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Illinois beef production costs and returns

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[SEPT. 24, 2004]  URBANA -- Illinois beef producers should find 2004 profitable but may have a hard time equaling the record returns of 2003, according to a University of Illinois Extension study.

"Returns to cattle feeders increased significantly in 2003 compared to 2002 and were at record levels," said Dale Lattz, U of I Extension farm management specialist, who authored the study "Costs to Produce Beef in Illinois--2003."

Higher total returns were due mainly to higher market cattle prices, Lattz noted.

The study was based on information collected by the Illinois Farm Business Farm Management Association record-keeping and business analysis program from 11 beef-feeding farms. The sample farms had no other kind of livestock enterprise and specialized primarily in beef production.

But, Lattz indicated, the results reveal a positive trend for Illinois farmers who have beef enterprises.

"The 2003 level of returns was $26.27 per hundredweight of beef produced above the average returns for the 1994 through 2003 time period," said Lattz. "Total returns have exceeded total economic costs in only five years since 1980, when this study began. Those years were 2003, 1999, 1992, 1990 and 1987."

In 2003, total returns for Illinois beef feeding enterprises exceeded total economic costs by $20.87 per hundred pounds of beef produced.

"This was by far the highest profit margins for these farms since the study began," said Lattz. "The average price received per 100 pounds of beef sold was $84.57 in 2003, up 30 percent from the 2002 figure and the highest price received since this study began.

"The average price paid for feeder cattle replacements in 2003 was $88.13, slightly higher than in 2002. The price paid for feeder cattle replacements was also the highest since this study began. The purchase cost of feeder cattle is subtracted from finished cattle sales in determining total returns per 100 pounds produced."

 

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In addition to higher prices, lower feed costs helped improve producer profitability in 2003.

"Feed costs were $34.65 per 100 pounds produced in 2003 compared to $37.73 in 2002. Excluding the cost of feeder cattle, feed costs were 61 percent of the total cost to produce beef in 2003," said Lattz. "Non-feed costs increased from $21.44 per 100 pounds produced in 2002 to $22.56 in 2003. Maintenance and power costs of $5.67 per 100 pounds produced make up the largest portion of the non-feed costs."

Lattz said that while finished cattle prices are projected to be slightly higher in 2004, due to lower beef production, feeder cattle prices are also projected higher.

"Feed costs are also likely to increase in 2004," he said. "Finished cattle prices are expected to average about $2 more per hundredweight in 2004 compared to 2003. Replacement feeders are expected to average about $10 more per hundredweight in 2004."

Lattz said that if these projections materialize, cattle feeders should continue to cover total costs but below 2003 profit levels.

"The beef industry is experiencing some of its better times in regards to returns, but the cow-calf producer will be reaping more of the profits and cattle feeders less in 2004 compared to 2003," said Lattz.

The full report can be read online at http://www.farmdoc.uiuc.edu/manage/
enterprise_cost/FBM-0170beefcost.pdf
. [To download the Adobe Acrobat reader for the PDF file, click here.]

[University of Illinois news release]

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