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Economic calculations determine acceptable cow price

By Steve Swigert, Agricultural Economics Consultant (Retired)

Posted Apr. 1, 2014

Updated February 2018

Droughts can cause a lack of available forage in many areas, making the incentive to retain heifers and purchase cows very low. That situation, coupled with the high value of heifer calves after weaning, preconditioning or the stocker phase, makes the decision to retain or purchase females extremely difficult.  Historically, as a drought carries on, the cattle inventory begins to decline. Additionally, the costs for feed supplies increases due to higher demand and possible lower supplies.

If we have low cow numbers, high prices for weaned calves, and high cow costs, this means younger good quality producing cows may be hard to find. In this scenario, prices may again exceed $2,000 per cow.

When determining if the investment of replacement cattle should be made, producers should ask themselves a few questions. Are more cows really needed? Is there enough grass for more cows? Is there a better alternative use for the available grass than cows (e.g., retained ownership of owned calves or purchased stockers)? Are the estimates in the previous example higher or lower than your operation? Can financing be secured for cows at the higher price?

If it is determined that cows are the best option, then the decision has to be made when to buy the cows, and what type and age of female. Because of the cow cost and the value of the calves, the timing of the purchase can make a significant difference in the value of the cow (a cow is typically more valuable the closer it is to the sale of a calf). Also, the age of the cow will make a difference because younger females will typically have more economic value because they will have more calves.

All of these factors should be considered when making the decision to buy cows at a time when cow and calf prices are at a premium. It is extremely important to know and understand the producer’s annual cost to maintain a cow, the percent weaned calf crop and the weaning weight per calf. All these factors will weigh into how much can be invested in a cow and have a reasonable return.

Graph 1.
Annual Average Cattle Prices (LMIC)

Graph 2.
Total Cattle Inventory by Cycle (LMIC)

Graph 3.
Estimated Average Cow-Calf Returns (LMIC)