September 14, 2004
COSTS AND RETURNS FOR ILLINOIS BEEF PRODUCERS IN 2003
Total returns in 2003 for Illinois beef feeding
enterprises exceeded total economic costs by $20.87 per 100 pounds
of beef produced on 11 beef feeding farms. This was by far the highest
profit margin for these farms since this study began in 1980. Total
costs exceeded returns by $7.97 per 100 pounds produced in 2002.
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. The 2003 level of returns was $26.27 per 100
pounds beef produced above the average returns for the 1994 through
2003 time period. Figure 1 illustrates average returns, cash operating
costs and total costs for the 1994 through 2003 time period.
Figure 1. Returns and costs to produce beef
on Illinois farms, 1994 - 2003.
HIGHER TOTAL RETURNS
Higher total returns due to higher market cattle prices was the
main factor contributing to the significant improvement in returns
for these enterprises. Total returns per 100 pounds produced increased
from $51.20 in 2002 to $78.08 in 2003. Total returns for 2003 were
the highest on record. The average price received per 100 pounds
of beef sold of $84.57 was 30 percent higher than 2002. This also
was the highest price received since this study began. The average
price paid for feeder cattle replacements in 2003 of $88.13 was
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. Higher inventory prices for
cattle at the end of the year as compared to the beginning also
contributed to the higher returns.
FEED COSTS DECREASE
Feed costs decreased in 2003 as compared to 2002. Feed costs were
$34.65 per 100 pounds produced in 2003 compared to $37.73 in 2002.
Nonfeed 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 makes up the largest portion of the nonfeed costs.
Feed and nonfeed costs totaled $57.21 per 100 pounds produced in
2003. Total costs in 2003 were $4.18 per 100 pounds produced below
the last ten year average of $61.39. Excluding the cost of feeder
cattle, feed costs were 61 percent of the total cost to produce
beef in 2003.
Returns to cattle feeders increased significantly in 2003 compared
to 2002 and were at record high levels.
Higher total returns due to higher market cattle prices were the
main factor for the increased returns. Returns to cattle producers
in 2004 should remain at profitable levels but most likely below
2003 returns. Finished cattle prices are projected to be slightly
higher in 2004 due to lower beef production. However, feeder cattle
prices are also projected higher. Feed costs are also likely to
increase in 2004. 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 per hundredweight more.
If these projections materialize, returns to cattle feeders should
continue to cover total costs but below 2003 profit levels. The
beef industry is experiencing some of it's 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.
The author would like to acknowledge that data
used in this study comes from the local Farm Business Farm Management
(FBFM) Associations across the State of Illinois. Without their
cooperation, information as comprehensive and accurate as this would
not be available for educational purposes. FBFM, which consists
of 6,000 plus farmers and 62 professional field staff, is a not-for-profit
organization available to all farm operators in Illinois. FBFM field
staff provide on-farm counsel with computerized recordkeeping, farm
financial management, business entity planning and income tax management.
For more information, please contact the State FBFM Office located
at the University of Illinois Department of Agricultural and Consumer
Economics at 217-333-5511 or visit the FBFM website at www.fbfm.org.
A more thorough report can be found at the University
of Illinois farmdoc website:
Issued by: Dale Lattz, Department of Agricultural and Consumer Economics