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Thinking About Marketing Makes You Money

Thinking about marketing makes you money. The recent Benchmark Beef study conducted by the University of Guelph demonstrated that producers who spend time on marketing were among the most profitable producers.

What kind of marketing decisions were these producers thinking about? There is a whole range of decisions to make around how and when to market your calves. Do you consider retained ownership? Do you participate in a value added sale which features age verification and audited vaccination protocols? How do special sales compare to regular weekly sales for price?

There are many aspects of marketing to think about. One thing you may not be sure about is how much your calves cost you to produce. OMAFRA has several excellent interactive spreadsheet tools to assist you with evaluating various aspects of your farm, including calculating your cost of production on a per cow basis. With this knowledge, you can then estimate the revenue required on a $/lb of beef produced basis to at least cover your costs. A screen shot of the cow calf budget is shown in Figure 1.

Figure1. Screen Shot of Beef Cow Cost of Production Calculator

Text equivalent of graphic

The example below looks at a 100 cow herd which is marketing 600 lb calves through a regular weekly sale for $1.00 per lb. If the producer were to package those calves in a value added sale, he or she could potentially increase returns by 10 %, and sell those calves at $1.10 (a review of special sales over the last few years have shown them to consistently be 10 % higher than other sales held during the same time period). Selling at a special sale and being paid a premium for the work you are likely already doing (like vaccination and age verification) would provide an additional $60 per calf, or in this case $5160 more dollars for the 85 calves marketed (Table 1). By increasing our revenue by 10 % we can change the net return per calf from a negative to a positive value.

Table 1. Comparison of Regular Sale with Value Added Sale

Another major factor impacting profitability is cost of production. Knowing your costs is a critical component of evaluating and improving any economic enterprise. Table 2 shows the combined effect of three levels of market price and three levels of cost of production on net return per calf.

Table 2. Net Return ($/lb) of Calf Produced

The Benchmark Study showed that farmers who think about where and how they are going to market their calves actually received more dollars for their product. As your calf crop grows this summer, spend some time to focus on what you can do to increase the return for your calves this year.

Various OMAFRA farm business management tools can be accessed free of charge on line at:
http://www.omafra.gov.on.ca/english/busdev/bear2000/Budgets/budgettools.htm
The cow-calf budget can be accessed directly at:
http://www.omafra.gov.on.ca/english/busdev/bear2000/Budgets/livestock/cattle/cowcalf.xls

If you prefer, you may request a cd copy of these excel spreadsheet files by phoning OMAFRA at 1-877-424-1300

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