Critical Control Points for Profitability in the Cow-Calf Enterprise

Abstract

Financial, economic, and biological data from cow-calf producers participating in the Illinois and Iowa Standardized Performance Analysis programs were analyzed. Data were collected from 1996 to 1999; each herd-year represented one observation. The database consisted of 225 commercial herd observations (117 Iowa; 108 Illinois) and ranged from 20 to 373 cows. Analyses were conducted on financial and economic costs of production. Each observation was analyzed as the difference from the mean for that given year to eliminate environmental and cattle cycle effects. The dependent variable used as an indicator of profit was return to unpaid labor and management per cow (RLM). Independent variables were feed, operating, depreciation, capital, hired labor costs, calf weight, calf price, cull weight, cull price, weaning percentage, calving distribution, herd size, and investment. Family labor was used in the economic analysis. All financial factors analyzed were correlated to RLM (P<0.10) except cull weight and cull price. All economic factors analyzed were correlated to RLM (P<0.10) except calf weight, cull weight, and cull price. A financial prediction equation using eight variables accounted for 82% of the variation among farms. For both economic and financial analyses, feed cost accounted for over 50% of the variation among farms. In the financial regression model, depreciation cost was the second critical factor accounting for 9% of variation in RLM followed by operating cost (5%). Calf weight was the fourth indicator of RLM in the financial model (5%). Cost factors accounted for more variation in RLM than production, reproduction, or producer-controlled marketing factors. Feed cost was the most critical control point, as it accounted for 50% of the variation in profit among the herds.