Economic Research Service 1

United States

Department

of Agriculture

www.ers.usda.gov

Electronic Report from the Economic Research Service

Statistical

Bulletin

Number

974-3

November

2001

Characteristics and Production

Costs of U.S. Cow-Calf

Operations

Sara D. Short1

In this report...Differences in regional conditions were

the chief influence on variations in cow-calf production

costs across the United States. Cow-calf operators in the

West and Southern Plains have significant cost

advantages over operators in other regions because, with

a longer grazing season, their herds require less

supplemental forage during the winter. The larger

acreage size of operations in the West and Southern

Plains also can support more cows and take advantage

of economies of scale (spreading the fixed investment

over more units of production). Because of the harsher

climate, operations in the North Central region and

Northern Plains spend significantly more to maintain their

herds. Cowherds in the Southeast are primarily on small

and part-time operations. These findings are based on

the 1996 Agricultural Resource Management Study

(ARMS), the most recent national survey of cow-calf

producers.

Keywords: Cow-calf, operation characteristics,

production practices, costs of production, cost variation.

Acknowledgement: The author appreciates the reviews

and suggestions of her colleague William D. McBride.

1

Agricultural Economist, Resource Economics Division,

Economic Research Service, USDA
Overview

2 Economic Research Service

Beef cow-calf production is relatively

widespread and economically important in most

of the United States. According to the 1997

Census of Agriculture, about a million farms had

inventories of cattle and calves that generated

$40.5 billion in sales, accounted for 21 percent

of the total market value of agricultural products

sold in the United States, and ranked first in

sales among all commodities.

Four dominant cattle-raising systems have been

identified in the United States—the cow-calf

feeder, cow-calf-slaughter, stocker purchaseslaughter sales, and stocker purchase-feeder

sales systems (Boykin et al.). In the commercial

cow-calf feeder system, animals are sold at

weaning, shortly thereafter, or when they are a

year old (i.e., yearlings). Because profit is

related to fluctuating forage supplies and cattle

prices, beef cow systems may be modified.

Although lightweight calves may be sold

following weaning, if forage is available, they

may be carried longer and into a stocker phase.

Operators can sell calves at lighter weights to

stocker or feedlot operators who graze them

briefly on pasture and crop residue before

placing them in feedlots. Other operators carry

calves to the yearling stage, expecting weight

gains and possible price increases. According to

survey results, about 70 percent of U.S.

operations follow the cow-calf feeder system of

cattle raising (Boykin et al.).

Production costs and feeder cattle prices are

major profit factors of cow-calf production.

Feeder cattle prices are affected by prices paid

for fed cattle which, in turn, are affected by

consumer demand for beef as reflected in retail

beef prices. Actions on the part of cow-calf

producers to increase (decrease) production in

response to high (low) beef prices are slow in

taking effect and are likely to intensify the

perceived need for change during the interim,

promoting overreaction (Gilliam). This helps to

explain the periodic swings in beef cattle

numbers, a phenomenon called the cattle cycle.

Because cattle are routinely transported, changes

in cattle prices tend to be similar around the

country (Gilliam). By contrast, changes in

annual costs of production are more variable,

particularly because of differences in the cost of

providing forage for grazing, the principal feed

source in cow-calf production. For example,

cropland pasture constitutes more than 25

percent of the total area grazed in the eastern

half of the United States, compared with less

than 2 percent in the western half. Cropland

pasture is usually fertilized regularly and tilled

periodically to prepare for reseeding (Gilliam).

Thus, petroleum price increases have a greater

impact on costs of grazing resources in the

eastern half of the Nation than in the western

half.

Costs of producing or purchasing feed

frequently account for more than half of the total

direct cost in cow-calf production. Types and

costs of feed used in cow-calf production are

quite variable, however, because of the broad

range of materials containing cellulose, which

cows can easily digest. Cow-calf herds are

grazed not only on pasture and range acreage,

but also on land used primarily for other

purposes. Crop residues are frequently grazed

for limited periods following harvest of corn,

grain sorghum, soybeans, small grains, hay, etc.

Although beef cows are kept on pasture or range

throughout the year in much of the Nation, few

producers depend on grazing alone to furnish a

year-round supply of forage for their cattle. In

parts of the country, snow cover prevents

grazing occasionally during the winter; and in

other parts, growth or nutritive content of

pasture and range plants varies during the year

due to plant dormancy and temperature or

moisture fluctuations. Grazing during these

nonproductive periods would require too much

area per cow to be economically feasible

(Gilliam). Thus, most producers feed their cows

some harvested forage almost every year.

Operation characteristics and production costs of

operations are compared using the cow-calf

feeder system. Operations are grouped

according to regions (fig. 1), enterprise size,

production costs, and farm typology (glossary).

Data are obtained from the 1996 Agricultural

Resource Management Study (ARMS) of U.S.

cow-calf operations. Only cattle operations

producing 10 or more weaned calves were
Economic Research Service 3

surveyed in the ARMS. To isolate resources

used in the cow-calf feeder system, costs

associated with cattle finishing were excluded in

the ARMS data and operations purchasing

calves for backgrounding were deleted from the

analysis. Of the respondents to the 1996 ARMS,

1,151 reported using the cow-calf feeder system

of cattle raising. The ARMS uses a multiframe

stratified sample in which each operation

surveyed represents a number of similar

operations. These operations represented

296,759 operations and a beef cow inventory of

22 million head (80 percent of the number of

farms in the 1997 Census of Agriculture

classified as beef cattle ranching and farming

with 10 or more beef cows not fattening

cow/calves on grain and concentrates, and 95

percent of the beef cow inventory on these same

farms).

North

Central

Southern

Plains

Southeast

West

Figure 1 Regions

The larger acreage size of cow-calf operations in the West and

Southern Plains allows operations there to support more cows and

take advantage of economies of scale.

Northern

Plains
Cost of Production Components

4 Economic Research Service

Operating plus ownership costs are used in the analysis of production costs. These costs indicate the

cow-calf operation’s ability to meet short-term debt obligations and to replace capital assets as needed,

and thus stay in business.

Operating costs include major inputs such as

feed, veterinary and medicine, bedding and

litter, marketing, customs operations, fuel, lube,

electricity, repairs, and interest on operating

inputs. Ownership costs include the annualized

cost of maintaining the capital investment

(depreciation and interest) in cow-calf facilities

and equipment, and costs for non-real-estate

property taxes and insurance.

The cost of purchased feed items, veterinary and

medicine, bedding and litter, marketing, and

custom operations are developed by

summarizing survey responses about the total

amount paid for these inputs. Fuel, lube,

electricity, and repair costs are estimated using a

combination of survey information and

engineering formulas. Detailed information is

collected regarding the machinery, buildings,

and equipment used in production. The data

include hours of use, age, type, and size of

machinery, buildings, and equipment items.

Engineering formulas are modified periodically

to reflect technological change. The interest on

operating inputs is the opportunity cost of the

investment in total operating inputs during the

year.

