147 Effect of Elasticity Analysis on Beef Cattle Production Costs

Abstract

The influence of major cost items on the total production cost of beef cattle during the growing phase was evaluated. A mathematical model assessing production inputs considering the cost of the items according to the Economic Theory was used. Costs were allocated into: A) variable costs, B) fixed costs, and C) factor income. A survey was carried-out in 2018 and 2019 with a rancher located in the state of Minas Gerais (Brazil) aiming to define the major technical indicators of production. The spot prices used in the current analysis refered to December 2019. The base-animal used during the growing phase represented the Nelore breed (Bos indicus), intact males and females (n = 34), separated into three lots according to the ranch of origin and sex. The initial averaging 195 ± 15 kg of live shrunk BW (body weight), and the average selling weight was 360 ± 15 kg shrunk BW. Two types of supplementations were offered during the year, the mineral was provided for 150 d, and protein supplementation was offered for 210 d. In the base scenario, the production cost was US$ 1.13/kg of animal. The fixed cost of the activity represents 23% of the total cost, in which capital depreciation, equipment maintenance, and labor represented 7.1%, 6.7%, and 5.9%, respectively. The variable cost of the activity represented 66.3% of total costs, in which cattle purchase price and feed costs represented 58.8% and 7.1%, respectively. These two factors, cattle purchase price, and feed costs, can be directly related to the success or failure of the system, thus also becoming good variables to be closely managed, justifying the importance of current elasticity analyses in such items. The price elasticity of items involving production cost variability in case a total expenditure cost of such items increased by 1% was hypothesized. The input costs that most represented the total cost were in order: 1) cattle purchase price, 2) feed, 3) capital depreciation, 4) labor, and 5) equipment maintenance. The cattle purchase price represented in the elasticity analysis as the most impactful factor, followed by equipment maintenance, feed, depreciation, and labor, at +0.54%, +0.11%, +0.07%, +0.07%, +0.05%, respectively. The cattle purchase price was the most related to the total cost. The increases of 1% in this variable caused variations of +0.54% of the total cost. It means the cost of production of 1 kg of beef cattle goes from US$ 1.13/kg to US$ 1.74/kg. In conclusion, the power of negotiation when buying and selling animals was the factor that can influence the most total costs of the cattle enterprise assessed.