If you read last week’s article, it’s no surprise to you that farm production expenses are expected to increase over 7% this year. In livestock industries, where profit margins are low to begin with, producers can’t afford to overlook the impact their added expenses will have on their bottom line. There are two primary tactics that can be used to help maximize profitability- setting up to receive the best premium for your stock and reducing expenses without cutting corners.
Profitability in livestock production involves more than just producing animals and selling them. Many producers produce animals that are easy to raise, sell at the most convenient locations, and sell at the most convenient times. While that method works for some, it makes the producer be a price-taker with little control over their profits. Producers that learn how to market their livestock by digging deeper into what to produce, where to sell it, and how to price it find they have more control over their earnings. In order to start being an effective marketer, there are a few things to consider. First, consider your operation as a business, and be sure to have an effective business plan in place! Our partners at the UGA Small Business Development Center in Augusta and AgPlan (agplan.umn.edu) can be helpful in getting a plan developed. Second, be sure to understand exactly what your costs and expenses are, from fixed expenses like land, buildings, and facilities to variable costs like feed, hay, and vaccinations. Third, select the type of animal (breed, color, age, etc) and production method (cow-calf, freezer beef, etc) that is most profitable for you based on location and consumer demand. Finally, be sure to consider a variety of sales options like sale/auction barns, pooled sales, private treaty, or freezer beef. For more information on profitability, reference UGA Bulletin 1078.
In addition to more effectively marketing your livestock, reducing your expenses without sacrificing productivity is essential. There are a few tips that might be useful on this side of things as well. First, just like in the business side, you have got to understand your input costs! For example, in Georgia around 70% of input costs go towards feed, pasture, and hay, so that tends to be an area we look at to capture some savings. Saving money on feed expenses really comes down to tailoring your program to your herd. First, be a good steward of your pasture- take soil tests, follow lime and fertility recommendations, and stay on top of weed control and grazing management. Some techniques, like rotational or strip grazing, can improve forage utilization immensely and reduce your feed expenses. If you’re feeding stored forage like hay, maximize it by using forage tests and matching forage quality to each stage of production. Then, work with the UGA Feed Cost Analyzer (beef.caes.uga.edu/tools.html) to determine the most economical supplement to make up any deficiencies you might have. Don’t skimp on your mineral program, as minerals are critical for reproductive and growth efficiency. Finally, be sure to have a good herd health program to reduce risk of any unexpected expenses in veterinary costs or declined production due to health issues. Read UGA Bulletin 1373 for more information on cutting costs in cattle production.
