In March 2009, Donna and Jim Green looked with dismay at the financial statement summarizing th

In March 2009, Donna and Jim Green looked with dismay at the financial statement summarizing the performance of Old Mule Farms for the year 2008. Old Mule’s cow-calf operation had experienced another year of losses. Especially frustrating was that the losses occurred desp ite the Greens’ multiple efforts to improve the farm’s efficiency. While these efforts improved performance compared to 2007, they were not sufficient to overcome the decline in calf prices, so the operation continued to lose money (see Exhibit 1). If the situation did not improve, the Greens faced the threat of losing the farm that had been owned by the family for three generations.

COW-CALF OPERATIONS

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The cow-calf segment is the foundation of the beef cattle industry. A ranch maintains a herd of cows, each of them expected to wean a calf once a year. Like a human, the gestation period of a cow is approximately nine months. After birth, the cow nurses the calf for another six or seven months until the calf is weaned from its mother’s milk. During this time, the cow enters estrus, is impregnated, and the cycle begins again. Thus, once a farm reaches a steady state of operations, a cow can produce a calf each year.

There were more than 750,000 cow-calf operations in the United States in 2007, the vast majority of them with fewer than 50 cows. Cow-calf operators sell their weaned calves to a stocker operator or to a feedlot, where the calves are fattened before being sent to a packinghouse. The end products are the various fresh beef products such as steaks, roasts and hamburgers that are consumed by millions of people around the world.

Revenues and expenses for a cow-calf operation typically are presented on a per cow basis, as shown for Old Mule Farms in Exhibit 2.