1.83$        -$             19.25$       Sub Total 80,000.00$    NA 21,500.00$    NA 2,150.00$     2,055.00$ 78.75$      -$             827.75$     Purchased LivestockBulls (1) 3,500.00$      100% 3,500.00$      5 1,750.00$     350.00$     -$          -$             -$           Sub Total 3,500.00$      NA 3,500.00$      NA 1,750.00$     350.00$     -$          -$             -$           Total 95,000.00$    NA NA 5,050.00$     3,185.00$ 120.88$    -$             954.25$     Retained Livestock (interest only)Heifers (10) 24,000.00$    100% 24,000.00$    NA 24,000.00$   1,200.00$  -$          -$             -$           Total 24,000.00$    -$              1,200.00$  -$          -$             -$           6  Table 3. Total Ranch Income and Net Returns by Sales Price    Price Per Pound (Live Weight)  Total Ranch Income  Income Per Head Sold  Total Ranch Net Returns 2.80$          26,080.00$      2,608.00$    335.87$         3.00$          27,600.00$      2,760.00$    1,855.87$      3.20$          29,120.00$      2,912.00$    3,375.87$      3.40$          30,640.00$      3,064.00$    4,895.87$      3.60$          32,160.00$      3,216.00$    6,415.87$      3.80$          33,680.00$      3,368.00$    7,935.87$      4.00$          35,200.00$      3,520.00$    9,455.87$      4.20$          36,720.00$      3,672.00$    10,975.87$    4.40$          38,240.00$      3,824.00$    12,495.87$    4.60$          39,760.00$      3,976.00$    14,015.87$    4.80$          41,280.00$      4,128.00$    15,535.87$    

Northern Utah Grass-Fed Beef Production Costs and Returns, 2016

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Northern Utah Grass-Fed Beef Production Costs and Returns, 2016

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