Cattle Economics: Winners and Losers

By Dr. Andrew Griffith

The society we live in says a person is either a winner or a loser, important or not important, essential or non-essential, and the list goes on. However, this seems like a somewhat naïve over simplification of a person’s “status.” People say things are either black or white and there certainly are cases of things that are very definitive. However, there are an infinite number of shades of gray that are between black and white and this can apply to many aspects of life. For instance, many business owners would classify themselves as winners or losers based on profitability of the business, which could apply to the cattle business also.

Thinking from a profitability standpoint, what will make a cattle producer a winner versus a loser in 2025? Is there anything between being a winner or a loser? Hopefully, this article will address some aspects to consider to determine if a producer was a winner or loser in the cattle business in 2025.

The University of Tennessee has published the 2025 cow-calf and stocker/backgrounding budgets for use by producers. These budgets can easily be used in any region of the United States, but the default values do represent the Mid-South and Tennessee more so than other regions of the country. The budget estimates production expenses of $750 per cow-calf pair in 2025 with pasture and hay production accounting for $527 of that total and labor accounting for $120 of the cost. Total variable expense jumps to $816 per pair after interest and marketing expenses are added. Fixed expenses are estimated at $348 resulting in a total expense of $1,164 per pair.

The aforementioned production cost for a cow-calf operation may be high for some and low for others, but it is a good starting point for those who do not know actual cost. Ideally, a producer would use their actual cost projections to calculate an estimated cost of production in 2025. On the revenue and profit side of the equation, the return to variable expenses is estimated to be $418 per pair while the return to land and management is estimated at $70 per pair. As previously stated, a producer using their own cost and revenue estimates may have drastically different values than those presented here.

What does this have to do with being a winner or a loser in the business? Some producers would call themselves winners if they make a profit and losers if they fail to make a profit. Alternatively, there are others who would set a profit objective and only call themselves a winner if they meet or exceed that profit objective and a loser otherwise. For example, a person may set a profit objective of $200 per head, which means they would need a total revenue per pair of $1,364 for the Tennessee budget estimates. They would be a winner at this level or higher and a loser otherwise. However, what is the difference between $200 of profit and $199 of profit? Even if it is a 1,000 head operation, that would only be $1,000 in a $200,000 profit operation. Thus, there is probably some gray area from this perspective.

Profit is certainly one thing cattle producers can hang their hat on as far as being a winner or lower, but there may be other goals that determine if a producer is a winner or a loser. For instance, if the operation has employees other than the owner then maintain a certain percentage of the workers may contribute to being a winner or loser. There may be certain production goals such as weaning weight or quantity of bulls meeting the criteria to qualify as a herd bull in a seedstock operation. There could be an infinite number of goals and objectives, but all of these are important in determining if a person is a winner or loser or maybe even something in between.

Beyond being a winner or a loser, essential or nonessential or whatever other comparison people want to throw out there, it is important to define goals in the cattle business. Goals that are defined provide a mark to shoot for. They also provide a mark to gauge successes and failures.