Cost of production for beef cattle is challenging to measure on a farm-by-farm basis, but it is being benchmarked
ASSINIBOIA, Sask. — Financially successful cow-calf producers know their cost of production, but determining that number for an individual farm can be a challenge.
Kathy Larson, research associate at the University of Saskatchewan, said the Canadian Cow-Calf Cost of Production Network launched in 2020 to establish baseline benchmarks across the country and help producers figure out where they might fit.
The network uses Agribenchmark technology developed at Texas A and M University and adopted by countries around the world.
The first set of Canadian data came from 115 producers in early 2021. That information was then used to develop 25 benchmarks associated with different production systems; six of those are in Saskatchewan.
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Larson told the Saskatchewan Stock Growers Association that there is a wide variation in the numbers.
“There is more than $1,000 per cow variation from the lowest cost to the highest cost across Canada,” she said.
The network, which is operated by Canfax Research Services with provincial partners and funding from the Beef Cattle Research Council, works on an enterprise basis and calculates economic profit. That means, it includes cash costs, depreciation and opportunity costs.
Depreciation is based on 10 percent of equipment market value and five percent of the market value of buildings.
While opportunity costs don’t require a cash outlay, they should be part of the equation to put a value to things like unpaid labour, Larson said.
Economic profit will always be lower than accounting profit, she noted.
“If you have an economic profit of zero that’s not a bad thing. That means that your revenues that you’re generating in your operation are enough to cover all your cash costs, your depreciation, as well as money toward paying yourself,” she said.
Across Canada, the data found the average cost of production per cow wintered was $1,124. Sixty-three percent of those costs are cash, 11 percent depreciation and 26 percent opportunity.
In Saskatchewan, cash costs represented 63 percent, while depreciation was nine percent and opportunity costs were 28 percent.
Of the cash costs, variable costs such as feed accounted for 75 percent of the total.
“Depending on where you are (the cost of production is) $830 per cow wintered up to almost $1,900 per cow wintered,” Larson said.
When revenues were plotted against costs, there was also variation in how well the producers were covering their costs.
“There’s over $530 per cow difference in range on the cash cost side,” Larson said. “And then $1,000 a cow difference from the lowest to highest on all costs.”
The data indicated that the average number of winter-feeding days was 200 and most winter feed was hay.
Larson said one way to bring costs in line is to feed test and develop balanced rations.
“That’s one thing you can do to make sure that you’re doing things on a least-cost basis and you’re not wasting nutrients,” she said.
One of the critical opportunity costs to consider is the value of unpaid labour. Producers estimated between 1,500 and 5,000 hours per year looking after their cattle.
Larson said they also suggested a value of between $20 and $25 per hour for that work. The result was an average of $263 per cow wintered for unpaid labour.
The network will update the data from participants every five years. Producers receive $500 for an eight-hour commitment to share their numbers.
Larson said while the benchmarks are useful it would be even better for each producer to know the exact cost of production on that farm.
She noted that the studies she did while at the Western Beef Development Centre haven’t been done for 10 years now.
“I am very aware that we have a gap in our province and it’s something I’d like to see corrected,” she said, adding that a team would be required to do the analysis.
Larson also said Alberta uses one benchmark and results from its 2020 data collection found costs of $994 per cow wintered and $1.86 per pound of calf weaned.
More details and results are available on the Canfax website.
