Tuesday, April 5, 2011

Size and Costs of Beef Cow-Calf Production

Note that the following is a short excerpt from the recent USDA report, "The Diverse Structure and Organization of U.S. Beef Cow-Calf Farms":

The above graph illustrates the relationship between costs of production and size of operation for beef cow-calf operations using data from the 2008 ARMS. Operating, operating plus capital, and total economic costs per cow are highest among the smallest (20-49 cows) producers and lowest among the largest (500 or more cows). Significant economies of size are achieved by moving from the 20-49 cow herd size to the 50-99 cow herd size.

Between the 50-99 and 200-499 herd sizes, operating and operating plus capital costs per cow are much the same for the three size groups. Total economic costs, primarily due to charges for unpaid labor, reveal economies of size across all size groups, and the largest farms (500 cows or more) have significantly lower costs per cow than all other farms. Capital and labor costs are much lower on larger operations because they are able to spread fixed units of these resources over greater production. For example, farms with 20-49 cows reported using 31 hours of labor per cow (29 unpaid hours), compared with 6 hours per cow (2.5 unpaid hours) on farms with 500 or more cows. Even if charges for unpaid labor are omitted from production costs, significant economies of size remain.

Despite this evidence for the existence of economies of size in beef cow-calf production, the dramatic shift to larger operations that occurred in hog and milk production was not evident among beef cow-calf farms. Census of Agriculture data reveal that the number of operations with beef cows dropped 15 percent from 1997 to 2007, but the distribution of farms by herd size changed little. In 1997, 82 percent of farms with beef cows had fewer than 50 cows, compared with 80 percent in 2007. Farms with 500 or more cows increased from 0.6 percent of farms with beef cows in 1997 to 0.8 percent in 2007. The beef cow inventory on farms with 500 or more cows increased from 15 percent of the U.S. total in 1997 to 16 percent in 2007.

Calving and weaning practices used on beef cow-calf operations surveyed in the NAHMS study varied significantly by size of operation. NAHMS data indicate that the largest beef cow-calf operations were more likely to follow a defined calving season than smaller operations. More than three-fourths of farms in the largest size group (200 or more cows) used spring calving, compared with 38 percent of the smallest operations (1-49 cows). The smallest operations were more likely to sell calves at weaning, whereas the largest were more likely to add value to the calves after weaning by backgrounding.

To evaluate the relationship between beef cow-calf farm characteristics, practices, costs, and size of operation, we divided producers surveyed in ARMS into size groups and measured differences in farm structural and financial characteristics among the groups. Beef cow-calf operations were assigned to the following groups based on the reported peak number of beef cows on an operation at any time during 2008: (1) 20-49 cows, (2) 50-99 cows, (3) 100-249 cows, (4) 250-499 cows, and (5) 500 or more cows. Of the 765,000 U.S. beef cow farms reported in the 2007 Census of Agriculture, about 407,000 had less than 20 cows, whereas more than 200,000 had 20-49 cows. Only 5,800 farms, or less than 1 percent, had 500 or more cows.

For much more about Cow-Calf operation statistics go to the source: usda [pdf]