Lowest Cost Production

Production, not consumption, makes our world a better place for all. Some of this looks like a chicken and egg discussion but it really is not. Irwin Schiff illustrated this well years ago and I encourage you to read what he wrote (link). In his story the inhabitants of the island caught and ate fish every day but it took them all day to do it. That’s expensive fish…costing them a day’s wages. Then one guy got a bright idea. He made a net (production) so people could work fewer hours to catch their fish (consumption) and could, ultimately, go on to do better things with their time like run for office or open banks (lol). Consumption is an ongoing deal and happens naturally. Efficient production requires risk, effort, imagination and capital.

I am working to insert myself into the cattle business. Just typing that causes me to laugh at my own pretentiousness but that’s what I am doing. I am working to produce cattle efficiently. This requires capital, it involves risk and varying (but never insignificant) amounts of effort. And it requires imagination. Before I move on I want to re-emphasize the word “efficient”. Profit is not a bad thing. Profit is not the measure of greed. Profit is the measure of efficiency. You and I can both produce beef. That’s fine. But I can sell mine below what yours costs because I’m more efficient. But what neither you nor I can do is determine the price. I may be able to sell a few head at $9/pound but none at $900/pound so I have no control, really, over price. I can’t force a customer to buy my beef instead of your beef. I also can’t force my customers to buy beef instead of chicken. I only have total control over production costs. My profit is the difference between the selling price (which I have little control over) and the production costs (which I have absolute control over). If I am going to succeed in the cattle business (remember that 5,000 cow thing?) I am going to have to find ways to profit from cattle production. I mean, I would much rather do nuthin’ for nuthin’ as work for nuthin’. And keeping cattle is work (though, fun work…but is it enough fun to waste the most productive years of my life with?).

But what other costs are involved in cattle ownership? I mean, look. If I have a nice herd of 20 cows and I go out to buy a $4,000 bull that I’ll keep for 3 years I have increased the cost of each calf by $66…not counting the feed that monster will eat or the repair bills he will cause. But we have only just started. Forget the bull. Let’s look around my zip code and see what else I’ll need to keep cattle (if you want to do the math check equipment costs on Tractor House). Apparently I’ll need a couple of loader tractors with front-wheel assist, a newer 4WD 3/4 ton truck, a livestock trailer, a silage wagon, some way to cut silage, a silage pit or a silo, silage blower and silo unloader (God help us!), a hay baler, a mower-conditioner, a hay rake, a trailer to haul hay bales on, ring feeders, feed bunks, head gates, an extra 4WD truck, cell phones, shotguns, rifles, 7-wire fencing, tillage equipment to tear up the fescue, a drill to plant better pasture, a wiper bar for thistle, some sort of sprayer and a big tractor to pull the tiller and drill. In our part of the country we call ourselves farmers and not ranchers and that job title comes with an immense mountain of additional iron supplementation I won’t go into here because it doesn’t effect the price of the cow…it effects the price of the corn…which effects the price of the cow. Because cows just have to have corn…otherwise they don’t get so big and fat. And we need big, fat cows whatever the cost! But all of that equipment will share shed space in the new sheds we have to build for our cow accessory collection. You should note that the whole collection must be painted one color cause that’s better than the other color and gets us more free hats and jackets and the like. And I can’t neglect the new car for my wife and she needs streaks of lighter color in her hair so her friends will say her hair looks cute as they have a $4, four hundred calorie chocolate coffee on their way to the weight watchers meeting. And my kids are going to want to play baseball and soccer and every boy should be in scouts, right? And we’ve been wanting to go to Disney.

So now what does that calf cost? Let’s see…feeder cattle are at $1.68…times 500 pounds…so I get a near all-time high $840 for each calf I sell. Minus transportation costs. Minus auction percentage. Minus, minus, minus. Shoot, just the bull accounts for 7% of the sale price of the calf crop. And each heifer has to have 4 calves to cover the costs of her own development and the average cow doesn’t last that long. How do I make any money at this with all that other nonsense going on?

Today’s post is strongly insprired by Kit Pharo’s Winter 2014 newsletter I received in email this morning (you can, and should, subscribe for free here.) In the lead article he shares his fears that we are pricing our product out of the market. More and more consumers are eating chicken over beef. Why? Because chicken is cheaper. That statement should just about make your head explode. Is it more efficient to plant, fertilize and spray herbicide on corn and beans, harvest those crops, screen them, haul them to town, dry them in a bin, grind them into feed, haul that feed back to the farm where you feed chickens in long houses with high rates of death so we can manually pack the birds into crates, haul them to a processing plant, hang them on a shackle, dress the bird out on a conveyor, part the bird up and sell the tenders at the deli than it is to do basically the same process with cattle?

Read the last 5 words again. Think back to piano lessons. Remember the bass clef? Name the spaces. All. Cows. Eat. Grass. Today not all cows eat grass. We are feeding them like they are hogs or chickens. And that’s why beef is so expensive. We have selected for tall, heavy cows. Cows that can’t maintain body condition on grass alone. Cows that need a little boost of grain to put on enough fat that they cycle on pastures that are simultaneously over- and under-rested because of non-stop grazing and animal selectivity.

We need to re-examine our procedures. Why are we doing what we are doing? We need to take it to bare-bones again to become more efficient producers. North America is a grass-growing paradise! We could be profitable raising cattle at half of current prices! But we would have to sell our tractors for that to happen. And that would hurt consumption. Lower prices lowers GDP (we can’t have that!)…but it feeds more people. We are so strongly oriented toward pure dollars we have lost sight of what we’re here to do. We are not here to use as much fuel as possible while poisoning the soils. We are here to feed the soil and feed the people. And cattle do that much more efficiently than do chickens. But you look weird walking your pasture instead of riding on a 4-wheeler. You look lazy sipping tea while your neighbors put up hay. They might think your baler is broken. And you certainly can’t call yourself a farmer if you don’t own a tractor!

