Does Grazing Lower My Cost of Production?

1. Does Grazing Lower My Cost of Production? Kenny Burdine University of Kentucky

2. Economic Nature of the Cow-calf Business • Only sector of livestock market that is not a margin business • Costs, productivity, overall price level • Cyclical in nature • Multi-year periods of profit and loss • Wide range of production costs • Production cost are crucial to profitability

3. What does it cost to maintain a cow for one year?

4. KY Auction Prices500 to 600 lb steers (Med /Large #1)

5. Where are the costs? • Feed • Purchased concentrates and hay • Home grown feeds • Non-feed cash costs • Vet, fuel oil, repairs, hired labor, etc • Non-feed non-cash costs • Depreciation, unpaid labor, non-cash interest

6. KFBM Records (1996-2003) 30% 45% 25%

7. Breaking Down Feed Costs Home grown feed is the single biggest cost for most cow-calf operations!!

8. Home-grown Feed? • Hay production • Seed, fertilizer, labor, machinery, depreciation, and interest • Pasture Maintenance • Renovation, fertilizer, machinery • Both require significant time and financial resources

9. Hay Production What is the most economically efficient forage harvesting machine on your farm?

10. Hay in the cow-calf operation • Hay is an expensive feed on cost basis • Primary winter feed for the cow-calf operation • There is always loss / additional costs associated with feeding hay • Cutting • Harvest • Storage • Feeding • Labor

11. Hay Production Costs • Variable Costs • Seed, fertilizer, hired labor, etc. • Non-cash costs • Depreciation, Interest, etc. • Operator labor

12. Hay Dependency(2006 Survey) • 87% fed more than 3 rolls of hay per animal during winter • 61% fed more than 4 rolls of hay per animal during winter • 62% fed hay 120 days or more • 82% fed hay 100 days or more

13. A Basic Cow-Calf Scenario • 200 acres Grass / legume hay fed annually • 3 ton per acre yield • Equipment • 2 tractors (25%) • 2 wagons (50%) • Mower, rake, tedder, baler (100%) • No truck!! • 3 hours of family labor per acre @ $10 / hr.

14. Hay Production Cost Calculator • Estimates hay production cost • User inputs • All variable costs of production (seed, fertilizer, fuel, hired labor) • All equipment used in hay enterprise • Other fixed costs • Calculator will estimate hay production costs on a per ton basis • This can be compared to market price of hay in your area

15. Breaking Down the Costs • Variable cost (seed, fert, fuel) - $141 per acre • Family labor (3 hours / acre @ $10 / hr) -$30 per acre • Interest on Investment (6% / yr.) -$5 per acre • Depreciation on Investment -$16 per acre • Variable cost per ton - $46.87 • Total cost per ton - $64.07

16. Hay versus Pasture • 1200 lb cow consumes 25 lbs DM per day through winter (31 lbs hay AFB) (NRC) = 1.86 tons over 120 days (winter feeding) • At $64.07 per ton, that is a cost of $119 to winter cows on hay • About $0.99 per day

17. Pasture Maintenance Budget

18. Hay versus pasture • Assuming renovated pastures • $61 per acre pasture maintenance • $122 per cow (2 acres per cow) • If we graze 240 days per year: • $0.51 per grazing day, compared to • $0.99 per day on produced hay

19. Increasing Grazing Days • For every grazing month, we save $14.40 per cow • If we can increase our grazing season by 60 days per year, we save $28.80 per cow • This equates to more than $5 per cwt on a 500 calf!!!

20. Stockpiling Fescue • Common way to increase grazing days • Cost per day likely higher than grazing average, but less than stored feed • Key Considerations • Nitrogen costs • Timing of application • Time forage is unavailable

21. Cost per day on Stockpiled Fescue Cost per lb of Nitrogen Lbs of DM per lb of N

22. More Information Kenny Burdine (859) 257-7273 kburdine@uky.edu www.uky.edu/ag/agecon/burdine.php -> click on publications