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Payroll Defined In The Cattle Industry
DR. ANDREW P. GRIFFITH
KNOXVILLE, TENN.
What do payroll and trees have in common? And, the answer is not paper! Payroll is an easily recognized word. Most people want to be on a payroll while others want to be the person making the payroll. Similarly, many people have heard someone say that “you cannot see the forest for all of the trees.” When in the business of farming, everything is on the payroll and the person who owns the farm has to make sure the payroll is met. Many farmers look at the overall profit of the operation to make sure they are making money. If the net return to the farm is positive then the thought is that things are on the right track. This is an example of looking at the forest and not the trees. However, there are times when a farmer needs to look at the trees instead of the forest. For instance, each acre of crop ground is on the payroll. If there is a 50 acre field that consistently fails to earn a positive return then it should not be on the payroll. The same is true for cattle. If there is a cow or group of cows that are failing to return a profit to the operation then that tree needs to be uprooted so it provides space for a more fruitful tree to take its place.
Staying with the philosophical approach and tying it in to cattle production, each cow or group of cows is an employee of the farm. The owner of those animals pays each cow by providing feed, water, health care, and housing. The cow in return produces calves and nurses those calves until the owner makes a management decision to remove the calf from the cow. The calf then becomes his or her own unit, and the owner makes decisions with that animal that can either garner a positive or negative return. Thus, the point is, sometimes it is important to look at the trees to more fully evaluate the forest. This can be done on an individual basis for small cow herds, and it does not require collecting a bunch of data to micromanage.
Some easy ways of looking at the individual animals and knowing when to remove one from the herd so a more productive and profitable animal can enter the herd can be made easy. The first step is to use some form of pregnancy evaluation shortly after the breeding season. Any open cows or heifers can be quickly removed from the workforce and the payroll. Believe it or not, there are people in society today that produce less than these cows, because these cows can be marketed and value salvaged. The second step can be if they are late bred or not, which can be determined at pregnancy evaluation or after the calving season. The cattle that get bred early are like the people that show up early to work while the cattle that are late breeders are the ones who overslept and showed up late. A person would only keep the slacker if they had no other alternatives. The third evaluation point is weaning. It is easy to see which cows are producing the calves that grow the best and look the part of being good feeder cattle. It is also easy to see the cows that just do not have what it takes to produce superior calves. A producer should weed out the cows that produce inferior calves and attempt to replace them with a cow with more potential.
Here are some quick values based on a simple analysis Dr. Justin Rhinehart and I performed for marketing rate and calving distribution. Our base scenario was an 88 percent marketing rate with 40 percent of the calves born in the first 30 days, 35 percent from day 31-60, and 25 percent from day 61-90. In this analysis the return per cow to variable expenses was $60. An increase in the marketing rate to 92 percent and the calving distribution to 50 percent in the first 30 days, 30 percent from day 31-60, and 20 percent from day 61-90 increased the return to $100 per cow. On the opposite end of the spectrum, a decrease to an 82 percent marketing rate and a calving distribution of 35 percent in the first 30 days, 30 percent from day 31-60, and 35 percent from day 61-90 yielded a return of $7 per head. Performing a simple evaluation of the workforce could be beneficial and may mean making payroll and having more left over as profit. ∆
DR. ANDREW P. GRIFFITH: Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
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