Capital recovery is an estimate of the annual

capital expenditure necessary to replace

machinery over its assumed ownership period

and includes an interest charge on unrecovered

capital. Non-real-estate taxes and insurance for

the whole operation are allocated to the cow-calf

enterprise according to the gross margin of cowcalf production relative to other farm enterprises.

All capital costs are computed using methods

recommended by the American Agricultural

Economics Association (AAEA) Task Force on

Commodity Costs and Returns (AAEA

Handbook).

Official U.S. Department of Agriculture cost of

production estimates for cow-calf operations

(www.ers.usda.gov/data/costsandreturns/car/cow

calf2.htm) include a charge (i.e., an opportunity

cost) for owned forage resources, including

pasture and harvested forage, along with land

and unpaid labor. These charges are excluded

in this analysis. Cow-calf operations often make

use of pasture and other forage resources that

have little or no alternative use. Costs of

harvesting owned forage resources were

included in this report by charging a custom rate

on the amount of hay harvested (Doane’s).
Cow-Calf Production Costs Influenced Primarily by Regional Factors

Economic Research Service 5

Cow-calf operators in the West and Southern Plains had significant cost advantages because climatic

conditions allow for a longer grazing season, requiring less supplemental forage during the winter.

Forty-nine percent of cow-calf operations were

located in the Southern and Northern Plains

combined and accounted for 51 percent of the

total number of weaned calves (table 1). Forty

percent of the operations were in the North

Central and Southeast regions combined and

accounted for 27 percent of the total number of

weaned calves. Only 10 percent of operations

were in the West, and these operations produced

over 20 percent of the weaned calves.

Operations in the North Central region, Northern

Plains, and Southeast fed significantly more tons

of harvested forage per bred cow than operations

in the Southern Plains and West (table 1). The

higher feeding rate of harvested forage was

likely due to climatic conditions, such as snow

in the North Central region and the Northern

Plains and temperature or moisture fluctuations

in the Southeast (Gilliam). In the North Central

region and Northern Plains, snow cover prevents

grazing at least occasionally during the winter.

In the Southeast, growth or nutritive content of

pasture and range plants varies during the year

due to temperature or moisture fluctuations, so

adequate grazing during nonproductive periods

require too much area per cow to be

economically feasible (Gilliam).

Cow-calf operators in the West and Southern

Plains had some significant cost advantages over

operators in the North Central region, Northern

Plains, and Southeast (fig. 2).

More than 80 percent of West and Southern

Plains cow-calf operators had operating plus

ownership costs less than $600 per bred cow,

compared with 72 percent in the Southeast, 71

percent in the Northern Plains, and 62 percent in

the North Central region. Average total

operating and ownership costs per bred cow

were highest in the North Central region (table

2). In the North Central region, operating costs

were higher because of the additional costs of

supplemental feed and forage. Ownership costs

were driven higher by significantly greater

capital recovery costs for tractors, vehicles, and

equipment. In the North Central region, winter

Figure 2 Regional cumulative distribution of cowcalf operating plus ownership costs, 1996

0

200

400

600

800

1000

0 20 40 60 80 100

Percent of operations

Dollars per bred cow

North Central

Northern Plains

Southeast

Southern Plains

West

Source: 1996 USDA Agricultural Resource Management Study.
6 Economic Research Service

feeding is done in centralized locations, and

more tractors, vehicles, and equipment are used

to process and distribute feed and handle

manure. Also, operations in this region have a

smaller average herd size, meaning that fixedcost items like equipment were spread over

fewer units of production than in other regions.

Despite the relatively harsher climate, operations

in the North Central region, Northern Plains, and

West had some reproductive and productive

advantages over operations in the Southern

Plains and Southeast regions, including higher

weaning percentages and weaning more pounds

per bred cow (table 1). Many of these

operations may have been more closely

managed, since more than 70 percent of

operations in the North Central region, Northern

Plains, and West had one set calving season.

Many operators in these regions must deal with

subfreezing temperatures and/or snow cover in

the winter. As a result, operators minimize

environmental stress by scheduling calving

during periods of moderate temperatures and

precipitation.

Cow-calf production was a less important

component of the overall operation business in

the Southeast (table 3). The value of cattle

production (glossary) on these operations

accounted for 23 percent of the total value of

farm production (glossary), compared with 41

percent in the Southern Plains, 36 percent in the

West, 35 percent in the Northern Plains, and 31

percent in the North Central region. Cow-calf

production was likely not the primary enterprise

for operations in the Southeast. These

operations had much less acreage (averaging

318 acres) than those in the other four regions.
Economic Research Service 7

Table 1—Performance and input use of cow–calf operations, by region, 1996

Item Units North Central (a) Southern Plains

(b)

Northern Plains

(c) Southeast (d) West (e)

Number of operations 65,079 87,400 60,310 53,489 30,481

Beef cow inventory 3,257,319 6,792,631 4,549,566 3,081,265 4,390,904

Share of ARMS percent

 Cow-calf operations 22 29 20 18 10

 Weaned calves 15 28 23 12 21

Size number

 Bred cows 50 79 78 57 146

 Weaned calves 44 60 72 43 132

 

Calving seasons percent of operations

 One 59 *19 83 na 85

 Two 12 19 na na na

 None 29 61 na 67 na

Reproduction performance percent

 Calf death loss 5 c 4 d 4 a d 5 b c 4 b c

 Weaning percentage 87 b c d e 76 a c e 93 a b d e 75 a b c e 91 a c d

 Female replacement rate percentage 11 c e *9 c e 20 a b d 9 c e 16 a b d

 

Production performance

 Average age at weaning months 7 e 8 7 7 e 8 a d

 Pounds weaned per bred cow 437 b c d e 381 a c e 479 a b d 375 a b e 475 a b d

 

Labor efficiency hours per bred cow

 Paid 2 b d e *5 a c *2 b d e 4 a c 4 a c

 Unpaid 17 c e 12 c e 22 a b d 15 a b e 24 a b d

 

Harvested forage efficiency tons per bred cow

 3.38 b e 1.38 a c d e 3.25 b e 3.09 b e 2.37 a b c d

Coefficient of Variation (CV) = (Standard Error/Estimate)x100. * CV is greater than 25 and less than or equal to 50.

na indicates value is not available due to no observations, an undefined statistic, or reliability issues.

Rounded percents may not add to 100.

a, b, c, d, e indicate that estimates are significantly different from the indicated region above at the 90 percent or better level using the

t-statistic.

