Tuesday, February 18, 2014

Why does my hamburger cost so much?

As copied from http://ebeyfarm.blogspot.com/2014/01/small-beef-ranch.html
"............He sells his cattle for $3.50/lb hanging weight, but what I really wanted to know is how much profit margin he's making vs his input costs.  Kill fee and cut-and-wrap fees are included in that amount. 

HHW (hot hanging weight) is the weight of the warm steer immediately after slaughter.  This includes about 5% extra weight that will be lost as the animal cools and drains blood; typically beef is hung for two to three weeks after slaughter, and during this  hanging time the animal looses water weight.  Hanging weight includes the weight of the head and hooves; what is removed is the hide and the organs.  A typical yield for choice-grade cattle is 62% of live weight. 

So to yield a 900lb HHW you'd need a 1500lb or so live weight steer.  So from what was said it costs about $1.50/lb (grain, hay, corn silage) to put a pound of live weight on a steer.  One pound of live weight is .62lb of hanging weight.  So it costs $1.50 to put on beef that you'll sell for $2.17. 

Well, not really.  the quoted price of $3.5 includes kill fee and cut and wrap fees, which around here are about $60 for the kill and  $0.60/lb for the cut-and-wrap - so the gross proceeds to the farm aren't $3.5, they're $2.9.    And 62% of $2.9 is $1.79.  His gross margin is about $0.29 per pound - he makes about $0.60/cow/day.   If I were to pay someone to feed and water the cows, I'd expect that to take about an hour, or an hour and a half.  At $10/hour, that's a daily labor cost of $10 to $15.  at this rate, that's the entire profit from  51lbs of beef -- or 25 head.     Since I'd expect his production to be about 35 cows a year (70 cows * 50% bull calves) this enterprise survives on the profit from 10 cows after labor costs.  I don't know what he leases the barns for, or whether he owns or leases the other property his cow-calves are on, but there are costs there, too. 

My opinion?  Thats a vanishingly small profit margin.  If a cow dies or doesn't gain as expected, or the lease on the barn goes up, or any one of a number of other things go wrong, there won't be any profit from this entire operation for the year.  It's possible that he makes more money on selling breeding stock or show steers and that makes up for this small margin, but I think his prices are a bargain at his expense.  Great deal for the consumer, considering the beef right now in the supermarket is way north of $3.5 a pound for virtually every cut. 

I sell my beef at $3.5/lb hanging weight exclusive of kill and cut-and-wrap fees, and that extra $0.60/lb is the difference for me between making a profit and making a loss, after considering equipment, fuel, rent and other associated costs. 

He showed samples of his beef, and they looked great.    I'd buy some.  And honestly, after looking at these numbers and his operation, I just might.  I don't think I could produce beef myself any cheaper. 

I may have misstated some of these numbers; I'm going to go back to the farmer and confirm what I've written here to make sure I've got it down correctly........ "

After reading this, and contemplating the hardship of the American cattle farmer,drought, blizzards... I was so glad we started raising our own steers. The cattle ranchers have either had to sell off or slaughter what they couldn't feed, or freak blizzards killed thousands of cows. It'll take at least two years to come back from that, for those that can even afford to buy new stock, for the heifer calves to come to age to breed, and start calving. For most of the ranchers this last few years was it. They folded and went under. I count myself so lucky that we've started raising what we eat, and are on the road to being more self sufficient. 

No comments:

Post a Comment


Try these other posts