What is in this article?:
- Cow-Calf Production Is Largely A Part-Time Business
- Few full-timer producers
- Off-farm income is the rule
Few full-timer producers
Yet, the cow-calf business is, on average, largely a part-time endeavor.
“Operators of more than a third of beef cow-calf farms worked off-farm in 2008, and half of beef cow-calf farms are classified as rural residence farms,” say William D. McBride and Kenneth Mathews, Jr., in “The Diverse Structure and Organization of U.S. Beef Cow-Calf Farms,” which was published by USDA’s Economic Research Service (ERS) last year. “These farms are small operations that specialize in beef cow-calf production but report off-farm earnings as the primary source of household income. Commercial farms with beef cow-calf enterprises are mostly diversified farm operations on which cattle are a secondary enterprise that accounts for about a fourth of farm product value.”
The ERS study summarized information from a 2008 Agricultural Resource Management Survey (ARMS) and also utilized state data from the USDA Ag Census for 1997, 2002 and 2007.
The lion’s share of beef cow operations (80%) had 50 head or fewer, representing 27.7% of the cow inventory in 2011. Operations with 100-499 cows represent 8.7% of the operations and 38.2% of the cow inventory (Table 1).
Noted agricultural economist James McGrann puts it this way: “In reality, fewer than 4% of beef cow-calf operations make their sole living from the cow-calf enterprise. This means that the industry can produce at least 50% of the feeder cattle and not be profitable to owners. These calves support the feedyard and packing industry and lower consumer cost of beef.” McGrann is a Texas A&M University professor emeritus and owns Ranch Management Economist, a ranch business consulting firm.
There are plenty of reasons why those who specialize in beef production tend to be among the smallest producers, and why the largest herds tend to be part of a diversified agricultural operation. Economics tops the list.
“No one can start a ranch business with ranch earnings and expect to earn $60,000 before self-employed and income taxes. With a 2% return on investment (ROI) in ranching, it would require $3 million in equity. Assets earning 2% can service only limited debt,” McGrann explains. “The cow-calf sector is an investment business and ROI is what attracts capital for growth.”
Beef cow-calf production continues to be driven as a byproduct of land ownership, with land becoming more difficult to acquire.
“Increase in land values does make landowners wealthy, but makes it prohibitive for young ranchers to enter the sector without equity contribution from parents or off-ranch income,” McGrann says. “The high cost of estate transfer means it’s difficult to hold ranches together between generations.”