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Keep Expenses In Check When In Cattle Business

11 August 2010

US - Watching the bottom line in an operation is more important than ever in the cattle business, and there’s not much room for equipment-related purchases that aren’t absolutely necessary, according to an expert with the Texas AgriLife Extension Service.

At the 2010 Texas A&M Beef Cattle Short Course in College Station, ranchers were reminded not to get carried away with buying too much equipment to run an operation.

On average, cow-calf producers operate on something around a $40 per calf profit margin, said Dr Ron Gill, AgriLife Extension beef cattle specialist and associate department head for the department of animal science at Texas A&M. Gill reminded producers to be mindful of operation expenses.

The bottom line is to be practical, he said.

"A lot of people in the cattle business die of heavy metal disease," he told producers, meaning too many people buy too much equipment and don't pay enough attention to purchasing equipment that is essential for a ranch.

"What are the basic requirements for a ranching operation?" Dr Gill asked. "If we really look at the ones who are making a lot of money in the cattle business, they don't have a lot of metal lying around (i.e., farm equipment, implements, etc.)."

The average herd size in Texas is between 30 and 40 head of cows, which produces half of the beef statewide. Gill said these small operators can easily get carried away with buying unnecessary equipment rather than making sound business decisions. A case in point is buying a trailer to haul cows and calves.

"This is a big-ticket item," he said. "How many times a year are you going to use one of these?"

Dr Gill showed the audience a photo of a Gooseneck-style cattle trailer.

"It's nice to have one of them, but economically for a small cow-calf operator it's not feasible if you are using it once or twice a year," he said. "At $40 a head profit for that calf, how many would it take to pay for that trailer? There's plenty of people that haul cattle for a living and can be recommended at the auction barn. Give them a chance." Same goes for tractor and pickup purchases. He said some producers go overboard with these purchases and incur unnecessary expenses.

Dr Gill spoke of a man in the stocker business with more than 1,000 head, but operated out of an S-10 pickup with two hammers and a set of panels.

"He's been successful for many years," Dr Gill said. “I'm trying to get everybody to think how many calves it's going to take to pay for it. It’s very disturbing math. You can get in so deep sometimes; it's very difficult to get out."

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