Which Replacement Female Option is Right for You?
Cow-calf producers across the United States are increasing the size of their cow herds. One indication of herd rebuilding is the ratio of female (cow plus heifer) slaughter to steer slaughter. During the first eight months of 2004, female slaughter was 93 percent of steer slaughter. For the same period in 2005, female slaughter totaled just 85 percent of steer slaughter. Combined with the fact that federally inspected cow slaughter so far in 2005 has been 7 percent below cow slaughter for the same period in 2004, one could conclude that the rate of herd expansion is increasing in 2005. During 2004, the total U.S. cattle herd (all cattle and calves) grew 1 percent, while beef cow numbers specifically grew one-half of 1 percent. In real numbers, the beef cow herd grew from 32.861 million head to 33.055 million head. During 2004, beef cow replacements were estimated to have increased from 5.518 million head to 5.746 million head, a 4.1 percent increase. The number of beef cow replacements is expected to be even larger when the inventory numbers are released in late January 2006.
Although the nation's beef cow herd is expanding, the decision to increase numbers is made individually by each beef cow-calf producer. Each producer must decide whether it is right for them to increase the number of beef cows in their herd. Once the decision has been made to increase numbers, then the bigger decision of how best to acquire the additional females must be made. A selected number of options available to most producers include raising their own, purchasing open, just-weaned heifers, purchasing bred heifers or purchasing bred cows or even pairs and the list could go on. How does a producer evaluate the options?
One possibility for determining the best option to increase the cow herd is by completing an investment analysis. The analysis is really pretty straightforward, once you have the information or make the assumptions for the numbers needed to work through the calculations. The better the information a producer has on their own individual operation, the better the analysis will be. However, income also must be estimated, and that relates to pounds of calf to sell and the price per pound. So, yes, one can manipulate the numbers, but there are sources of information from people who spend their lives making price forecasts based on fundamental supply-and-demand data.
This article will not analyze the decision of raising replacements versus purchasing them. It is my opinion, however, based on previous analysis, that for most commercial beef producers with herds of a few hundred (about 300) cows, or less, it is not economically feasible to raise their own replacements. Too many pounds per calf are sacrificed by using bulls strong in maternal traits, and too much of the resource base is given up for the development of the replacements. After adding the complexity of managing forage resources and multiple classes of animals, the analysis provides strong numbers and reasoning to purchase replacement females rather than raise them. Personal goals can override economics and do many times. That is OK as long as the producer is making an informed decision.
In an effort to help answer the question of which class of female is the best deal right now, three options were analyzed. They were 1) an open, just-weaned heifer, 2) a bred heifer to calve in the spring 2006 and 3) a bred 5-year-old cow to calve in the spring 2006. All animals are assumed to be purchased in fall 2005. Purchase prices used in the analysis for the three classes of females were $625 for an open heifer, $900 for a bred heifer and $1,000 for a bred cow. Prices from the Food and Agricultural Policy Research Institute were used for future revenue estimates. To simplify the analysis, no production costs were used, so the results could be used with more operations since it was not unique to any particular set of production costs. Each female was assumed to be sold in 2010 at a salvage value of $845 each for the open heifer and bred heifer and a salvage value of $475 for the bred cow, since she was 10 years old in 2010. The analysis favors purchasing a bred heifer this fall, although only by a small margin (less than $50) over the open heifer. Purchasing a bred cow is the third choice by a substantial margin. The results of the analysis could be different if the bred cow was sold before she is valued as a cull animal. The two most important items that will affect the outcome of this type of an analysis are the purchase price and the salvage value of the animals. The importance of the salvage value cannot be stressed enough. A valid recommendation would be to try to sell an older female at a replacement value rather than as a cull by the pound. Selling a cow by the pound as a cull reduces the overall profitability of your investment in her.
This may not be the best time to purchase a replacement female in relation to the cattle cycle. However, if your plans include increasing your beef cow herd, then a bred heifer purchased this fall makes the most sense if the purchase prices of the three options are close to what I have presented.
Credit is due the Livestock Marketing Information Center in Denver, Colo., for providing cattle slaughter and inventory information.