Source: 1996 USDA Agricultural Resource Management Study.
8 Economic Research Service

Table 2—Cow–calf production costs and returns, dollars per bred cow, by region, 1996

Item North Central (a) Southern Plains

(b)

Northern Plains

(c) Southeast (d) West (e)

Value of production 245.69 cde 233.29 cde 304.12 abd 191.91 abce 291.28abcd

 

Operating costs

 Feed

 Concentrates and other feed 28.39 bcde 44.02 acde 20.20 ab 20.97 ab 17.22 ab

 Supplemental feed 40.32 bcde #1.25 acde 21.39 abe 16.25 abe 10.42 abcd

 Purchased harvested forages *8.94 e 13.14 e *12.21 e *8.00 e 22.72 abcd

 Rented cropland pasture na *5.96 cde *2.64 bd #0.59 bce *2.24 bd

 Rented private pasture 14.14 bcde 22.99 ad 31.06 ade 5.05 abce 20.87 acd

 Public land na #0.66 ce 2.23 bd 0.00 ce #9.37 bd

 Total purchased feed cost 98.94 d 88.02 d 89.74 d 50.86 abce 82.84 d

 Veterinary and medicine 35.65 bcde 16.69 ac 21.96 abde 16.08 ac 17.55 ac

 Bedding and litter 1.06 bcde *0.13 ae *0.22 ae *0.33 a *0.56 a

 Marketing 4.10 bcde 6.68 a 6.08 a 5.51 a 6.32 a

 Custom operations 35.48 bd 21.99 ace 34.11 bd 24.95 ac 30.56 b

 Forage harvesting charge 37.59 bc 18.70 acde 48.61 b 45.26 b 41.89 b

 Fuel, lube, and electricity 18.75 ce 21.30 c 28.98 abde 17.29 ce 22.10 cd

 Repairs 25.75 e 28.79 28.53 e 21.25 18.75 ac

 Interest on operating inputs 12.12 bcd 8.30 ace 9.77 abe 9.15 ae 12.07 bcd

 Total operating costs 269.45 bde 210.61 ac 267.99 bde 190.68 ace 232.64 acd

 

Ownership costs

 Capital recovery 202.20 bcde 120.08 ade 129.31 ae 156.50 abe 71.32 abcd

 Holding facilities 0.01 bde 0.01 acd 0.01 bde 0.01 abce 0.01 acd

 Feed storage facilities 5.92 be #0.76 ac *4.30 be *4.14 e 0.96 acd

 Tractors, vehicles, equipment 147.58 bcde 59.42 acde 91.78 abe 97.87 abe 38.69 abcd

 Breeding animals 48.69 bce 59.89 ace 33.21 abd 54.48 abe 31.66 abd

 

 Non-real-estate property taxes and insurance 42.11 bde 21.18 ace 42.48 ad 26.63 ace 35.45 abd

 Property taxes 4.44 bde 2.64 ae *4.24 de *1.85 ace 6.89 abcd

 Insurance 37.67 bde 18.54 ace 38.24 bd 24.78 b 28.56 ab

 Total ownership costs 229.07 bcde 136.94 acde 160.14 abe 177.63 abe 98.70 abcd

 

Total operating and ownership costs 498.52 bcde 347.55 ac 428.13 abde 368.31 ac 331.34 ac

 

Returns above

 Operating costs @-23.75 ce @22.68 *36.13 a @1.24 e 58.64 ad

 Operating and ownership costs -252.82 bcde -114.27 ade -124.02 ae -176.40 abe *-40.06 abcd

Coefficient of Variation (CV) = (Standard Error/Estimate)x100. * CV is greater than 25 and less than or equal to 50. # CV is greater

than 50 and less than or equal to 75. @ CV is above 75.

a, b, c, d, e indicate that estimates are significantly different from the indicated region above at the 90 percent or better level using the

t-statistic.

Source: 1996 USDA Agricultural Resource Management Study.
Economic Research Service 9

Table 3—Cow–calf operator and operation characteristics, by region, 1996

Item Units North Central (a) Southern Plains

(b)

Northern Plains

(c) Southeast (d) West (e)

Age distribution percent

 Less than 50 years na *24 47 24 37

 50 years or more na 76 53 76 63

Operator education percent

 High school or less 79 43 51 74 42

 Attended college na *23 na na 34

 Completed college na 34 na na 24

Sales class percent

 $19,999 or less 66 66 na 65 29

 $20,000-$49,999 na na na 20 18

 $50,000 or more na na 39 15 54

Production specialty percent

 Beef, hogs, sheep 91 93 64 64 75

 Other livestock na na na na na

 Cash grains na na 35 na 15

 Other na na na 26 na

Financial position percent

 Favorable *38 51 54 60 57

 Marginal income na 40 na 35 35

 Marginal solvency na na na na na

 Vulnerable na na na na na

Ranch organization percent

 Individual 95 92 90 86 78

 Partnership na na na na 12

 Corp or Co-op na na na na 10

Typology percent

 Retirement and residential/lifestyle na 44 na 50 23

 Farming occupation/lower-sales na 44 50 44 44

 Farming occupation/higher-sales na na na na 17

 Large and very large family farms na na na na 14

Cattle production value dollars 14,334 b c e 24,447 a d e *44,086 a d 12,312 b c e 52,706 a b d

Farm production value dollars 42,592 c e 59,494 c e 124,818 a b d 52,744 a b c e 147,782 a b d

 

Farm debt-to-assets ratio *0.08 c *0.09 c 0.19 a b d e 0.06 c e 0.09 d e

 

Total acres operated 364 b c e 1,030 a c d e *2,148 a d 318 a b c e 3,282 a b d

Coefficient of Variation (CV) = (Standard Error/Estimate)x100. * CV is greater than 25 and less than or equal to 50.

na indicates value is not available due to no observations, an undefined statistic, or reliability issues.

Rounded percents may not add to 100.

a, b, c, d, e indicate that estimates are significantly different from the indicated region above at the 90 percent or better level using the tstatistic.

Source: 1996 USDA Agricultural Resource Management Study.
Operation Performance, Input Use, Costs Varied by Enterprise Size

10 Economic Research Service

Operations with 250 or more bred cows had significantly lower total operating and ownership costs;

indicative of the economies of scale experienced as the enterprise size increased.

To analyze the relationship between enterprise

size and production costs, cow-calf operations

were divided into four enterprise-size groups.

Fifty-nine percent of cow-calf operations had

operations with fewer than 50 bred cows (table

4). These operations accounted for 22 percent of

the total number of weaned calves. The 6

percent of operations with 250 or more bred

cows accounted for 29 percent of the 1996

weaned calf crop.

Operations with 100 or more bred cows fed

significantly fewer tons of harvested forage per

bred cow than all other operations (table 4).

Operations with 100-249 bred cows fed 2.3 tons

of harvested forage per bred cow, while those

with 250 or more bred cows fed only 1.9 tons.

This is indicative of the regional distribution of

the size groups. Thirty percent of operations

with 100-249 bred cows were located in the

Southern Plains. Operations in the West

comprised 21 percent of 100-249 cow operations

and 31 percent of the largest operations. A

milder climate with a longer grazing season in

the Southern Plains and portions of the West

reduce the need for supplemental forage.

Operations with 250 or more bred cows had

significantly lower total operating and

ownership costs than all other operations,

averaging about $196 per bred cow (table 5).

Total operating and ownership costs declined

across all size groups (fig. 3).