So what do we really need to raise cattle? Sunshine. Rain. Salt. Fencing is really, really nice. Comes to it, we don’t need a big house or a woman with artificial hair coloring to produce beef. We could just live in a tent with our animals. Happens all around the world. Maybe add in some cast-iron cookware. Read Ben K. Green’s books to remember where we came from as a cattle-producing nation. But the house is nice. We enjoy our cast-iron even indoors. It’s handy to have a tractor. It sure would be nice to have a new 3/4 ton 4WD truck in the driveway and the kids want a pony. This is not to say that I believe farmers should take a vow of poverty. I am, however, suggesting that we farmers are impoverishing ourselves by pursuing consumption, rather than working toward efficient production. (That idea goes far beyond just farmers.) Supporting all of this extra consumption forces me to ask more for my product…or seek income elsewhere. Income elsewhere is probably easier. Well, not probably.

It’s hard work to keep a herd of animals healthy whatever the weather throws at us. I knew that before I started. I’m not here to ask for your sympathy. I’m here to say we have an obligation to attempt to lower our production costs, not simply to make more product available for consumption at lower prices, but also because we, as cattlemen, are uniquely suited to healing our soils, increasing fertility, diversity and water capacity. If you haven’t, I encourage you to check out the book Cows Save the Planet. Compare, in your mind, all of the fuel that goes into producing a pound of chicken to the lack of fuel involved in growing grass. Why is chicken cheaper? Any number of reasons…everything from government subsidies to unsustainable energy costs. But when you get down to it, it is largely because we are asking cows to be something they are not and to eat junk they don’t need so we can sit pretty in a new pickup truck.

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6 thoughts on “Lowest Cost Production

  1. Lot to chew over here. My morning coffee (this is my “Saturday”, so I indulge in reading with a coffee mid morning) went cold while I read through the Irwin Schiff story. Which was awesome and which I will share with my kids. From my perspective the post could have ended right there.
    Have you been able to lay your hands on Farming Ladder by George Henderson yet? Try ILLO (it’s hard to find even there) or shell out for it through Amazon used books or Abebooks.
    The reason it’s important is because in 1924, a few years before the Depression the author and his brother, at the ripe old ages of 18 and 20 bought a run down farm, and with the remains of the loan they used to do that, which amounted to 200 pounds, they started to stock their farm with pedigree livestock. They allotted 50 pounds each to their cattle, swine, poultry and sheep. They began their cattle herd with 2 pedigree Jersey cows, 25 and 24 pounds respectively – older milkers which they used to provide cream to make butter (to sell), and whey to feed chickens and pigs. It took 10 years to increase to 10 head. They sold calved heifers, retaining the calves to maintain the herd. They also bought in calves in the early years to fatten for veal on the excess milk. They could sell these for 10 pounds at 10 weeks old. At that time, farmers were selling surplus milk to the milk factories for fourpence to sixpence a gallon, while the brothers were cashing theirs through the calves at one shilling sixpence. And so on – the rest of the cattle chapter is just as full of detail of how they built up the herd, launched various cattle enterprises (calf rearing, dairy, beef, pedigreed livestock). Now they did level out their herd around 50 (including bulls),not 5000, but there’s still a lot of good info there.
    The price of beef. Yeah, it’s true. I might not be a typical consumer for pastured beef, since I raise my own chicken and pork, and hence my freezer is full of great meat already. I do buy pastured beef raised locally, but not in very large quantities, and mostly ground beef. I frankly balk at the price of steaks and roasts when I have perfectly good chops and hams in my freezer. Beef is lovely, but not for $40 for a roast. At that price, I’m going to feel compelled to treat it like turkey – a festive, once a year extravagance.
    Great post. Thanks.

    • Thanks. I am so far behind on reading I just can’t justify ordering another book. Please remind me of it again in a few months.

      We butchered a hog two weeks ago. Julie and I cut a shoulder in half and served a portion to our guests one evening. Then we roasted the other half, made pulled pork with a peach sauce and ate that for 5 more days straight with more in the freezer. Pork and chicken are our current primary meat sources. But we do try to buy a quarter of beef from Steve when we can. Like everything else it is cheaper if you can buy it on the hoof. We went years without beef in our house. Years. The first steaks we cooked were met with total silence. The kids were so busy eating they made no noise at all at the table. Since we have never raised a steer beef has been a real luxury around our house.

      Ground beef is quickly becoming the majority of beef sold. If that continues, it may become more economical to raise smaller cattle. Smaller cattle fatten more easily and the size of the steaks won’t matter if you grind it all up.

      • Re: your last paragraph, I kind of wondered if that was where beef might be heading. Dexters?
        My hubby’s theory is that when our kids are our age, meat eaters will be about as socially normal as chain smokers are here in Canada (ie, not.); that most people will be largely vegetarian.

      • I got a copy of The Farming Ladder a few years back on Soil and Health (used to be Steve Solomon’s site). The book was out of print then but I understand it’s available on Amazon now, at an unbelievably high price (because Salatin recommends it).

        If you haven’t check out Soil and Health, you owe it to yourself to click on the link below. Most of the books there are old and out of print but a lot of great information! They do ask for a donation when you download a book which is reasonable for the amount of material that’s available.

        Loved the post!

        http://www.soilandhealth.org/01aglibrary/01aglibwelcome.html

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