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Cost Analysis for Beef Production: Feedlot and Custom Farming Insights

This detailed analysis outlines the costs associated with beef production in a feedlot and custom farming setting. It breaks down the expenses related to land, the purchase of calves, processing costs, and various management expenditures. Key calculations reveal the cost of gain, break-even pricing, and potential profits per head. The insights provided are essential for understanding the financial aspects of running a successful livestock operation, including death loss considerations and average daily gain (ADG). Ideal for farmers, investors, and agricultural economists.

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Cost Analysis for Beef Production: Feedlot and Custom Farming Insights

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  1. Stocker/Feedlot Example Dr. Randy Harp

  2. Land Cost • $60 per acre (custom farming) • $20 per acre (lease) • Total = $80 per acre

  3. Purchasing of Calves • 360 # @ $1.05 = $378/calf • Processing costs/head = $20 • Wormer • Implant • Hay/feed • Ear tags • Antibiotics • Etc.

  4. Purchasing of Calves cont. • Death loss = $7.50 (2 % of 378#) • Interest = $19 (10%of 380 X ½ year) • Total cost per head = $504.50 • Includes purchase and processing cost • Total cost – cost of the calf = • $504.5 - $378 = cost of production = $126.5

  5. Cost of Gain • Cost of production /Total pounds of gain • Pounds of gain = 150 days on pasture X 2.0 lbs of gain per day = 300 pounds • $126.5/300 = $0.422 • 42.2 cents per lb = cost of gain

  6. Break Even • Total cost/sale weight = Break Even • Beginning weight + total gain = projected ending weight or pay weight • 360+300= 660 • 660 x .98 (2% shrink) = 647 (sale weight) • 504.50/647 = $77.98 cwt or $0.78 per lb

  7. Profit per head • 647 (sale weight) x $0.90 = $582.30 (projected pay price) • $582.30 - $504.50 = $77.80 per head • If I had 500 head (death loss of 2%) = 490 • $77.80 x 490 = $38,122 profit • What did we leave out???????

  8. Feedlot Example • Purchase 700# calves @ $0.90 per lb • 700 x 3% shrink = 679 x $0.90 = $611.10 • Processing and feedlot expenses = $350 medical, receiving, transportation, death loss interest, feed, yardage, etc. • Purchase + costs = $630 + $350 = $980

  9. Feedlot Example cont. • Break Even = $980/final weight • $980/1204 = $81.40 / cwt or $0.81 per lb • Cost of gain = total cost/ total gain • $350/504 = $69.44/cwt or $0.70 per lb • Assume 3.5 lb per day ADG

  10. Websites • www.agtexas.com • Links • Commodities • Texas livestock options • Chicago Mercantile Exchange Futures • www.cme.com • http://www.lonestarflba.com/

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