Beef Market Advisor

Monday, February 20, 2006

Ranchers Should Prepare A Projection For The Rest Of This Decade

by Harlan Hughes

In order to stimulate my clients' thinking, I prepare a chart similar to Figure 1 for each client's herd. I use his ranch's cost structure and my long-run planning prices to prepare these individual ranch charts. Figure 1 is based on approximately 200 Northern Plains Farm Business Management Herds' average annual cost structure. The bar represents the historical $110 average annual profit per cow for the 1999 through 2003 time period. The dashed line represents the actual 2004 profits and the projected profits for the 2005 through 2012 time period. Note that 2005 profits are projected to exceed 2004 record profits. Costs are assumed to inflate $14 per cow each year out to the end of this decade.

I tell my clients that this chart does not have to happen on their ranch. Every rancher has ample time now to make sure that this chart does not occur in their own beef cow herd. Changes in economic efficiency can be started now in the good years to ensure that herd profits do not go to zero by the end of this decade. Our IRM work in the 1990s confirmed that it takes multiple years to change the economic efficiency of a beef cow herd. Now is the time to start working on economic efficiency during the "good" times as you can not wait until the "not-so-good" times arrive to change economic efficiency. "Making the cattle cycle work for you" is one sure way to increase economic efficiency of your beef cow herd.

posted by Dr. Harlan Hughes 10:37 AM [edit]

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