Many operating costs declined with enterprise

size, including costs for: concentrates and other

feed; purchased harvested forage; veterinary and

medicine; bedding and litter; custom operations;

fuel, lube, and electricity; repairs; and interest on

operating inputs. Many ownership costs

likewise declined with enterprise size, including

costs for: feed storage facilities; tractors,

vehicles, and equipment; breeding animals;

property taxes; and insurance. This is indicative

of the economies of scale (i.e., spreading costs

over more units of production) experienced as

the size of the enterprise increases.

Cow-calf production was a more important

component of the overall business on operations

with 250 or more bred cows (table 6). The value

of cattle production on these operations

accounted for 57 percent of the total value of

farm production, compared with about 22

Figure 3 Operating and ownership costs by 

enterprise size, 1996

0

100

200

300

400

500

600

 < 50 50-99 100-249 >=250

Bred cows

Dollars per bred cow

Operating costs

Ownership costs

Total costs

Source: 1996 USDA Agricultural Resource Management Study.
Economic Research Service 11

percent on operations with fewer than 50 bred

cows, 25 percent on operations with 50-99 bred

cows, and 35 percent on operations with 100-

249 bred cows. Operations with 250 or more

bred cows consisted of significantly larger total

acres operated (e.g., 8,744 acres versus 340

acres in operations with fewer than 50 bred

cows), typical of the large operations in the

Southern Plains and West.

Table 4—Performance and input use of cow–calf operations, by enterprise size, 1996

Enterprise size (number of bred cows)

Item Units Fewer than 50 (a) 50-99 (b) 100-249 (c) 250 or more (d)

 

Number of operations 176,067 59,615 44,622 16,456

Beef cows inventory 4,648,041 4,040,529 6,630,354 6,752,762

Share of ARMS percent

 Cow-calf operations 59 20 15 6

 Weaned calves 22 19 30 29

Size number

 Bred cows 26 a b c 69 a c d 150 a b d 420 a b c

 Weaned calves 23 a b c 60 a c d 127 a b d 330 a b c

 

Calving seasons percent of operations

 One 43 55 59 53

 Two 10 18 13 na

 None 47 27 28 na

Reproduction performance percent

 Calf death loss 5 b 4 a 4 4

 Weaning percentage 88 d 87 d 85 79 a b

 Female replacement rate percentage 10 12 15 13

 

Production performance

 Average age at weaning months 8 7 7 7

 Pounds weaned per bred cow 439 439 d 439 400 b

 

Labor efficiency hours per bred cow

 Paid 2 c d 2 d 3 a d 6 b c

 Unpaid 30 c d 25 c d 18 a b d 10 a b c

 

Harvested forage efficiency tons fed per bred cow

 3.02 c d 3.10 c d 2.32 a b d 1.96 a b c

 

Regional distribution percent

 North Central 25 27 na na

 Southern Plains 30 26 30 na

 Northern Plains 18 23 27 na

 Southeast 23 13 na na

 West 5 11 21 31

na indicates value is not available due to no observations, an undefined statistic, or reliability issues.

Rounded percents may not add to 100.

a, b, c, d indicate that estimates are significantly different from the indicated enterprise size above at the 90 percent or better level

using the t-statistic.

Source: 1996 USDA Agricultural Resource Management Study.
12 Economic Research Service

Table 5—Cow–calf production costs and returns, dollars per bred cow, by enterprise size, 1996

Enterprise size (number of bred cows)

Item Fewer than 50 (a) 50-99 (b) 100-249 (c) 250 or more (d)

Value of production 253.84 259.69 254.78 255.87

 

Operating costs

 Feed

 Concentrates and other feed 32.41 c 30.40 25.47 a 26.88

 Supplemental feed 13.87 b 24.09 a d 16.57 d 9.03 b c

 Purchased harvested forages 19.26 c d 16.15 11.18 a *10.39 a

 Rented cropland pasture *3.20 *5.44 4.06 *3.41

 Rented private pasture 14.49 b c 22.28 a 24.71 a 19.44

 Public land *0.21 b d *1.44 a d #4.39 3.05 a b

 Total purchased feed cost 83.44 b 99.79 a d 86.39 d 72.19 b c

 Veterinary and medicine 30.07 c d 24.44 c d 16.34 a b 16.25 a b

 Bedding and litter 0.81 c d *0.58 d *0.23 a *0.18 a b

 Marketing 6.53 b 5.77 a 6.00 5.61

 Custom operations 42.08 b c d 29.88 a d 25.58 a 21.77 a b

 Forage harvesting charge 39.91 42.02 c d 34.27 b 31.42 b

 Fuel, lube, and electricity 30.58 b c d 22.81 a d 21.43 a d 16.80 a b c

 Repairs 30.60 c 27.89 c 22.39 a b *22.90

 Interest on operating inputs 11.67 c d 10.90 c d 9.38 a b 9.05 a b

 Total operating costs 275.69 c d 264.08 c d 222.01 a b d 196.17 a b c

 

Ownership costs

 Capital recovery 238.32 b c d 151.75 a c d 104.35 a b d 67.01 a b c

 Holding facilities 0.02 b c d 0.01 a c d 0.01 a b d 0.00 a b c

 Feed storage facilities 4.37 c 3.11 2.27 a #1.96

 Tractors, vehicles, equipment 177.09 b c d 101.54 a c d 57.10 a b d 25.00 a b c

 Breeding animals 56.85 b c d 47.09 a d 44.97 a 40.05 a b

 

 Non-real-estate property taxes and insurance 62.96 b c d 36.75 a c d 25.21 a b d 15.79 a b c

 Property taxes 7.84 b c d 3.86 a d 3.29 a *2.19 a b

 Insurance 55.12 b c d 32.89 a c d 21.92 a b d 13.61 a b c

 Total ownership costs 283.84 b c d 179.73 a c d 122.47 a b d 79.67 a b c

 

Total operating and ownership costs 559.53 b c d 443.81 a c d 344.49 a b d 275.84 a b c

 

Returns above

 Operating costs @-21.85 b c d @-4.39 a c d *32.77 a b d *59.70 a b c

 Operating and ownership costs -305.69 b c d -184.12 a c d -89.71 a b d @-19.97 a b c

Coefficient of Variation (CV) = (Standard Error/Estimate)x100. * CV is greater than 25 and less than or equal to 50. # CV is greater

than 50 and less than or equal to 75. @ CV is above 75.

a, b, c, d indicate that estimates are significantly different from the indicated enterprise size above at the 90 percent or better level

using the t-statistic.

