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,” says Kenny Burdine, University of Kentucky livestock agriculture economist.
However, Burdine stresses that smaller producers can be highly profitable by shifting their mindsets from volume to efficiency. He encourages producers to consider these three strategies:
1. Keep Overhead Costs in Check
Small operations often fail because they are overcapitalized — meaning they have too much money tied up in equipment and buildings for the number of cows they own.
“Cow-calf operations are capital intensive by nature, so I chose to use the words ‘in check,’ rather than something more specific,” Burdine says. “But the reality is that an operation running 30 to 40 cows can’t have the same overhead structure as one running several hundred.”
- Be Lean: An operation with 30 cows shouldn’t have the same tractor or baler as one with 300.
- Proportional Investment: Ensure the scale of your equipment matches the scale of your herd.
- Side Hustles: If you do own expensive equipment, consider performing custom work for neighbors to spread the cost 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,” he stresses.
2. Outsource Strategically to Save Time and Money
You don’t have to do everything yourself. In fact, doing it all might be costing you money.
“The first area that comes to mind is hay production,” Burdine says. “It may be more economical for a small cow-calf operation to purchase hay, rather than own hay equipment and devote land and time resources to producing it themselves.”
Read more about hay production:
Three Ways To Be More Profitable Making Hay
Why Should I “Quit Making Hay?”
10 Reasons You Should Quit Making Hay
In some areas, hay is not easy to source and may require significant effort. But by spending time developing relationships with hay producers and planning for winter feeding needs well in advance, the operation may be able to avoid significant hay production expenses.
Burdine suggests outsourcing other farm operations may also be worth consideration:
- Transportation: Hire a hauler instead of maintaining a truck and trailer that sits idle 90% of the year.
- Heifer Development: Purchase bred heifers and focus on terminal production rather than the high cost of raising your own replacements.
- Time Management: Outsourcing frees up time for off-farm employment or higher-value farm tasks.
3. Explore Value-Added Marketing Opportunities
Since small farms can’t compete on cost-per-head, they must compete on revenue-per-head.
- Commingled Sales: Sell in larger, uniform groups through cooperative sales to capture “large lot” price premiums.
- Health Programs: Participate in certified preconditioning programs to prove the value of your calves.
- Direct-to-Consumer: Explore freezer beef or farmers’ markets. Smaller herds are perfectly positioned to tell a local story consumers are willing to pay a premium for.
Small cow-calf operations should recognize they are unlikely to successfully compete with large operations on scale and cost efficiency. For that reason, they need to approach their operations differently and usee the unique advantages that come with being lean and flexible.
“By carefully managing their overhead cost structures and outsourcing operations that can be done more efficiently by other operations, they have the potential to see significant cost benefits,” Burdine summarizes. “And by exploring value-added marketing opportunities, they may be able to capture revenue benefits as well.”
Your Next Read: Marketing Options for Small Producers
