Cow-Calf SPA Results for the Southwest 1991-98*
Although the cow-calf SPA results for the southwest states are from 291 herds and 162
thousand cows, certain relationships are evident (see Table 1). There is a large difference between the
top net income quartile and the low quartile herds. Top herds cost of production is nearly $100 per cow
less than the low net income quartile herds. This large difference is also evident in cost per hundredweight of calf weaned because top herds are also more productive. Unit cost of production of top
producers is 25 percent of low net income herds. To be cost competitive, producers need to strive to
keep production cost under $350 per cow. This is a full cost of production including all cash costs,
depreciation, labor and management cost.
All SPA production values are based on the number of cows exposed, intended to breed and
weaning a calf. SPA performance levels are below coffee shop communicated values that often are
based on exposed cows and only include cash costs.
There are economies of size in cow-calf production. However, only the larger herds can
achieve this economy. There is limited opportunity for making the cow enterprise competitive through
increasing size. Less than one percent of the cow-calf operations in the southwest have more than 500
cows.
The cow-calf production is capital intensive (over $3,000 per cow) and produces a very low
return on investment (ROA) – under two percent. The enterprise cannot support debt that costs 8
percent to ten percent. This reality in part explains why over 90 percent of cowherds are small (less
than 100 cows) and supported by non-cow-calf income. Top net income herds however, included in
this data set produce a competitive ROA. Land appreciation is not included in returns shown in SPA
data.
All herds, irrespective of size, can lower costs of production. Producers should focus on
reducing grazing and feed costs as these costs account for more than 40 percent of total costs. Efficient
grazing systems and reduced supplemental feed used with a controlled breeding season that match
grazing production with cow requirements will lower cost. Producers need to minimize investment in
vehicles and machinery.
Differences in key production measures– weaning percent and pound weaned per exposed cow are not near as great as differences in production costs. Top herds calf crop is only 3 percentage points
(85 percent versus 82 percent) better than low net income herds. Production per cow exposed is 43
pounds greater. Low cost producers must be both production and cost efficient.
The large difference in performance between herds helps validate the necessity to measure and
manage performance. Ranchers can begin the process by completing SPA, use the analysis to identify
areas for change, and then focus on implementation. Using SPA to measure progress toward cost
reduction can be rewarding to owners and employees.
The Extension Service in Texas, New Mexico and Oklahoma conducts SPA workshops in
different areas of their states. A National Cattlemen’s Beef Association (NCBA) certified SPA
Consultant will be present to review the individual ranch SPA report card in a private meeting to
identify areas for change. Call 409-845-8012 for information on workshops and Cow-Calf SPA
software or check the web site http://agecoext.tamu.edu.
Click here for 1998 SPA results from Texas, Oklahoma and New Mexico.
Prepared by James McGrann, Economist, Texas A&M University, 7/18/99