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January 5, 2016
Several months ago, following a presentation at a Cattlemen’s College, I was asked how many years you would need to keep a cow before she would break even or recover all of her costs. I know it has often been said that you must own a cow five or six years before she would break even. I wish to present a far different point of view. My answer to the gentleman asking the question was “one day should be enough.” Let me establish a few points for consideration and then present an argument.
Every day, some class of cattle is overvalued and another class is undervalued in the marketplace. Cattle prices and culling rates on a ranch change from year to year. Because of that, I want to generalize and simplify to make a couple of points.
Let’s assume that you have 1,000 two-year-old bred heifers that will calve in the next few months. Further assume that they will wean a 94% calf crop and breed back at 90%. Excellent managers will do better than this, but these percentages are significantly better than national averages. Let’s assume that these percentages will be the same through the life of the animals. (They won’t. They will be lower for younger cows and higher for older cows.)
Since most of you tell me that you sell all your dry cows and all the opens, I am assuming that you sell 60 dry cows, 100 open cows and 40 cows (4%) for age, lameness, poor calf or other reasons. At the end of five years, you will have 410 of the original 1,000 heifers left in your herd. If you are really good and can get a 98% weaned calf crop and 94% breed back and cull 4% for other problems, you will, even then, have only 599 of the original 1,000 left. I use 1,000 cows in the example so that you can easily scale back or forward to the size of your herd.
Again using my original assumptions that you are selling 6% dry, 10% open and 4% for other reasons from a 1,000 cowherd, that means you are culling 20% per year. How many of you are actually doing that? Are you really selling all the dries and opens? Are you culling for any other reason?
If you do cull 20% per year, your herd makeup is approximately 180 two-year-olds, 148 threes, 121 fours, 99 fives, 81 sixes, 66 sevens 54 eights and 251 nine years and older. With all that culling, is your cowherd really that old?
The point is that cows fall out of your herd pretty fast. Over half of your herd is under six years old if you are near typical. Since the national culling percentage is in the mid to low teens, I want to suggest that many of you do not cull all your opens and dries—especially dries.
The reason many think that a cow has to last at least six years is to overcome all the depreciation. In spite of what your accountant tells you, cows don’t depreciate until they are about six years of age. They, in fact, appreciate until about four years of age then hold their own for a couple of years and then finally depreciate toward a cull cow value.
The day after a heifer calf is born, it should be worth a little more than it was before birth. At weaning time, you should be able to sell it for a profit. If not, you are either happy subsidizing your ranch from other income sources or you are in economic trouble.
Since yearling or stocker operations are proven to be more profitable than cow-calf operations in many parts of the U.S., if you keep the heifer calf until it is a yearling, in most years it will have added value or profit to its value as a weaned calf. Those that are pregnant should be worth more than the open yearlings that made a profit.
So now you keep and calve the pregnant heifer. She weans a calf and comes up open. The sale of the calf should cover the previous year’s cost to run the cow. The open heiferette (2 ½ year old) will be lighter than a typical cull cow but sell for significantly more per pound. Selling the cow and the calf should still be profitable.
In subsequent years the same thing should be true. The cows that really cost you money and take from the rest of the herd are those that are diagnosed pregnant and fail to wean a calf. That cow has her carrying cost from the previous weaning until she is sold with no calf to pay those costs.
Remember, calves pay each year’s cow carrying cost and, in addition, return a profit. The sale of cows should cover their own development cost, and it will if you use a low cost, minimal input approach to heifer development.
I might interject that two of the best indicators of ranch profitability are:
Cost to develop a replacement heifer
The average sale price of the ranch’s market cows from two year olds and older
What I have just written does not work with high-cost, high-input heifer development. But, it can work very well with a very short breeding season on yearling heifers. Then, recognizing that cows appreciate in the market until they are four years old, hold their own until about six years old and then depreciate, you might want to consider selling most of the cows as bred cows by the time they are six years old.
You can minimize the number sold as open cows by having a short calving season and a longer breeding season. You do that by selling late bred cows or late calving pairs. There is always someone within a reasonable distance who calves later than you. I found that it is easier than you think to get a nice premium over the cull cow market for cows bred later or calving just a little later than you are. This requires a good understanding of the market in your area and doing a little sales work.
If you buy replacement cows to terminal cross, go find a one-source provider of the cows I’ve just described and buy them.
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Burke Teichert was born and raised on a family ranch in western Wyoming and earned a B.S. in ag business from Brigham Young University and M.S. in ag economics from University of Wyoming. His work history includes serving as a university faculty member, cattle reproduction specialist, and manager of seven cattle ranchers for Deseret Land and Cattle.
Teichert retired in 2010 as vice president and general manager with AgReserves, Inc., where he was involved in seven major ranch acquisitions in the U.S. and the management of a number of farms and ranches in the U.S. as well as Canada and Argentina.
In retirement, he is a consultant and speaker, passing on his expertise in organizing ranches to be very cost-effective and efficient, with minimal labor requirements. His column on strategic planning for the ranch appears monthly in BEEF magazine.
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