r. curt lacy, ph.d agricultural & applied economics uga-tifton economic evaluation of cow...
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R. Curt Lacy, Ph.DAgricultural & Applied EconomicsUGA-Tifton
ECONOMIC EVALUATION OF
COW CULLING VS. REPLACEMENT
HEIFERS
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SLAUGHTER COW PRICESSouthern Plains, 85-90% Lean, Weekly
40
45
50
55
60
65
70
75
80
85
JAN APR JUL OCT
$ Per Cwt.
Avg.2005-09
2010
2011
C-P-3505/02/11Livestock Marketing Information Center
Data Source: USDA-AMS
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Cow sales comprise 15-25% of the beef enterprise’s income.
Slaughter cow prices are at an all-time high making it very tempting to liquidate cows.
However, with calf prices and heifer prices also at all-time highs it makes it worth considering getting 1-2 more calves before culling calves.
SITUATION
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Cull or keep?How much can I
pay for replacements?
DECISIONS, DECISIONS
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BASIC QUESTION
Is the money you give up on a cow today worth more or less in the future?
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BASIC COW (OR ANY OTHER ASSET) REPLACEMENT MATH
Where:NPV = Net Present ValueNCF = Net Cash FlowINV = Investment valuei= interest raten=Number of Periods
+
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Current cow value/Purchase price of heifers
MAJOR ITEMS TO CONSIDER
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CURRENT COW PRICES
01/1
0/09
02/1
0/09
03/1
3/09
04/1
3/09
05/1
4/09
06/1
4/09
07/1
5/09
08/1
5/09
09/1
5/09
10/1
6/09
11/1
6/09
12/1
7/09
01/1
7/10
02/1
7/10
03/2
0/10
04/2
0/10
05/2
1/10
06/2
1/10
07/2
2/10
08/2
2/10
09/2
2/10
10/2
3/10
11/2
3/10
12/2
4/10
01/2
4/11
02/2
4/11
03/2
7/11
30.00
40.00
50.00
60.00
70.00
80.00
90.00
Georgia Auction Slaughter Cow Prices2009-Current
Cows - BreakersCows - BonersCows - lean
$/C
wt.
Depending on weight, current cow values ca. $800-$1,000 per head.
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AS A RESULT, HEIFER PRICES ARE HIGH TOO
1 6 12 27 34 42 49 57 63 67 77 86 91 95 103
140
145
150
156
163
168
172
$500
$700
$900
$1,100
$1,300
$1,500
$1,700
$1,900
$2,100
$2,300
$2,500
UGA Tifton HERD Sale Results, April 19, 2011
Heifer Sales PriceLinear (Heifer Sales Price)
Lot Number
Sale
s P
rice $
/head
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THERE AREN’T JUST A FEW HIGH-PRICED HEIFERS EITHER
$95
0.00
$1,
100.
00
$1,
250.
00
$1,
400.
00
$1,
550.
00
$1,
700.
00
$1,
850.
00
$2,
000.
00
$2,
150.
00
$215
0+
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
Distribution of UGA Tifton HERD Sale PricesApril 19, 2011
Frequency
Price
Fre
quency
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Item Unit Cost/unit Quantity Item cost
Heifer cwt. 125.00$ 5 625.00$
Winter Pasture ac 150.00$ 0.67 100.00$
Coastal Pasture ac 150.00$ 0.67 100.50$
Other Pasture ac -$ 0.67 -$
Hay ton 75.00$ 1.65 123.75$
Feed - Developing Heifer lbs 0.13$ 540 67.50$
Feed - Pregnant Heifer lbs 0.13$ 300 39.00$
Feed - 1st Calf Heifer lbs -$ -$
Other Feed lbs -$ -$
Mineral hd 18.20$ 1 18.20$
Ear Tags hd 2.80$ 1 2.80$
Vet & Med - Vaccinations hd 6.12$ 1 6.12$
Vet & Med - Preg check hd 3.00$ 1 3.00$
Labor hrs 10.00$ 1.5 15.00$
Total Variable Costs hd 1,100.87$
Interest hd 8.00% 550.44$ 44.03$
Bull Costs hd 19.20$ 1.00$ 19.20$
Non-breeders percent 15.00% 1,144.90$ 171.74$
Total Costs of Retaining Heifers hd 1,335.84$
Adjustment for cull heifer sales hd 105.00$ 800 126.00$
Total net costs for retaining heifer 1,209.84$
Heifer Development Budget
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Purchase price of heifers/current cow valueProductivity of the female
Survivability Calf crop percentage Calf weight Calf quality
MAJOR ITEMS TO CONSIDER
+
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Not a lotBIF guidelines make
adjustments for Weaning Weights Based on mostly English-type
cattleOther factors to consider
include Survivability Conception rates
Anecdotal evidence suggest Brahman-cross cows start to see real quality declines after 13-14 years of age vs. 11-12 for English-breeds
OLD COW RESEARCH
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Purchase price of heifers/current cow valueProductivity of the female
Survivability Calf crop percentage Calf weight Calf quality
Future cull value of cows
MAJOR ITEMS TO CONSIDER
+
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WHAT DETERMINES COW VALUE
1. Percent Lean Meat Yield2. Live weight
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MARKETING CLASSIFICATIONS OF CULL
COWS Classification Lean
Percentage of Trimmings
Body Condition
Score
Premium (Discount)2009-2011
Cutter/Canner 85%+ 1-3 ($$3.00-5.00/Cwt.)