Source: 1996 USDA Agricultural Resource Management Study.
Economic Research Service 13

Table 6—Cow–calf operator and operation characteristics, by enterprise size, 1996

Enterprise size (number of bred cows)

Item Units Fewer than 50 (a) 50-99 (b) 100-249 (c) 250 or more (d)

Age distribution percent

 Less than 50 years 30 35 30 42

 50 years or more 70 65 70 58

Operator education percent

 High school or less 65 48 42 32

 Attended college 19 *24 23 32

 Completed college 16 28 35 36

Sales class percent

 $19,999 or less 79 37 na na

 $20,000-$49,999 12 40 na na

 $50,000 or more 9 24 61 91

Production specialty percent

 Beef, hogs, sheep 78 80 81 90

 Other livestock na na na na

 Cash grains *10 10 11 na

 Other na na na na

Financial position percent

 Favorable 51 54 55 51

 Marginal income 41 39 32 38

 Marginal solvency na na na na

 Vulnerable na na na na

Ranch organization percent

 Individual 92 91 84 67

 Partnership na na na na

 Corp or Co-op na na na na

Typology percent

 Retirement and residential/lifestyle 49 33 na na

 Farming occupation/lower-sales 44 54 51 na

 Farming occupation/higher-sales na na 17 30

 Large and very large family farms na na na 31

Cattle production value dollars 7,823 b c d 19,581 a c d 50,636 a b d 186,885 a b c

Farm production value dollars 36,124 b c d 77,644 a c d 143,617 a b d 325,359 a b c

 

Farm debt-to-assets ratio 0.07 0.10 *0.13 *0.09

 

Total acres operated 340 b c d 1,008 a c d 2,403 a b d 8,744 a b c

Coefficient of Variation (CV) = (Standard Error/Estimate)x100. * CV is greater than 25 and less than or equal to 50.

na indicates value is not available due to no observations, an undefined statistic, or reliability issues.

Rounded percents may not add to 100.

a, b, c, d indicate that estimates are significantly different from the indicated enterprise size above at the 90 percent or better level

using the t-statistic.

Source: 1996 USDA Agricultural Resource Management Study.
Location, Forage Use, and Herd Size Distinguished Low-Cost from High-Cost Operations

14 Economic Research Service

Low-cost operations showed the advantages of economies of scale, as the average operation size

was more than four times that of high-cost operations.

Estimated operating and ownership costs per

bred cow were ranked from lowest to highest to

form a weighted cumulative distribution of

operations. To analyze factors contributing to

variation in these production costs, cow-calf

operations were divided into low-, mid-, and

high-cost groups. Twenty-five percent of cowcalf operations had costs per bred cow of

$319.46 or less (fig. 4).

 These low-cost operations accounted for 45

percent of the total number of weaned calves

(table 7). Low-cost operations had significantly

larger cowherds than high-cost operations, with

an average of 144 bred cows versus only 35 for

high-cost operations. High-cost operations,

those with per bred cow costs of $586.28 or

more, accounted for 13 percent of weaned

calves.

Harvested forages represent a major expense in

cow-calf production. Low-cost operations fed

significantly fewer tons of harvested forage than

all other operations (table 7). High-cost

operations fed 4.96 tons of harvested forage per

bred cow, about four times the amount fed by

low-cost operations. This difference is likely

due to regional differences in production

conditions that were discussed earlier. About a

third of the high-cost operations were located in

the North Central region, while a fourth were

located in the Northern Plains (fig. 5). The

freeze-free growing season in the North Central

region and in the Northern Plains is less than 5

months, requiring more harvested forage to

support cattle during the winter season.

Regional factors also likely explain much of the

observed differences in the performance

indicators of low- and high-cost operators.

Weaning percentage and weaning weights were

more favorable among the high-cost operators

(table 7). The majority of high-cost operators

also had a set calving season, while many lowcost operators reported no established calving

period. Many high-cost operations were located

in regions that are subject to harsh winters, and

operators need to schedule calving during

periods of moderate temperatures.

High-cost operations had significantly higher

feed costs than all other operations (table 8).

Figure 4 Cumulative distribution of operating 

plus ownership costs, 1996

0

200

400

600

800

1000

0 25 50 75 100

Percent of operations

Dollars per bred cow

Source: 1996 USDA Agricultural Resource Management Study.

$319.46

$586.28

Low-cost

operations

High-cost

operations
Economic Research Service 15

The cost of purchased feed averaged about $159

per bred cow in these operations, compared to

close to $52 in low-cost operations. Feed costs

per bred cow for low-cost operations were

significantly lower, probably because many of

them were located in the Southern Plains (fig.

5), where the freeze-free growing season can last

more than 10 months, making grazing possible

almost all year.

High-cost operations also had significantly

higher ownership costs than all other operations

(table 8). The capital recovery costs for tractors,

vehicles, and equipment alone were more than

$209 per bred cow for the high-cost operations.

A relatively large number of high-cost

operations were in areas where much of the

winter feeding is done in centralized locations.

Tractors, vehicles, and equipment are used not

only for feed processing and distribution, but

also for manure handling. Total capital recovery

costs per bred cow for low-cost operations were

about $75. Low-cost operations showed the

advantages of economies of scale as the average

operation size was more than four times that of

high-cost operations (144 versus 35 bred cows).

Cow-calf production was a more important

component of the overall operation business on

low-cost operations than on high-cost operations

(table 9). The value of cattle production on lowcost operations accounted for 51 percent of the

total value of farm production, more than twice

the percentage on high-cost operations. Cowcalf production was likely the primary enterprise

on many low-cost operations, but more often a

secondary enterprise on high-cost operations.

Low-cost operations consisted of much more

acreage (2,477 acres) than did high-cost

operations (849 acres).

Figure 5 Distribution of cost groups by region, 

1996

0

5

10

15

20

25

30

35

40

Low-cost

Mid-cost

High-cost

Percent

North

Central

Southern 

Plains

Northern 

Plains

Southeast West

Source: 1996 USDA Agricultural Management Study.
16 Economic Research Service

Table 7—Performance and input use of cow–calf operations, by production cost group, 1996

Production cost group

Item Units Low-cost operations (a) Mid-cost operations (b) High-cost operations(c)

 Number of operations 73,317 148,616 74,826

 Beef cow inventory 10,320,176 9,107,550 2,643,961

Share of ARMS percent

 Cow-calf operations 25 50 25

 Weaned calves 45 42 13

Size number

 Bred cows 144 b c 62 a c 35 a b

 Weaned calves 114 b c 53 a c 33 a b

 

Calving seasons percent of operations

 One 45 44 60

 Two 17 12 na

 None 38 43 na

Reproduction performance percent

 Calf death loss 4 c 4 5 a

 Weaning percentage 80 b c 86 a c 96 a b

 Female replacement rate percentage 13 13 14

 

Production performance

 Average age at weaning months 7 8 c 7 b

 Pounds weaned per bred cow 400 b c 440 a c 493 a b

 

Labor efficiency hours per bred cow

 Paid 4 4 c 3 b

 Unpaid 14 b c 20 a c 29 a b

 

Harvested forage efficiency 

 tons fed per bred cow

 1.56 b c 2.88 a c 4.96 a b

 

Regional distribution percent

 North Central 13 20 35

 Southern Plains 38 34 12

 Northern Plains 16 20 25

 Southeast 16 18 20

 West 17 9 7

Coefficient of Variation (CV) = (Standard Error/Estimate)x100.

na indicates value is not available due to no observations, an undefined statistic, or reliability issues.

Rounded percents may not add to 100.

a, b, c indicate that estimates are significantly different from the indicated production cost group above at the 90 percent or better level

using the t-statistic.

