October 2012 | www.gelbvieh.org
In this Issue: Figure Out Where You Stand The Adaptability of Gelbvieh Cattle Observations of the TCSCF Sire Comparison Project Increase Efficiencies, Profits with Gelbvieh Crossbreeding Over the Fence with Bar T Bar Ranch Tennessee Grass-Fed Beef Finds Success with Balancer®
Figure Out Where You Stand By Wes Ishmael
Look at any chart depicting average cowcalf profitability over time and a thinking person has to ask the obvious questions: Why on earth would anyone be in the cattle business and how could anyone remain in the business over the long haul if they wanted to? After all, as a commodity, cattle and beef production are necessarily breakeven in nature. The largesse of the good years is returned during the bad ones. There are multiple answers to those questions, even when assuming the reason for being in the cattle business is to make enough profit with enough return on investment, on a sustainable basis, to outweigh the opportunity costs for the resources invested. A chief reason that folks get into the cattle business and the reason some are able to remain is because some producers make good money most all of the time. Average breakeven profitability means some folks making lots more money than average and others lose lots more than average.
This basic economic fact merits pondering especially now when you can argue strongly and logically that the cattle business stands upon the threshold of irrevocable structural change. Some would say the business has already crossed the threshold with drought the last two years accelerating things like concentration, consolidation, vertical cooperation and pricing mechanisms.
What We Thought We Knew More than ever, producers chasing elusive profits during the good times need to study how it is that other producers are able to profit during the bad times. In order to do so, it pays to take a broad-brush look at even an incomplete list of industry rules of thumb proven false on average, though still often held up as reality. “We’ve lost a third of the U.S. cattle producers we had in 1980 and the infrastructure is eroding. Many of our assumptions about the industry appear to have been naïve.” That’s how Barry Dunn put it a few years ago. He is dean of the College of Agriculture and Biological Sciences at South Dakota State University. At
Producers chasing elusive profits during the good times need to study how it is that other producers are able to profit during the bad times.
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