Economic Unit

[smcgrath76]

I have been doing some reading over the holidays and one thing that really got me thinking was a grain farmer discussing an economic unit. Apparently (I have no desire to ever find out) for a grain farmer this amounts to multiples of what an airseeder can cover, so by his math roughly 5000 acres units. A cost effective farm can be any multiple of roughly this size (speaking prairie agriculture here).
What is the economic unit size for beef production? One of our biggest costs at home is machinery (you would laugh if you saw our machinery and then heard me say that) but on a per cow basis, it is pricy. To get value out of machinery it basically has to run at its maximum capability (I think this is what cowman does with his Kubota and his other enterprise). So what is "the right" economic unit size (generally speaking).
It is probably more variable in beef than in grain farming, but I am curious what others think.

[cowman]

I have a neighbor who is a very smart man. He taught a seminar on "Pursuing profits in the cow/calf industry" a few years ago which I attended. Using his own operation as an example he stated that machinery costs were his greatest challenge. He used custom operators whenever possible and his cows are out swath grazing or corn practically all winter...and still he considered his machinery costs a problem!
I think a tractor is a personal thing. After all we could go back to horses if we didn't value our time or our comfort! Personally I find that the security of knowing I can get the job done, a reasonable cost, although it might not look good on paper? So if I get a flat tire or something I have a backup tractor? That kind of security doesn't look good on paper but is worth it to me.
A $120,000 tractor, a $20,000 feed wagon, a $15,000 bale shredder is hard to justify, in my mind, unless you have a lot of cows? The same goes for a $40,000 baler, $40,000 haybine...unless you are doing a lot of hay?
Machinery is costly to run whether old or new. You just can't be surprized when you go to buy parts from your friendly local dealer! Fuel is not exactly cheap anymore.

[farmers_son]

What is the economic size unit for beef production? Although I am aware of the value chain concept I really do believe we produce live cattle not beef. Cargill and Tyson are in the protein business not the beef business. In any event beef only represents a portion of the overall value of the live animal after slaughter. Certainly we get paid for producing live cattle and the price of those cattle are only loosely based upon the wholesale, much less the retail, price of beef.

The number one cost item for our cow herd is land. Even calculated on a rental basis pasture costs are number one for us. That cow is going to eat and on a per cow basis there is no getting around it. Next is living costs, a close second. Winter feed is third. We must run a more humble line of equipment than you because for us fuel costs and repairs are higher than our depreciation costs. We tend to encourage our cows to pasture for most of the year and have dramatically reduced our winter feeding season allowing us to get by with very little machinery for the cow herd. In effect we have substituted land and pasture costs for winter feed and machinery costs, however either way it still costs.

I have long considered that the factor limiting the size of the cow herd was the ability of the available labour force to calve the cows. However for a number of years I have kept records of every calving, whether I have even seen the cow calf much less offered any assistance. I have found we make a life or death difference on relatively few calves and that most cows could calve quite well without any help from us. Changing the calving season to warmer weather would certainly allow us to calve more cows if we have the land to pasture them.

As we have a number of different operations on our farm besides the cow herd, the way we allocate machinery costs may skew our numbers and someone else may allocate their costs differently.

[cswilson]

Alot of farmers up here got burned by the airseeder as a unit analogy. They quickly switched to the how much can i get combined in the fall model-pretty easy to seed yourself into a harvest bind. We winter around 500 head here and I don't even own a tractor-I buy feed delivered to the cows mouth and hire a neighbor to unload it.Have a team of horses to fill in when needed or an old 1986 one ton with a deck. I REALLY HATE IRON!!!

[PureCountry]

Same thing here cswilson. No tractor, '86 Chev with a Jiffy, June calving, swath-grazing as long as possible, all custom done. I've spent hours figuring numbers every which way from Sunday, but as far as I'm concerned, what works best for me is calculating each cow and each acre. I analyze what each cow is making, then break it down over the land base to a per/acre net return.

That way you can say I'm making X amount of dollars per head, or X amount per acre, and diagnose problems from there.

[smcgrath76]

part of the reason I ask is that we are in the midst of expansion and ideas are always welcome. Our iron is either fully depreciated (eg: our cultivators were purchased in the 70 or late 60s), used (eg: 30,000 hour 4430), cheap, or we have used it to expand without land or rental payments. We basically have doubled our ranch with a baler and a discbine through putting up feed on shares or custom work. I lean towards your thoughts CSW about iron, but if there is opportunity to keep someone busy doing custom work I don't have a problem with justifying iron. As long as it generates a reasonable rate of return above costs it is a worthwhile investment in my books. I am leaning towards thinking about cattle in 60,000 pound (liner loads) increments.
Being able to market in full loads really reduces trucking cost per head. I am still sorting out a business model that let's us ranch full time and not neccessarily work that way. Optimal size is a bit of a must.

[cowman]

I would think you could definitely justify certain equipment by doing custom work...in fact that is how a lot of airseeders, high clearance sprayers got paid for?
The only pitfall you might fall into is you might discover you can make a lot more money doing the custom work and decide to hell with farming!
Consider all the people running custom hay outfits or custom spraying rigs...they obviously aren't doing it for fun?
The local fertilizer dealer has a rather unique arrangement with a former farmer who does custom spraying. They pay him $5.35/acre to do the spraying, they handle the whole thing...he just does the work and picks up a check from them? Last year he sprayed slightly over 55,000 acres! He leases the sprayer but owns the transport/water truck...spends the winter in Arizona!

[rookie]

after running over 55000 acres, you would have to decompress in arizona

[cswilson]

Alot of burnt out former custom sprayers roaming the country-we did the custom haying thing for 4 or 5 years but I sure don't miss it. I make better money custom a'i'ing and I only invest in Motrin lol. I should be doing commercials for those 250 head days lol.

[cowman]

Well he maybe is burnt out! But he is relatively a young man (around 40) and he can do a slug of acres in a day! He recently(mid season) leased another John Deere Sprayer because he couldn't keep up! I know when the sun breaks the horizen...he is out doing his thing!
His spouse(who I know very well!) tells me he is very cranky...but is a real *****cat when lolling about in Scottsdale!
I truly admire young men who have this kind of drive? Have the drive to get out and hustle and make a buck...the Alberta way!...my kind of guy.

[cowman]

Oh, and by the way I know he is out doing his thing when the sun breaks the horizon because I am out there too!
...I'm old but still trying!

[cswilson]

An old cowboy told me once the only people who should work at night are *****s and thieves-alot of wisdom in that remark.

[cowman]

Well hope I don't fit into either of those categories but am a firm believer in the early bird gets the worm!

[wmoebis]

An old grain farmer told me about tractor lights "work the daylight hours and you don't need lights"

[cswilson]

Early bird gets the worm but the second mouse gets the cheese lol.