"The biggest challenge we have in the cattle business is to make money," Swigert said. "I assume most, if not all, cattlemen have the goal of making money. That is just something that us economist assume, is that people want to make money."
The big question is even with high prices for their stock, are cattlemen making as much money as they think they are? According to Swigert, if a producer doesn't know exactly what their input cost is to get that live calf on the ground and to the sale barn, they may not be making as much as they think they are.
"Prices are good," Swigert said. "But, virtually every input price is higher too. One that really sticks out to me, and the ones that you are going to have to really do a good job managing, is with cattle prices going up, the three Fs: fertilizer, fuel and feed."
Increased fertilizer costs are indirectly affecting many pastures, as land managers opt to spend less money treating pastures.
"Fertilizer right now, I am sure hopefully everyone is aware, that we are looking at uria prices in the $600s, or at least it is in southern Oklahoma, it may be cheaper in Texas," he said. "But, if you look at prices, uria is in the $600 per ton range, and you want to use enough to make some hay. I did some calculations a little bit ago on that and that is going to cost you $50 an acre."
And while that may not seem too high, cattlemen producers should be thinking in terms of cost per cow.
"The challenge we have is that you are running a cow to six acres," Swigert explained. "What is that per cow, $300 per cow? So, you either better have some really good calves or figure something out. I don't have the answer, I just know that $300 a cow is problematic. That doesn't leave you very much for other production cost and what you are going to get for your calves."
With some producers having presumably heaver wallets from de-stocking during the drought, some are looking at either purchasing or leasing additional land to let other pastures time to rest. The big question with new land is how fertile is it? Swigert said it is more important than ever to get soil samples when planning on leasing or buying property for livestock to evaluate what will need to be added to optimize fertility and maximize pasture production and quality. The purchaser needs to be sure that the input cost necessary to make the land useful doesn't outweigh their profits.
While fuel costs may not seem key, it factors in the bottomline. Producers use fuel in their tractors as well as in their trucks whether they are harvesting hay, going to feed cattle, check cattle or even just using it around the ranch to check or repair a fence line.
"You need to look at ways to reduce your use of fuel as it relates to the cows," Swigert said. "Cows cannot pay for a lot of fuel. That may mean you are feeding three days a week. That may mean that you are only checking them once a week. That stuff can add up. You have to look at it and put it into the whole picture because, again, you want to make a profit."
Feed costs have been increasing for months. When producers talk about the cost of feed, they are not only thinking about the cost of actual cattle cubes, but minerals and the possibility of having to purchase hay from outside sources. While the cost of hay may be determined by supply and the weather, the cost of cattle cubes and other bagged feed can strongly be determined by the grain markets.
"I would strongly encourage anyone in the cattle market that if you do not have the markets on your phone, that you get them," Swigert said. "It is a way to keep track of where the market is constantly. You can get whatever markets you want to, as long as they are reported by the USDA."
With the 2011 drought many cattlemen found themselves paying more than $100 per bale for round bales to be shipped in order to sustain the cattle that they did not sell. With all of the combined cost, producers may not be making quite the profit they think.
"One of the things that I would encourage you to do, if you don't do it already, is determine your cow cost," Swigert said. "Really, if you don't have your cow cost, if you haven't determined your cow cost for your operation, I would strongly encourage you to do that."
Texas A&M AgriLife Extension as well as the Noble Foundation have programs available to help producers determine cow cost.
"Be sure to know what your cow cost is so that you can know," Swigert said. "The point is, that by determining your cow cost, there may be a way that you can figure to do it cheaper. Getting the best price for your calves at the time is going to be very important."