Source: 1996 USDA Agricultural Resource Management Study.
Economic Research Service 17

Table 8—Cow–calf production costs and returns, dollars per bred cow, by production cost group, 1996

Production cost group

Item Low-cost ranches (a) Mid-cost ranches (b) High-cost ranches (c)

Value of production 220.09 b c 279.60 a 316.63 a

 

Operating costs

 Feed

 Concentrates and other feed 19.44 b c 34.87 a 40.58 a

 Supplemental feed 7.14 b c 7.73 a c 37.78 a b

 Purchased harvested forages 7.28 b c 16.56 a c 28.16 a b

 Rented cropland pasture *2.05 c *3.40 c *13.49 a b

 Rented private pasture 13.46 b c 25.96 a 29.83 a

 Public land 2.11 b 1.23 a @9.14

 Total purchased feed cost 51.49 b c 99.75 a c 158.97 a b

 Veterinary and medicine 13.02 b c 20.14 a c 53.47 a b

 Bedding and litter 0.11 b c 0.48 a c 1.28 a b

 Marketing 5.89 5.94 6.19

 Custom operations 16.36 b c 28.87 a c 77.54 a b

 Forage harvesting charge 24.16 b c 40.57 a c 67.77 a b

 Fuel, lube, and electricity 15.76 b c 25.26 a c 37.06 a b

 Repairs 16.38 b c 25.62 a c *60.05 a b

 Interest on operating inputs 7.58 b c 10.69 a c 17.67 a b

 Total operating costs 150.74 b c 257.33 a c 480.00 a b

 

Ownership costs

 Capital recovery 75.23 b c 149.84 a c 276.23 a b

 Holding facilities 0.01 b c 0.01 a c 0.02 a b

 Feed storage facilities *0.96 b c *2.98 a c 9.33 a b

 Tractors, vehicles, equipment 34.53 b c 96.24 a c 209.20 a b

 Breeding animals 39.73 b c 50.61 a 57.68 a

 

 Non-real-estate property taxes and insurance 16.68 b c 30.62 a c 89.20 a b

 Property taxes 2.66 c 3.53 c 9.75 a b

 Insurance 14.02 b c 27.09 a c 79.45 a b

 Total ownership costs 87.81 b c 171.97 a c 352.68 a b

 

Total operating and ownership costs 238.56 b c 429.29 a c 832.68 a b

 

Returns above

 Operating costs 69.35 b c *22.27 a c -163.37 a b

 Operating and ownership costs @-18.46 b c -149.69 a c -516.05 a b

Coefficient of Variation (CV) = (Standard Error/Estimate)x100. * CV is greater than 25 and less than or equal to 50. # CV is greater

than 50 and less than or equal to 75. @ CV is above 75.

a, b, c indicate that estimates are significantly different from the indicated production cost group above at the 90 percent or better level

using the t-statistic.

Source: 1996 USDA Agricultural Resource Management Study.
18 Economic Research Service

Table 9—Cow–calf operator and operation characteristics, by production cost group, 1996

Production cost group

Item Unit Low-cost operations (a) Mid-cost operations (b) High-cost operations (c)

Age distribution percent

 Less than 50 years 29 32 35

 50 years or more 71 68 65

Operator education percent

 High school or less 40 64 54

 Attended college *24 19 24

 Completed college 36 17 22

Sales class percent

 $19,999 or less 42 63 49

 $20,000-$49,999 28 16 *20

 $50,000 or more 30 21 30

Production specialty percent

 Beef, hogs, sheep 86 83 67

 Other livestock na na na

 Cash grains na 9 16

 Other na na na

Financial position percent

 Favorable 57 51 49

 Marginal income 34 39 44

 Marginal solvency na na na

 Vulnerable na na na

Ranch organization percent

 Individual 81 93 89

 Partnership *11 na na

 Corp or Co-op *8 na na

Typology percent

 Retirement and residential lifestyle 34 44 34

 Farming occupation/lower-sales 49 44 47

 Farming occupation/higher-sales na 6 8

 Large and very large family farms na 4 *11

Cattle production value dollars 42,605 b c 24,186 a 22,240 a

Farm production value dollars 82,741 62,662 c 110,310 b

 

Farm debt-to-assets ratio *0.09 0.09 0.13

 

Total acres operated 2,477 b c 1,000 a 849 a 

Coefficient of Variation (CV) = (Standard Error/Estimate)x100. * CV is greater than 25 and less than or equal to 50.

na indicates value is not available due to no observations, an undefined statistic, or reliability issues.

Rounded percents may not add to 100.

a, b, c indicate that estimates are significantly different from the indicated production cost group above at the 90 percent or better level

using the t-stistic.

Source: 1996 USDA Agricultural Resource Management Study.
Most Cow-Calf Operations Classified as Small Family Farms1

Economic Research Service 19

Cow-calf production tends to fit well into retirement and part-time farm operations and as a

secondary enterprise on smaller farming operations where land and labor resources are often

limited.

Ninety percent of the cow-calf operations

surveyed in 1996 were classified as small family

farms1

 (total farm sales less than $250,0002)

(table 10; fig. 6; glossary). These small farms

accounted for over 80 percent of weaned calves.

More than 90 percent of the farms with 10 or

more beef cows not fattening cow/calves on

grain and concentrates had total farm sales less

than $250,000 (1997 Census of Agriculture).

Over one-third of the cow-calf operations were

classified among the retirement and

residential/lifestyle farms. Also, 44 percent of

the operations were in the farming

occupation/lower sales group. Cow-calf

production has a relatively low labor

requirement and makes use of land that is often

unsuitable for other uses. Thus, cow-calf

production tends to fit well into retirement and

part-time farm operations and as a secondary

enterprise on smaller farming operations where

land and labor resources are often limited.

 

1

 Because farm operator household income was not

available for cow-calf operators, limited-resource

farms were excluded from this analysis.

2

 The $250,000 cutoff for small farms was suggested

by the National Commission on Small Farms.

Operations among the farming occupation/

higher sales and large and very large family

farm groups were often located in the Plains and

West, where large cattle operations predominate.

However, 30 percent of the farming

occupation/higher sales group and 25 percent of

the largest farm group were in the North Central

region. Since North Central farms had relatively

small cowherds (table 1), these farms in the

largest typology groups had small cow-calf

enterprises that were secondary to other farm

activities. The primary activity of these North

Central farms was likely cash grain production.

Cow-calf operations in the retirement and

residential/lifestyle category had significantly

lower total operating costs per bred cow than

operations in the other three categories (table

11). These cow-calf operations had significantly

smaller bred cowherds and relied primarily on

owned pasture resources to feed the animals.

These operations tended to be low-input, lowmaintenance, part-time operations. However,

total ownership costs mostly declined from the

smallest farm to the largest farm typology

groups, showing the advantages of economies of

scale associated with larger herd sizes.

Figure 6 Distribution of cow-calf operations by typology group, 1996

Source: 1996 USDA Agricultural Resource Management Study. 

