Production scale effect on the profitability of beef cattle in a pasture system in the South of Minas Gerais State

Abstract

This research sought to evaluate the effects of production scale on the profitability of pasture-dependent, full-cycle beef cattle operations. Specifically the aim was to identify the total and effective operational cost components that exert the greatest influence on the unit cost of meat produced and estimate the break-even point. Data was collected from April 2009 to April 2010, in three production systems located in the south of Minas Gerais State, Brazil. The analysis of profitability utilized Custo Bovino Corte® software and encompassed gross margin, liquid margin, and net return (profit or loss) as indicators of economic efficiency. Production scale did influence profitability of the three operations, the one of large scale having the lowest unit costs, the best profitability and net return; the one of intermediate scale was second, and the small-scale operation was last. The variable unit costs of the latter were higher than the sales price, thus it was not possible to estimate the break-even point. The components of total cost that most influenced the cost per unit of meat produced of all three operations were, in descending order: acquisition of animals, compensation for land and for labor. As to the effective operational costs, those cost components of greatest effect were acquisition of animals and labor.