RANCHING Business
the cattle’s current value, the real costs associated with the cattle, and the cattle’s future value,” he says. The second break-even is associated with the sale
price. Producers must know how much money they have invested in getting the calf to the sale weight and what price it has to make to recover those costs.
Cost of gain Cost of gain is the amount of money spent to put ad-
ditional weight on a calf divided by the total weight gain. “What an operator includes in a measure of cost
of gain can be different depending on the operation,” Nichols says. “You have to include everything that is necessary for your specifi c operation.” Obvious costs include medicine, feed (either grazing or purchased feedstuffs), and labor. Other costs can include oppor- tunity cost, facilities cost, equipment payments, loan interest and salary. “The goal is to put as much weight on as effi ciently
as possible while keeping the cost as low as possible,” Nichols says. A small reduction in cost of gain can make a big
difference. For example, if an operator can lower the cost of gain from $.60 per pound to $.55 per pound on
a calf that gains 300 pounds, the operator will make an additional $15 per head. It may not sound like much, but on 1,000 head, it is an additional $15,000.
Value of Gain Value of gain is the amount of money the market
is paying for each additional pound of weight on an animal. For instance, if a 500-pound steer is going to bring
$1,500 and a 600-pound steer is going to bring $1,600, the difference between them is $100. Divide the dif- ference in value by the difference in weight, which in this case is $100/100 pounds. The value of gain is $1 per pound. “If the value of gain is greater than the cost of gain,
then an operator is making money on that animal,” Nichols says.
Final thoughts “The stocker business is just like any other busi-
ness; it is about taking advantage of opportunities,” Nichols says. “To do this, operators must understand their capabilities and skill sets, have a plan and ex- ecute the plan.”
Before the Chisholm and Goodnight-Loving Trails, Wortham - San Antonio
was insuring Texas ranchers and cattlemen.
Wortham - San Antonio puts our 150 years of experience behind every policy we write, every acre we insure, and the stock we protect:
• Property and equipment loss or damage • General liability (includes oil & gas and hunting operations on property)
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For a professional assessment of your insurance needs, please call Burton Barnes, Jr. at (210) 223-9171 or 1-800-779-4677 or visit us online at
www.worthaminsurance.com.
“Since 1852 Wortham - San Antonio has been protecting the interests of cattlemen across Texas and the Southwest.
WORTHAM - SAN ANTONIO 131 Interpark Blvd. San Antonio, Texas 78216
72 The Cattleman September 2015
thecattlemanmagazine.com
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