Feed, dewormers, vaccines, mineral supplements, fuel, veterinary expenses are all easy to see because checks are written monthly to cover those inputs.
Other expenses are less obvious on a day-to-day basis.
Longer-term “investments” that end up on the depreciation schedule are purchases that keep on giving even after the initial check is written. Depreciation shows up as one of the largest expenses on many operations.
When the financial performance of the cow-calf sector is reported, it is often shown to be unprofitable or show only a marginal return.
However, it is also the only livestock production sector where you will routinely hear this statement: “My accountant said I need to buy something before the end of the year so I won’t have to pay taxes.”
If that is your management philosophy, you will rarely be profitable in cow-calf production. I see many operations dying from heavy metal disease because of this philosophy.
Paying for a reality check
Equipment purchases are usually necessary, but what is purchased and how it is used is always up for negotiation.
For example, if a ranch has multiple processing facilities, they may have more than one squeeze chute, but they might have been better off purchasing one really good portable chute and suffering the inconvenience of moving it from one location to the other.
There are people pushing for no inputs in cow-calf production, which sounds like a noble effort, but it is not completely realistic. There are inputs that can add value, income and profit to an operation when used correctly. Every dollar spent does not have to be a dollar wasted.
However, the industry has moved toward larger and higher-milking beef cows that often outproduce the environment in which they are managed and require extra supplementation to maintain an acceptable reproduction and performance level.
The economic side to cow size, lactation and performance is a discussion in itself and will not be addressed here other than to say you can cut down on production costs if the cows are matched to the production environment.
Wants vs. needs
Each operation needs to evaluate what they purchase and see how much of it is really necessary and what could be done away with.
A lot of what we purchase is so the operation can get bigger and run more cattle or more country. If additional equipment or labor is needed to make this happen, careful budgeting should be done.
On the flip side, if scaling back the number of cattle or the pressure put on an operation to produce forage could allow the operation to cut back or eliminate investment in equipment, the operation might be more profitable than one pushing the limit. Pushing the limit in an environmentally based enterprise is rarely profitable in the long term.
What equipment is needed depends on the assumptions made from the start. For example, if you assume you’re going to need a stock trailer to haul your cattle, you start the process of spending money.
Everyone needs the ability to haul cattle on an emergency basis, but do you really need to own a trailer that is large enough to haul your calf crop to town?
If you have very many cows, you will assume you need at least a 24-foot gooseneck that should be pulled by at least a three-quarter ton pickup, and while you’re at it, why not get a diesel so it will handle the load easier?
That assumption alone has just cost you an additional $20,000 over the assumption that you could use a half-ton pickup with a small stock trailer to haul a horse, ATV or a few cows or calves.
Any additional cattle transportation would be hired to a custom hauler. How many loads of cattle would $20,000 pay for, and what could you be doing for the business while those cattle are on the road to market or their next destination?
Expanding purchase power
Where should money be spent? There are two areas where it makes perfect sense to spend money. That would be on things that will improve the land and the performance and value of the livestock.
Fencing to control grazing (can be done through stockmanship if time is available), water distribution to improve forage production and utilization.
Word of caution – this can also be overdone as there is certainly a point of diminishing return on grazing infrastructure.
Spend money on items that will allow you to add value to cattle. Corrals adequate to hold, sort and process the cowherd or the calf crop.
Improved stockmanship skills and the resulting behavior of cattle in the corrals can literally save thousands of dollars in construction materials necessary to hold and process the cattle.
A portion of that money should be spent on purchase of processing headgates or squeeze chutes that are safe and secure for people and cattle.
Tires and tracks
Where most operations spend money that is debatable is on things that require tires or tracks. Tractors, hay equipment, loaders, trucks, trailers to just name a few.
This is not to say that some if not many operations can justify these purchases, but they can come at an extreme price and ramifications to long-term profitability.
For example, the decision to utilize hay harvested on the ranch in the form of bales starts a cascade of decisions that can result in a tremendous amount of expense.
Compare that to the decision to purchase hay produced elsewhere and brought to the ranch. The actual process of feeding hay requires little expense.
A discussion about the forage management decision is also a long one that does not lend itself to this article.
If the decision is to harvest hay and do it yourself, you start the expense train. Tractor, cutter, rake, baler, wrapper, flatbed trailers, hay trailers, grapples, etc., just to name a few.
This equipment will normally be used no more than four times a year. If it being used as part of a commercial hay enterprise and can be justified by the extended use of the equipment over the entire hay production season, that starts to make sense.
I often hear producers say they purchase their hay equipment because they can’t get the hay harvested “when it is the right time.”
That may be a valid point for some, but the better discussion might be “Why am I using hay on my operation at all, or can I purchase what little emergency reserves I really need?”
Most people hate to write a check to purchase hay because they see the real expense of hay. Hiding that expense behind depreciation does not make it any less expensive.
Expenses related to capital expenditures for equipment purchases are directly related to the management team’s production philosophy.
Once the decision to head down a path that requires equipment purchases is made, it is difficult to find a stopping point. 
PHOTO
Where most operations spend money that is debatable is on things that require tires or tracks. Tractors, hay equipment, loaders, trucks, trailers to just name a few. Staff photo.
Ron Gill
Associate Department Head
Extension Animal Science
Texas A&M AgriLife Extension
