By Dr. Kenny Burdine
Running a small cow‑calf operation can be rewarding, but it is not without challenges. Larger farms spread their costs over more cows, making it harder for smaller herds to compete. There also tend to be scale efficiencies related to labor, input purchases and other expenses that make larger operations more economically efficient. But smaller producers can be profitable, and this article focuses on three strategies small operations should consider to improve their profitability.
Keep Overhead Costs in Check
Cow-calf operations are capital intensive by nature, so I chose to use the words “in check”, rather than something more specific. But the reality is that an operation running 30-40 cows can’t have the same overhead structure as one running several hundred. This sounds obvious but I often see new cow-calf operations that are badly overcapitalized from the start. Smaller operations should focus on being lean with respect to equipment, facilities, and other fixed costs. In a lot of cases, this means limiting capital investment and ensuring that the scale of equipment is proportional to the scale of the operation. However, performing custom work with owned equipment is another way to spread that capital investment over more hours of use and add a second income stream. Regardless of what approach is taken, small cow-calf operations must be aware that disproportionately large overhead cost structures can be a major drain on profitability.
Source : osu.edu