The Economics of Agriculture

THE ECONOMICS of agricultureFarmer. Rancher. Ag teacher. Veterinarian. Extension agent. Not only are these just a few of the career opportunities that a degree in agriculture can lead to, they are fairly common across the country. One job title that isn’t as top of mind but is still critical to the industry is that of agricultural economist. It’s a role that Cameron alumnus Stan Bevers held for almost three decades before retiring in 2016. After earning a Bachelor of Science in Agricultural Education in 1982 (the first year that degree program was offered), Bevers spent five years as a vocational agriculture instructor at Carmen-Dacoma High School in Carmen, Oklahoma. After receiving a Master of Science degree in Agricultural Economics at Texas A&M University in 1989, he served as an Extension economist with the Texas A&M AgriLife Extension Service, retiring as professor and Extension economist. As you might expect, an agriculture economist deals with the money end of the industry, including balance sheets, profit and loss statements, financial projects on cattle and other livestock, agronomy and more. Bevers says it’s a profession that is becoming more critical to the ag industry. “Ag economists are needed more and more,” he explains. “Cattle prices are dropping like a rock. Although people see that, they don’t recognize the impact on the economy because 95 percent of the population only sees prices at the grocery stores and restaurants. They think the price of beef is high, yet they don’t see the low prices that cattle producers are currently experiencing. There are a lot of middlemen in between the producer and the end user.” “If you want to reduce greenhouse emissions, you quit driving your car and stop heating and air conditioning your home,” he says. “Those activities account for more than 50 percent of greenhouse gas emissions, while cows account for less than three percent.”

Another largely unknown fact is that one agriculture producer provides enough food substance for 120 people annually. Yet many of those consumers discount the importance of agriculture, choosing to focus on what Bevers refers to as “cow farts.”

For students who hope to enjoy a long-term career in agriculture, Bevers offers advice on how best to achieve that goal.

“There are two groups – those who come from an ag background, and those who don’t,” he says. “For those who do, who want to farm like dad and grandad and be part of the family operation, I recommend getting a business degree. Ninety-nine times out of 100, dad and grandad didn’t teach the younger generation the business end of the operation. Dad doesn’t think about teaching the financial end – maybe because he doesn’t want to tell the kids they’re in a tight financial situation. I want that young family member to get a business degree and figure out the financials of the operation.”

As for those who don’t have an ag background, Bevers suggests they learn the basics – animal science, agronomy, etc. - and mix in business classes as electives.

Bevers says there are ample career opportunities for agriculture graduates.

“There are a lot of students who come from ranching families – huge ranches that operate on thousands of acres with massive herds. There’s a chance that ranch is going to be sold and the younger generation is going to be working for the guy who buys the ranch. The guys who buy these large operations do so because they think ranching is an easy way to make money. They just want the ranch to break even for several years, because the value of the land is going to increase about three percent every year. That’s better than a savings account or a CD. The people who are buying don’t want the ranch to be a money pit, so they hire people who have the agronomic basics. They need someone who knows the numbers. The opportunities are there now and they’re only going to get more important. Commodity prices haven’t kept up with inflation, so it’s a tighter squeeze. We have to have good managers who know how to operate on tight margins.”

And then there’s the increasing role that technology plays in agriculture.

“A recent thesis was on the use of radio frequency tags on cows and calves,” Bevers explains. “Run a cow through a chute with a reader, pull up everything on that cow and calf. You spend a lot of money to do that – the EID tags are $3 each, and the reader attached to the chute is about $1,500. The cow goes through the chute, the tag triggers the reader so information is downloaded to a computer. That is technology at its finest for ranchers, but that data on the computer has to be accumulated or in some way aggregated and analyzed by someone who can look at that information and determine that cow has produced belowaverage calves the last three years, so that cow has to go. That person is not going to be cheap; the cost of the person doing the analytics costs more than the profit margin.”

He breaks it down into three steps.

“Number one is gathering the data – both financial and inventory, profit and loss statements for each asset, the balance sheet. Next is taking that reconciled information and performing analytics – using a drone to study cattle movement patterns to see where I need water to improve grazing in a certain area. Step three is taking the analytics and turning it into action plans. I see what that drone has told me. Is it financially feasible to use my cash flow to put in a new well in the back pasture? If it is, put it into action.”

Following his retirement from Texas A&M AgriLife Extension Service, Bevers established RanchKPI, a consulting firm that works with livestock producers across the country.

“My average customer has 2,000 cows in Wyoming and Montana,” he says. “They are profit motivated but their costs continue to rise. The average cost to run a cow for a year, including feed, vet care and machinery, used to be about $1 a day. Now, it’s about $950 per cow per year. That cow is maximized in production and can only have one calf a year. Take that maximum production relative to rising input costs, and your costs get higher than your production is going to return. What’s the calf worth? Calves are selling now for what they brought 20 years ago. What’s a profitable rancher do? He scrutinizes every dollar he spends. He scrutinizes productivity to make sure he’s producing a calf that the market is demanding. You don’t control the average price for calves. What you do control is whether you’re above the quality the market is demanding.”

Bevers has fond memories of his time as a Cameron Aggie. A native of Altus, he spent two years at Western Oklahoma State College before transferring to CU. The ag professors consisted of Bennie Doane, Al Bennett, Ira Kennedy, Don Profitt and Dr. David Cox, who came in from Arizona specifically for CU’s new agricultural education program.

“The classes were great, and what the professors did for me was huge,” Bevers says. “Al Bennett was a big influence on me. I wrote a paper on soil fertility and really busted my butt on it. He gave me a B+, but I went to him because I thought I deserved an A. He said he graded my paper like it was a graduate paper and told me I needed to go to graduate school. It took me five years to get there, but I enrolled in Texas A&M. My ag ed degree from Cameron set up everything for me.”

My ag ed degree from Cameron set up everything for me.