What Goes Into Calculating Yardage?
By : Julie Walker, Professor & SDSU Extension Beef Specialist and Warren Rusche, Courtesy of extension.sdstate.edu
Yardage cost is the non-feed cost per head for every day that an animal is fed harvested feed in some form of confinement. Yardage is usually associated with calves and yearlings in the feedlot, but this concept can apply to drylotted or wintering cows as well.
So what goes into total yardage costs? Yardage should cover all fixed and non-feed operating costs. Fixed costs includes taxes, insurance, depreciation, and interest on long-term assets. Non-feed operating costs would include labor, bedding, veterinary medicine, processing charges (feed or cattle), fuel, utilities, office, repairs and miscellaneous expenses. Some of these non-feed operating costs such as interest, bedding and veterinary expenses may be charged or accounted for separately in a budget or custom feeding bill, which would reduce the yardage cost.
Yardage costs (expenses assigned to feedyard enterprise):
- Machinery Repairs
- Building (Fences, Lots) Repairs
- Lease payments
- Interest on long-term assets
Non-feed costs may or may not be included in yardage:
- Interest if feedyard is financing expenses
- Veterinary medicine
- Processing (Chute charge – per animal treatment or general processing)
Yardage will vary by operation. Variations in yardage are influenced by: 1) age or cost of facilities, 2) type of facilities (earthen lot versus barn), 3) whether or not certain items are included such as bedding expense, 4) owned versus leased equipment, 5) custom work hired, such as manure hauling or custom processing crews, 6) extent of sharing with other enterprises, 7) labor, 8) economies of size, and 9) capacity (head days). In 2013, Dr. Dan Loy, Extension Beef Specialist, estimated breakeven yardage charge at 85% capacity for various feedlot systems. These ranged from $0.59 per head per day for earthen lot with windbreak to $0.88 per head per day for confinement (solid floor) facilities. However, when a manure credit was given based on the fertilizer value these breakeven yardage charges were reduced to $0.29 (earthen lot with windbreak) and $0.49 for confinement (solid floor).
The first step to determine yardage costs for an individual operation is to calculate head days in the yard. To determine that value, take the actual utilization of the yard capacity and multiple by 365 days. For example, a yard with a 5,000-head capacity that is 85% utilized will have a total of 1,551,250 head days in a year (5,000 x 0.85 = 4,250 x 365 days = 1,551,250 head days). Although most feedyards calculate yardage based on full pen utilization, the cost of yardage is significantly higher when yards are not used to capacity.
To calculate the yardage cost per head day, divide the head days into the total annual yardage costs. Using the example below, if the total yardage costs (X) were $775,625 then the yardage cost per head day is $0.50 ($775,625 (X) total yardage cost / 1,551,250 (Y) head days= $0.50 head/day).
Producers are often surprised at those cost estimates depending on whether they are contemplating putting cattle in a custom facility or determining what to include in a feeding budget or custom feeding charge. Yardage charges are also sometimes used to “price-shop” custom cattle feeders. Keep in mind that a low yardage charge may be hiding a larger feed mark-up. For the cattle owner, the bottom line is always total cost of gain, regardless of how that may be calculated. Feedlot owners need to make certain that they are accounting for all the costs of operation and including those into their operating budgets or as part of their custom charges.