Farming occupation/

lower sales

Farming occupation/

higher sales

Retirement and residential/lifestyle

Large and very large

family farms

34 %

44 %

12 %

8%
20 Economic Research Service

Cow-calf production was a more important

component of the overall business for operations

in the retirement and residential/lifestyle group

(table 12). For this group, the value of cattle

production accounted for more than 50 percent

of the total value of farm production. Cow-calf

operations in the retirement and

residential/lifestyle group do little else but graze

a small number of animals. Similarly, cow-calf

production is a relatively large part of lowersales farming operations, accounting for 45

percent of the total value of farm production.

Among the two largest farm typology groups,

however, the value of cow-calf production

averaged less than 30 percent of the total value

of farm production.
Economic Research Service 21

Table 10—Performance and input use of cow–calf operations, by typology group, 1996

Typology group

Item Units

Retirement and

residential /lifestyle

(a)

Farming occupation

/lower-sales (b)

Farming occupation

/higher-sales (c)

Large and very large

family farms (d)

 ------------------- Small family farms-----------------

 Number of operations 106,986 138,689 38,040 26,303

 Beef cows inventory 5,071,017 8,173,335 4,344,375 3,188,580

Share of ARMS percent

 Cow-calf operations 34 44 12 8

 Weaned calves 23 39 20 15

Size number

 Bred cows 50 b c d 63 a c d 122 a b 147 a b

 Weaned calves 41 b c d 54 a c d 100 a b d 127 a b c

 

Calving seasons percent of operations

 One na 37 72 55

 Two na 11 na na

 None 51 46 na na

Reproduction performance percent

 Calf death loss 5 d 5 d 4 3 a b

 Weaning percentage 82 86 82 87

 Female replacement rate percentage *10 11 13 d 10 c

 

Production performance

 Average age at weaning months 8 b 7 a 7 7

 Pounds weaned per bred cow 417 430 414 451

 

Labor efficiency hours per bred cow

 Paid *2 c d 3 d *4 a 6 a b

 Unpaid 20 24 c d 17 b d 12 b c

 

Harvested forage efficiency 

 tons fed per bred cow

 2.32 c 2.45 2.94 a 2.79

 

Regional distribution percent

 North Central 19 20 30 25

 Southern Plains 37 29 na na

 Northern Plains na 22 36 23

 Southeast 24 16 na na

 West na 13 18 *21

Coefficient of Variation (CV) = (Standard Error/Estimate)x100. * CV is greater than 25 and less than or equal to 50.

na indicates value is not available due to no observations, an undefined statistic, or reliability issues.

Rounded percents may not add to 100.

a, b, c, d indicate that estimates are significantly different from the indicated typology group above at the 90 percent level or better

using the t-statistic.

Source: 1996 USDA Agricultural Resource Management Study.
22 Economic Research Service

Table 11—Cow–calf production costs and returns, dollars per bred cow, by typology group, 1996

Typology group

Item

Retirement and

residential /lifestyle

(a)

Farming occupation

/lower-sales (b)

Farming occupation

/higher-sales (c)

Large and very large

family farms (d)

 --------------------- Small family farms -------------------

Value of production 267.60 245.64 269.34 277.12

 

Operating costs

 Feed

 Concentrates and other feed 37.42 b c d 26.96 a 25.74 a 22.59 a

 Supplemental feed *8.21 c d 11.03 c d 22.36 a b 21.36 a b

 Purchased harvested forages 16.31 15.66 *14.50 *14.75

 Rented cropland pasture *6.88 b *1.66 a c d *6.97 b *4.73 b

 Rented private pasture 21.09 19.36 d 20.26 28.40 b

 Public land #0.57 b c *1.64 a *2.39 a *1.41

 Total purchased feed cost 90.47 76.32 c 92.22 b 93.26

 Veterinary and medicine 17.61 d 13.55 c d 21.48 b d 40.54 a b c

 Bedding and litter *0.17 b *0.60 a *0.29 *0.54

 Marketing 5.95 6.63 c 4.88 b d 6.81 c

 Custom operations 21.07 c d 21.39 c d 32.27 a b d 53.07 a b c

 Forage harvesting charge 29.59 c d 35.25 40.53 a 43.91 a

 Fuel, lube, and electricity 19.38 b 28.27 a c d 21.25 b 17.67 b

 Repairs 20.92 b 30.97 a c 19.78 b 25.01

 Interest on operating inputs 9.29 d 10.31 10.11 11.30 a

 Total operating costs 214.45 d 223.28 d 242.82 d 292.11 a b c

 

Ownership costs

 Capital recovery 162.37 c d 140.34 c d 107.11 a b 101.15 a b

 Holding facilities 0.01 c d 0.01 d 0.01 a 0.01 a b

 Feed storage facilities 1.10 b c d *2.32 a 3.76 a *3.58 a

 Tractors, vehicles, equipment 107.92 b c d 86.50 a c d 69.61 a b 56.95 a b

 Breeding animals 53.33 c d 51.51 c d 33.73 a b 40.61 a b

 

 Non-real-estate property taxes and insurance 28.84 c d 27.38 c d 34.99 a b d 51.95 a b c

 Property taxes 4.02 4.04 5.19 5.19

 Insurance 24.82 d 23.34 c d 29.80 b d 46.75 a b c

 Total ownership costs 191.21 c d 167.72 c 142.10 a b 153.10 a

 

Total operating and ownership costs 405.67 391.00 384.92 445.20

 

Returns above

 Operating costs *53.14 *22.36 #26.52 @-14.99

 Operating and ownership costs -138.07 -145.36 -115.58 *-168.09 

Coefficient of Variation (CV) = (Standard Error/Estimate)x100. * CV is greater than 25 and less than or equal to 50. # CV is greater

than 50 and less than or equal to 75. @ CV is above 75.

na indicates value is not available due to no observations, an undefined statistic, or reliability issues.

a, b, c, d indicate that estimates are significantly different from the indicated typology group above at the 90 percent level or better

using the t-statistic.

Source: 1996 USDA Agricultural Resource Management Study.
Economic Research Service 23

Table 12—Cow–calf operator and operation characteristics, by typology group, 1996

Typology group

Item Unit

Retirement and

residential /lifestyle

(a)

Farming occupation

/lower-sales (b)

Farming occupation

/higher-sales (c)

Large and very large

family farms (d)

 ------------------ Small family farms ----------------

Age distribution percent

 Less than 50 years 43 20 45 37

 50 years or more 57 80 55 63

Operator education percent

 High school or less 48 66 49 *35

 Attended college 22 17 na 32

 Completed college 30 16 na *32

Sales class percent

 $19,999 or less 75 53 na na

 $20,000-$49,999 na 28 na na

 $50,000 or more na 19 100 100

Production specialty percent

 Beef, hogs, sheep 90 80 49 48

 Other livestock na na na na

 Cash grains na na 27 33

 Other na 8 na na

Financial position percent

 Favorable 42 55 73 69

 Marginal income 47 38 21 na

 Marginal solvency na na na na

 Vulnerable na na na na

Ranch organization percent

 Individual 90 93 86 65

 Partnership na na na na

 Corp or Co-op na na na na

Cattle production value dollars 12,975 b c d 17,796 a c d 59,938 a b d *160,335 a b c

Farm production value dollars 24,289 b c d 39,750 a c d 211,288 a b d 568,019 a b c

 

Farm debt-to-assets ratio *0.12 0.07 c d 0.14 b 0.12 b

 

Total acres operated 486 b c d 996 a c d 2,798 a b d 6,539 a b c

Coefficient of Variation (CV) = (Standard Error/Estimate)x100. * CV is greater than 25 and less than or equal to 50.

na indicates value is not available due to no observations, an undefined statistic, or reliability issues.

