Monday, March 11, 2013

Farming by the numbers

One of the biggest challenges that you have in starting a new farm, or a new venture of any sort, is figuring out what the costs are, or coming up with some sort of educated guess on what it costs to farm, and what  your profit margins are. 

Many farmers are happy to talk to you about their farm, but when it comes to the numbers, not many will actually talk about the bottom line, or if they do, and you do the math, my experience has been that it's always a little fluffier than is possible. 

So I'm reading about cattle operations, and I run across a publication put out by Kansas State University with the catchy title of "MF-266 Beef Cow-calf enterprise".

When I find one of these publications, I often wonder how old the information in.  Feed prices from 20 years ago aren't the same, costs aren't, and generally the older the financials are the less relevant they are to todays market. 

I'm reading this particular study, and I notice first that the forage (hay, alfalfa) prices are pretty current.  And then I notice that feed prices are current.  And land prices are.  They're all reflective of the prices that I'm seeing now. 

Buried in the find print is a notation that every year, specialists in each field go through these reports and update the numbers to reflect current market conditions. 

So here's the full list; you can pick out your favorite type of animal farm and see what the numbers look like for that kind of farm in the midwest, and they're pretty accurate as far as I've read: I've read the swine ones and the cow-calf and dairy ones. 

If you've ever wanted to peek at the books of an operating farm, here's the closest thing that I've found so far. 

With the beef cattle series you can download the spreadsheet.  Even better!  wish they had done that with the swine and dairy, but it's pretty great as it is. 

Swine
Farrow-to-Finish Swine cost-return budget
Farrow-to-weaned pig cost-return budget
Feeder pig nursery cost-return budget
Wean-to-Finish cost-return budget

Summary of Swine operations: You'll lose money

Dairy
Dairy Enterprise: 100 lactating cows (freestall)
Dairy Enterprise: 600 lactating cows (freestall)
Dairy Enterprise: 2400 lactating cows (freestall)
Dairy Enterprise: 2400 lactating cows (drylot)
Raising Dairy Herd Replacements

Summary of Dairy operations:  Most will lose money

Beef Cattle
Beef cow-calf enterprise

Every 8 to 11 years you'll have 3-4 bad years, but you'll be profitable the other years.  We're in the bad cycle now

Raising beef replacement heifers
Drylot backgrounding of beef
Drylot backgrounding and finishing beef
Finishing beef
Summer grazing of steers in western Kansas
Summer grazing of steers in eastern Kansas
Winter Wheat Grazing

Sheep and Goats
Farm Ewe Flocks:  Once a year lambing
Finishing Feeder Lambs
Stocker Goats in Eastern Kansas

7 comments:

solagratiasnohomish said...

I have some of these, they also have a few for home production of different animals as well, a lot of people think hobby production shouldn't break even or make a profit, but since the information to help breakeven/profit be possible is available, we try to make use of it.

off grid mama said...

It's interesting .. hobby farms only exist in nations like ours. Every where else you're looking at it has to be profitable or at the very least keep you alive.. sorry.. slightly off topic i suppose. Anyway, as for seeing farmers books most leave stuff out. Like a decent wage or even a wage. A lot aim for it to 'just cover the feed.' This kind of idea is ludicrous and badly hurts the farmers actually trying to make a living at it. Or the product isn't actually what's advertised but that can be a hard one to catch. You really have to understand what's going on and some aspects you're average consumer either doesn't know/understand, doesn't care to know or can't fathom because it's too overwhelming.

Final note: sometimes things just don't work even when you think you're doing everything right.

Jeff said...

These are great. Thanks for posting. They highlight the necessity to charge a reasonable price for your meat in order to make a profit/pay for your own labor.

Bruce King said...

Sola: would you have a source or a link for the hobby farm versions?

Grid: Yep, you've got to have some wealth to be able to "hobby" farm. We're very lucky here.

Bruce King said...

Jeff: I agree, these are great. I was happy to find them, and then really happy to learn that they get updated yearly to reflect current conditions.

One thing that I picked up here is the underlying assumption that a "minimum" farm is a lot bigger than most folks would think.

Since these are based on commercial farms wtih standard practices, you can really see that the profit margins they run on are very small, or no profit at all.

I'll contrast that with software where a 50% gross margin was considered tiny. These guys are on a 1% profit margin, and it takes a lot more to start a dairy than another software firm.

solagratiasnohomish said...

http://www.youragnow.com/breakevens

is pretty good, although not hobby-focused.

I am on toddler patrol right now and can't track down where I got the hobby spreadsheets I have. I just downloaded and closed the tab. A lot were from university livestock extension programs though.

Jake said...

This is really helpful. Current numbers are quite valuable. Margins that low on many of these enterprises is pretty daunting...not that they are surprising, but it does reiterate how important a different model, value-adding and correct pricing are.