Profit = Revenue – Cost
If you are reading this, I have no doubt you are fully attuned to this equation in light of the cattle market crash in late 2015 and 2016. Because input costs dictate a large proportion of profitability, consultants and educators across the U.S. have spent a lot of time this past winter discussing the best ways to control costs without negatively impacting production. I am as guilty as the next for getting producers too focused on ways to “trim the fat” in their operation for 2017.
At the end of the day, however, we still sell commodities, including cattle, as weight multiplied by price per pound. While we largely cannot dictate prices for commodity cattle, we can control the amount of product we produce through optimization of resources.
But what are resources? This term is often synonymous with feed and forage in the beef industry. However, what about genetic resources? Are you truly optimizing the genetics of your cow herd? If you are buying a bull just because he is “cheap” I would argue you probably are not. This is not to say a low cost bull is always inferior, but in most instances, the extra $500 or $1000 spent on a bull that better meets your marketing goals will have a far superior return per dollar invested than the less costly bull.
In my opinion it is time for producers to stop focusing solely on cost and put more effort into optimizing revenue. The most profitable operations will take all aspects of the profit equation into consideration, starting with inputs that have the best ROI. In an already well-managed enterprise, the best ROI likely begins with a bull battery that best complements the genetics of your cows. Pay it forward to cow herd this spring, and reap the benefits for years to come.
Good luck and happy bidding this spring!
Source: Patrick Gunn, ISU Extension cow-calf specialist