What is the “best” way to evaluate profitability of an enterprise, more specifically feeding cattle? The most common approach is to look at the enterprise through an accounting lens; value of cattle sold minus the purchase price and total feeding costs equals profit or loss.
That approach works well to evaluate returns on a pen basis or to examine the impact of marketing or production decisions. However, most cattle feeders in South Dakota and the Upper Midwest also grow corn and use feedlot cattle to add value to home-raised feeds. In those cases what is the best way to evaluate how cattle feeding fits into the entire farming business?
Dr. Alfredo DiCostanzo presented some interesting data on how cattle feeding fits into an integrated crop-livestock operation at the 2018 Northern States Beef Conference held in Watertown, SD in December 2018. Using historical closeouts from an industry database, he determined the net value of corn grain as cattle feed. He derived that value by subtracting all non-corn costs from cattle sales and added back the net value of cattle manure to meet phosphorus needs. He then compared those values on a corn feed value per acre basis to the FINBIN (Center for Farm Financial Management, Univ. of MN) return over direct costs for corn production on owned land.
The net returns for the two different scenarios over the last 19 years are shown in Figure 1. Over that period the average return over direct costs per acre for corn marketed through cattle was $173 compared to $108 for cash corn. Those values do not include any efficiencies that might be gained by early harvest of high moisture corn, reduced drying costs, or reduced handling/shrink of the corn crop.
Source: sdstate.edu
Photo Credit: gettyimages-luc-pouliot
Categories: South Dakota, Crops, Corn, Livestock, Beef Cattle, Dairy Cattle