R. Curt Lacy, Ph.DAgricultural & Applied EconomicsUGA-Tifton

ECONOMIC EVALUATION OF

COW CULLING VS. REPLACEMENT

HEIFERS

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

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

Cull or keep?How much can I

pay for replacements?

DECISIONS, DECISIONS

BASIC QUESTION

Is the money you give up on a cow today worth more or less in the future?

BASIC COW (OR ANY OTHER ASSET) REPLACEMENT MATH

Where:NPV = Net Present ValueNCF = Net Cash FlowINV = Investment valuei= interest raten=Number of Periods

+

Current cow value/Purchase price of heifers

MAJOR ITEMS TO CONSIDER

+

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.

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

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

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

Purchase price of heifers/current cow valueProductivity of the female

Survivability Calf crop percentage Calf weight Calf quality

MAJOR ITEMS TO CONSIDER

+

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

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

+

WHAT DETERMINES COW VALUE

1. Percent Lean Meat Yield2. Live weight

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.)

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.

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

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?

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

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

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

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

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

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

$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?

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)

R. Curt Lacy, Ph.DAgricultural & Applied EconomicsUGA-Tifton

www.secattleadvisor.com