Boning Utility 80-85% 4-6 Base
Breaking Utility Less than 80% 7+ ($0.00-$3.00/Cwt.)
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QUALITY DOES MATTER,..SOMETIMES
01/1
0/09
02/1
0/09
03/1
3/09
04/1
3/09
05/1
4/09
06/1
4/09
07/1
5/09
08/1
5/09
09/1
5/09
10/1
6/09
11/1
6/09
12/1
7/09
01/1
7/10
02/1
7/10
03/2
0/10
04/2
0/10
05/2
1/10
06/2
1/10
07/2
2/10
08/2
2/10
09/2
2/10
10/2
3/10
11/2
3/10
12/2
4/10
01/2
4/11
02/2
4/11
03/2
7/11
30.00
40.00
50.00
60.00
70.00
80.00
90.00
Georgia Auction Slaughter Cow Prices2009-Current
Cows - BreakersCows - BonersCows - lean
$/C
wt.
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HOW CAN YOU PREDICT THE CULL COW MARKET? WATCH FED OR FEEDER
CATTLE PRICES.
03/31/0
1
08/04/0
1
12/08/0
1
04/13/0
2
08/17/0
2
12/21/0
2
04/26/0
3
08/30/0
3
01/03/0
4
05/08/0
4
09/11/0
4
01/15/0
5
05/21/0
5
09/24/0
5
01/28/0
6
06/03/0
6
10/07/0
6
02/10/0
7
06/16/0
7
10/20/0
7
02/23/0
8
06/28/0
8
11/01/0
8
03/07/0
9
07/11/0
9
11/14/0
9
03/20/1
0
07/24/1
0
11/27/1
0
04/02/1
10.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
Weekly Average Price of 5-Area Fat Cattle vs. Georgia Cull Cow Prices (2001-2011)
5-Area Wtd. Averegethin cowsBoner Cows
Axis Title
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Mature Cow
Likely productivity over then next year or so. Conception rate Calf weight Calf quality
Current cull cow value
Replacement Female
Investment costProductive life
MEANWHILE, BACK AT THE RANCH. CULL NOW OR LATER?
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14-Year old Cow
Forego favorable cull price
One more calf without the heifer expense.
Probably worth less at culling due to lower BCS
Purchase Bred Heifer
Delayed returnsHigher initial costsLonger useful lifeBetter calves
DECISION AND CONSIDERATIONS
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Base herd F1 Brahman-cross cows with English
or Continental bulls Calving season November- January Average weaning weight 550 pounds Average cow cash expense = $500
14 year old cow Good health Current cull value = $840 Future cull value = 50% of steer
price If culled later
BCS 3 $5.00/cwt. discount 250 pounds less
Bred heifer Two years old at calving Similar genetics as cows $1,300 purchase price
BASIC ASSUMPTIONS
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Age Weaning Weight Adjustment
Calf Crop Percentage
Death Loss
2 (bred) 60 90 0
3 40 75 0
4 20 85 1
5-13 0 85 2
14 20 75 8
15 40 75 10
16 60 73 12
17 60 70 12
ASSUMPTIONS
Adapted from 2006 BIF Guidelines
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2011 2012 2013 2014 2015
$(200.00)
$(150.00)
$(100.00)
$(50.00)
$-
$50.00
$100.00
$150.00
$200.00
$250.00
$135/Cwt.$140/Cwt.$150/Cwt.
NPV OF MATURE COWS AT VARIOUS PRICES FOR 550 POUND STEERS
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8 9 10 11 12
$(300.00)
$(200.00)
$(100.00)
$-
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
$700.00
$135/Cwt.$140/Cwt.$150/Cwt.
Heifer Age at Culling
NPV BY AGE AT CULLING OF BRED HEIFER AT VARIOUS PRICES FOR 550
POUND STEERS
Heifer price = $1300
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2011 2012 2013 2014 2015
$(500.00)
$(400.00)
$(300.00)
$(200.00)
$(100.00)
$-
$100.00
$200.00
$300.00
$135/Cwt.$140/Cwt.$150/Cwt.
DIFFERENCE IN NPV OF HOLDING MATURE COWS VS. REPLACING WITH BRED HEIFERS AT
VARIOUS SALES PRICES FOR 550 POUND STEERS
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$1,200 $1,300.00 $1,400.00 $1,500.00
-400
-200
0
200
400
600
800
$135/Cwt. $140/Cwt. $150/Cwt.
Heifer Purchase Price ($/Head)
WHAT CAN I PAY FOR A HEIFER?
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Cow culling and heifer replacement is ranch and probably even herd specific.
High cull prices make liquidating cows today very attractive.
Higher future calf prices make purchasing heifers more attractive now.
If heifers are around $1200-$1300 buy today. If heifers are around $1400 buy later (and hope they
don’t go up).Now may be the time to start looking at some form of
calf price risk management and/or input cost risk management.
SO WHAT? (CONCLUSIONS AND IMPLICATIONS)
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R. Curt Lacy, Ph.DAgricultural & Applied EconomicsUGA-Tifton
www.secattleadvisor.com