Rounded percents may not add to 100.

a, b, c, d indicate that estimates are significantly different from the indicated typology group above at the 90 percent level or better

using the t-statistic.

Source: 1996 USDA Agricultural Resource Management Study.
Glossary

24 Economic Research Service

Acres operated are all farmland for which the

operator made day-to-day decisions. Includes

land that is owned by the operation, plus land

rented in, less land rented out, plus land that is

used part of the year and rented out during

another part of the year. Rental may be for cash,

for a share of production, or free-of-charge.

Excludes land rented in on an animal-unit-month

(AUM) basis.

Calf death loss is the number of calves that died

per bred cow.

Calving percentage is the number of calves

born per bred cow x 100.

Enterprise size is a structural indicator of farm

size based on the number of bred cows.

Farm operator is the person who makes most

of the day-to-day decisions about the farm,

regardless of whether or not others share

management responsibility. Thus, for the

ARMS as for the census of agriculture, the

number of farm operators equals the number of

farms.

Farm operator household income is the sum

of earnings of the operator household from

farming activities and earnings from all off-farm

sources received by household members in the

reporting year.

Farm typology is a classification developed by

the Economic Research Service to divide U.S.

farms into mutually exclusive and more

homogeneous groups. The farm typology

focuses on "family farms," or farms organized as

proprietorships, partnerships, and family

corporations that are not operated by a hired

manager. To be complete, however, it also

considers nonfamily farms.

• Small Family Farms (sales less than

$250,000)

Limited-resource. Any small farm with

gross sales less than $100,000, total farm

assets less than $150,000, and total operator

household income less than $20,000.

Limited-resource farmers may report

farming, a non-farm occupation, or

retirement as their major occupation.

Retirement farms. Small farms whose

operators report they are retired. (Excludes

limited-resource farms operated by retired

farmers.)

Residential/lifestyle farms. Small farms

whose operators report they had a major

occupation other than farming. (Excludes

limited-resource farms with operators

reporting a nonfarm major occupation.)

Farming occupation/lower-sales. Small

farms with sales less than $100,000 whose

operators report farming as their major

occupation. (Excludes limited-resource

farms whose operators report farming as

their major occupation.)

Farming occupation/higher-sales. Small

farms with sales between $100,000 and

$249,999 whose operators report farming as

their major occupation.

• Other Farms 

Large family farms. Sales between

$250,000 and $499,999.

Very large family farms. Sales of $500,000

or more.

Nonfamily farms. Farms organized as

nonfamily corporations or cooperatives, as

well as farms operated by hired managers.

Female replacement rate percentage is the

raised replacement heifers exposed for first calf

+ purchased replacement heifers and bred cows

÷ total number of bred cows x 100.

Financial position describes the financial health

of a farm business from a combination of

income (net operation income) and solvency

(debt/asset ratio) measures. Farm businesses are

categorized into one of four classes:
Economic Research Service 25

• Favorable—positive income and debt/asset

ratio less than 0.40. These businesses are

generally considered financially stable.

• Marginal income—negative income and a

debt/asset ratio less than 0.40. Periods of

negative income may not pose financial

difficulties if these businesses are carrying a

low debt load and can either borrow against

equity or obtain income from off-farm

sources.

• Marginal solvency—positive income and a

debt/asset ratio above 0.40. A high

debt/asset ratio may be acceptable if these

businesses can generate enough income to

service their debt and meet other financial

obligations.

• Vulnerable—negative income and a

debt/asset ratio above 0.40. These

businesses are generally considered

financially unstable.

Sales class is a structural indicator of farm size

based on gross value of sales.

Value of farm production is the dollar value of

all commodities produced on the farm in a given

year, excluding commodities used on the farm.

Commodities included in the value of

production may be sold or added to inventory.

Value of sales differs from value of production

in that the value of sales includes commodities

sold in the current year but produced in previous

years (drawing down inventory) and also

includes government payments received.

Value of cattle production is the dollar value of

all cattle produced on the farm in a given year.

Cattle included in the value of cattle production

may be sold or added to inventory.

Weaning percentage is the number of calves

weaned per bred cow x 100.

Data Reliability

Survey results are only indications of the total

population. They may differ from data collected

in a complete census using the same

questionnaires, instructions, and enumerators.

The U.S. Department of Agriculture’s (USDA)

annual ARMS survey applies complex,

stratified, multiple-frame, probability-weighted,

and sometimes multiple-phase sampling

methods to provide financial measures of the

agricultural sector. These sampling methods

lead to complications in estimating the

efficiency of summary statistics. Software has

been developed within USDA’s Economic

Research Service (ERS) that addresses the

intricacies of the ARMS. This software employs

the delete-a-group jackknife variance estimator

(Dubman). The jackknife is a universal allpurpose variance estimator that avoids problems

in complex sample design. The delete-a-group

jackknife is easy to apply to all weighted

estimates, regardless of their complexity or

statistical properties. In this report, ranges for

coefficients of variation (CVs) are presented if

the CV is greater than 25.

Differences among means of the characteristics

and cost and return items for the various

groupings presented in this report were

statistically tested. Although t-statistics are not

reported here, the discussion in each section

emphasizes comparisons among the groups only

when means were significantly different at the

95-percent level.

Survey data are also influenced by nonsampling

errors, which are not measurable or known.

Nonsampling errors may be introduced by

enumerators, respondents, and questionnaire

design, among other factors. Efforts were made

to minimize these errors and maintain survey

accuracy, including training of data collectors,

detailed review and editing of data, and analysis

for comparability and consistency.
References

26 Economic Research Service

American Agricultural Economics Association

Task Force on Commodity Costs and Returns.

“Commodity Costs and Returns Estimation

Handbook.” Ames, Iowa. July 20, 1998.

Boykin, Calvin C.; Henry C. Gilliam; and

Ronald A. Gustafson. Structural

Characteristics of Beef Cattle Raising in the

United States. AER-450. U.S. Dept. Agr.,

Econ. Res. Serv., March 1980.

Doane’s Agricultural Report. Vol. 63, No. 20-5.

May 19, 2000.

Dubman, Robert W. “Variance Estimation with

USDA’s Farm Costs and Returns Surveys and

Agricultural Resource Management Study

Surveys.” AGES 00-01. U.S. Dept. Agr., Econ.

Res. Serv. April 2000.

Gilliam, Henry C. Jr. The U.S. Beef Cow-Calf

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