Curt Lacy Extension Economist

Current Situation Relatively high prices Positive expected profits for the next few years Producers looking to recoup some of last few years losses Weather and other events still a major concern

Outlook – Cow-Calf Producers – profits – losses 2009 – profits/losses

Cattle numbers usually increase 2 yrs. after cow/calf profits

Three Alternatives to Expand Cow-Herd Retain heifers from your own herd Buy heifers (bred or open) Buy cows (often either bred or as 3-in-1)

Replacement Female Economic Considerations Production – Percentage calf crop – Weaning weight – Frame size/Muscle score Economic – Development costs – Market value of female Price-Position in Cattle Cycle – Expected prices – Effect of Frame/Muscle score on price (read discounts)

Possible Outcomes Base – 90% L/M-1/2 – 10% #3 muscling Alternative 1 – 80% L/M-1/2 – 10% L/M-3 – 10% S1/2 Alternative 2 – 70% L/M-1/2 – 15% L/M-3 – 15% S1/2 Alternative 3 – 60% L/M-1/2 – 20% L/M-3 – 20% S1/2

Comparison of Most Likely Scenario for Fall Calving Herd Retain heifer and breed in December for fall calving Buy bred heifer next summer for fall calving

Tale of the Tape Retaining Your Own – Advantages Known genetics Capability to build on past genetic decisions Price?? – Disadvantages Inferior genetics Foregoing of current sales Additional management required to develop and breed heifers Buying Bred Heifers – Advantages Improve genetics Saves time and trouble of managing and breeding replacements – Disadvantages Unknown genetics Sources?? Price!!

Doing the Math – Steps to Follow to Estimate the Economic Value of a Heifer 1. Develop a budget 2. Prepare a schedule of expenses and income (cash flow projection) of development phase 3. Estimate annual returns 4. Estimate the useful life of the heifer 5. Estimate the cull value

Items You Will Need Prices – Expected calf prices – Adjustments for quality grades – Cull prices – Price for the heifer??? Production – Expected production Weaning weights Conception rates

Items You Will Need Budgets – Winter pasture – Summer pasture – Vet & Medicine Shots Eartags Minerals Expected Cull Rate

Doing the Math - Prices & Discounts Base Price - $90/cwt. for Steers Discounts – Heifers $5.00/cwt. – #3 muscling $18.00/cwt. – Short-frame $25.00/cwt.

Retain Heifer

Buying Bred Heifer

Results - Buying Bred Heifer Expected Profits 500 Pounds 475 Pounds 450 Pounds Base$176.86$78.20($20.45) Scenario 1$121.79$25.89($70.01) Scenario 2$66.72($26.43)($119.57) Scenario 3$11.65($78.74)($169.13) Pay $700 for heifer in June Retaining Own Heifer – $188.54

Results - Buying Bred Heifer Economic Value – What can you afford to pay? 500 Pounds 475 Pounds 450 Pounds Base$836.22$737.57$ Scenario 1$781.15$685.25$ Scenario 2$726.09$632.94$ Scenario 3$671.02$580.63$ Retaining own heifer = $685.23

Conclusions Producers should carefully consider their source of replacement heifers Purchasing heifers can be a profitable alternative Key considerations: – Price of the replacement animal – Expected profits from the asset Price Production – Longevity

Conclusions Considerations – Retaining your own heifers allows you to take advantage of past breeding decisions – Retaining your own heifers reduces the variability of the calf crop and makes it easier to group calves in more uniform lots – Purchasing females of unknown genetics increases variability of calf crop and returns – Purchasing females of known genetics can improve profits

Conclusions Bottom Line-Retaining and developing your own replacement females or females of known genetics gives you: – Better control – reduced variability in genetics – Predictable production – Greater uniformity in calf crop – Increased ability to sell in larger lots higher price

Heifer Percentage of FI U.S. Slaughter vs. Total U.S. Cattle Inventory

U.S. Cattle Inventory and Prices Total U.S. Cattle Inventory and April prices for m1 steers

U.S. Cattle Inventory and Prices Total U.S. Cattle Inventory and April prices for m1 steers

Recent Prices

Results – Retain Heifer Expected profits - $68.65

Results - Buying 3 in 1 Expected Profits 450 Pounds 425 Pounds 400 Pounds Base$181.84$107.86$33.89 Scenario 1$164.85$91.82$18.79 Scenario 2$130.88$59.73($11.41) Scenario 3$96.60$27.65($41.61) Pay $750 for combo in June

Results - Buying 3 in 1 What Can You Afford to Pay? 450 Pounds 425 Pounds 400 Pounds Base$897.75$823.78$ Scenario 1$880.77$807.73$ Scenario 2$846.79$775.65$ Scenario 3$812.82$743.56$ Retaining own heifer = $565.34

Overview Current Situation Outlook Replacement Economics Results

What is the Economic Value of a Heifer? Curt Lacy University of Georgia Extension Economist - Livestock