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Curt Lacy Extension Economist
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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
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Outlook – Cow-Calf Producers 2001-2004 – profits 2005-2008 – losses 2009 – profits/losses
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Cattle numbers usually increase 2 yrs. after cow/calf profits
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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)
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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)
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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
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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
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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!!
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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
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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
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Items You Will Need Budgets – Winter pasture – Summer pasture – Vet & Medicine Shots Eartags Minerals Expected Cull Rate
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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.
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Retain Heifer
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Buying Bred Heifer
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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
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Results - Buying Bred Heifer Economic Value – What can you afford to pay? 500 Pounds 475 Pounds 450 Pounds Base$836.22$737.57$638.91 Scenario 1$781.15$685.25$589.35 Scenario 2$726.09$632.94$539.79 Scenario 3$671.02$580.63$490.23 Retaining own heifer = $685.23
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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
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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
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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
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Heifer Percentage of FI U.S. Slaughter vs. Total U.S. Cattle Inventory
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U.S. Cattle Inventory and Prices Total U.S. Cattle Inventory and April prices for 400-500 m1 steers
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U.S. Cattle Inventory and Prices Total U.S. Cattle Inventory and April prices for 400-500 m1 steers
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Recent Prices
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Results – Retain Heifer Expected profits - $68.65
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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
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Results - Buying 3 in 1 What Can You Afford to Pay? 450 Pounds 425 Pounds 400 Pounds Base$897.75$823.78$749.80 Scenario 1$880.77$807.73$734.70 Scenario 2$846.79$775.65$704.50 Scenario 3$812.82$743.56$674.31 Retaining own heifer = $565.34
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Overview Current Situation Outlook Replacement Economics Results
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What is the Economic Value of a Heifer? Curt Lacy University of Georgia Extension Economist - Livestock
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