Eat your own cooking, drink your own Kool-Aid: part 2

Posted: September 1, 2009 by Thrivelearning in Grass Fed Beef Cattle
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(For part one, part three – visit those links. Meanwhile, we re-join our author after he just explained how he got into raising grass fed beef cattle in the Missouri instead of pushing pencils in California…)

Our profit numbers reflect the efficiency of grass fed cattle. Inputs are some hay during the winter, for the two years you are raising them, plus the vet costs when you wean them. If you sell your cattle at 1,000 lbs and get about .80 per pound at auction (on average), you’ll net about $800 per head. Direct market this and you can make about $1K. Take out about $300 in hay cost and you’ll profit $700 after two years.  (The trick is that the same cow which gave you that steer or heifer you just sold meanwhile produced another which is one year old, and is about to deliver a third.

If you sell that calf immediately after it is weaned, you get about $500, but have to take off what it took to keep that mother (plus one bull per about 50 cows) on hay during the winter before, so you make about $350.

Let’s look at the land. As I mentioned, we’ve been doing both crops and cattle as production. Under conventional farming methods (moving cattle when they ate everything they could), a cow needs about 2.5 acres to live the year in Missouri. (And you have to hay some of that against winter.)

The 60 acres we have in cropland would then generate sustenance for about 15 cows. Those 15 cows, after a 9 months gestation and 7 months to weaning, would produce 15 x $350 = $5,250 profit. If you wanted to feed those calves out to get a higher profit, you’d have to replace some of those cows with yearlings.  You only have so much land and so much grass. Say you had 10 cows and 100% survival on birthing – so you then sell 5 of those calves so you can keep 5 to feed out to full maturity.

5 calves =  5 x $350 = $1750

5 calves fed to maturity = 5 x $700 = $3500

Total = $5250

Profit is the same for all that extra weight you put on, right?  Trick is that you can set up more options with direct marketing so that if you get them properly inspected and butchered (read: higher cost of overhead) and then sell the parts at farmers’ markets – you can make as much as $3,000 per animal. Of course, that is a lot more work. Your profit for farm-raised grass-fed beef would run probably about $2,000 per head.

Compare this to row crops, where we make about $1,000 t0 $2,000 profit off that same acreage every year. Net margin increase using pasture-finished cattle over row-crops = $5250 – $2,000 = $3250 at minimum, with the potential for about $10,000 if you inspect, butcher, direct sale  = $8,000 profit margin increase.

Row-crops are low-profit because you deal in commodities. The seed companies, fertilizer companies, chemical companies, and equipment dealers – all work to get the biggest slice of that pie you create by farming. If I wanted to raise stuff which was non-commodity – or would direct sell specialty seeds, for instance, to gardeners, I’d make considerably more income from row crops. (Sell a bushel of corn, you make $4; buy a bushel of corn seed – pay $100 – $200. The reason corn is profitable is because some places can make 200 bushel an acre out of 1/5 of a bushel of seed. Not on my land – it grows better grass than crops. Our average is about 80 bu per acre.)

Pasture-finished cattle has less variables than grain fed or finished beef – if it rains too much so you can’t get a crop in, you can raise grass anyway. If it’s a drought, you simply sell the calves early instead of having no crop at all (and still have the expenses of planting and soil prep and spraying.) Corn depends on the weather.

Needless to say, I’ll be taking our farm over to entirely a grass-finished cattle operation shortly. Just need to finish building my herd up to size. We’ll be at about 20-30 head and able to then generate $7K – $10.5K each year as profit.

Further profit will be by lowering inputs through real intensively managed grazing, which will minimize/eliminate hay costs. Dropping our cattle frame size will improve efficiency by about another 20%, so we can add another 5-6 head, or another $1750 to $2100 profit annually. If we direct market (part out) those beef, we’d add another $6K profit.

The next step is to move entirely out of winter hay, through managed grazing practices and so make grass-fed beef pure profit, since the pastures don’t have to be fertilized or sprayed to get production. (One further step would be to certify these pastures as organic, but this is really just adding another input cost. Right now, locally-raised grass-fed beef gives the same premium as organic – so government-trademarked organic beef is less profitable.)

While there is a ceiling on what you can make, it’s much, much higher than conventional farming methods with commodity products. Your profit is under your own control.

Key takeaway points are that by moving to grass fed beef production you lower input costs and are able to move into a much higher premium by direct marketing to local consumers. This model is consistent with marginal land which is normally used for beef production in the Midwest. Deep topsoil areas of Iowa and Illinois are natural for raising corn and other row crops – more power to them. But you won’t see my beef going to their feedlots…

(Next: Life on a profitable grassfed beef farm – how much money do you really need to live on and how prosperous is prosperity and how poor is “poverty”?)

  1. […] Read the original: Lifestyle Choices – Details of Raising sustainable grass fed beef … […]

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