While most producers direct energy toward marketing steer calves, few do the same for marketing cull cows. Ten years of economic analyses for Northern Plains Integrated Resource Management Cooperator Herds, however, says marketing cull cows is an important profit component of any high-profit herd.
Cull-cow income typically makes up 10-25% of gross income generated by the beef cow profit center (Figure 1). Fact is, very few beef cow herds can generate a profit without generating some cull cow income.
Three primary factors determine the economics of culling cows:
Why are cows culled?
How are cull cows marketed?
Are profit-enhancing, counter-cyclical culling strategies being employed?
Why are cows culled?
North Dakota has maintained the CHAPS (Cow Herd Analysis Performance System) database of beef cow herd performance since 1963. The five-year rolling average (1994-1998) of CHAPS herds shows a 16% average culling rate (13.17% standard deviation).
Ranchers mostly say they cull cows due to old age. But, the CHAPS database (Figure 2) suggests old age ranks second (2.3%), compared to open cows (5% of the herd).
Females most likely to be open are 2-year olds going on 3. Such females are still growing, producing milk for their first calf and trying to get pregnant. They typically just run short on groceries.
The third highest reason for culling females is to sell them as replacement breeding stock. Meanwhile, physical defects and inferior calves rank fourth and fifth, respectively. Less than 1% of the average herd dies annually.
The data suggest most females are culled as 3-5 year olds. Once a cow reaches 6, she tends to stay in the herd several more years. I guarantee when you cull females at 3-5 years of age, you've raised the unit cost of producing a cwt. of calf (UCOP) in your herd. Culling young cows due to being open or late breeding is a huge missed profit opportunity.
How are cull cows marketed?
How and when cull cows are marketed can significantly impact beef cow gross income. Cull cow prices tend to be determined by three economic forces: annual seasonal price pattern; carcass grade (Canner, Cutter, Utility and Commercial); and long-run price trends.
Annual seasonal price pattern: Cull cow prices tend to go in cycles driven by and corresponding to the 10- to 12-year cattle cycle. Driven by general supply/demand conditions for ground beef, they tend to parallel feeder calf prices.
Figure 3(page 10) presents the cyclical aspects of cull cow prices for several widely dispersed U.S. markets. All these markets experience the same general seasonal price pattern.
Cull prices tend to peak in spring and decrease substantially going into fall. November is typically the low-price month — and also the month most cows are culled and marketed. Astute marketers find ways to market cull cows at other times of the year.
Carcass grade: The price of cull cows is based on their expected carcass grade (Canner, Cutter, Utility and Commercial). Dillon Feuz, University Of Nebraska economist, published a mid-'90s article on price differences between these cow grades at Sioux Falls, SD. Presented in Figure 4, Feuz concluded a price increase of 10-24% is generally possible by upgrading a low-grade cull cow.
About that same time a South Dakota State University feeding trial demonstrated how days on feed relate to market upgrades when feeding cull cows corn and corn-silage diets. They found cull cow carcass grades could be raised one carcass grade, and sometimes two grades. The conclusion: “depending on cost of gain, it may be profitable to feed fall and winter culls.”
Long-run price trend: It's imperative producers be familiar with the current long-run cull cow price trend and know if the trend is up or down. Cull cow prices, for example, have generally trended up since 1996. With the current beef price cycle having peaked, I expect cull cow prices to trend down the rest of this decade (Figure 5).
A common misconception is that one can make a profit from a beef cow by just selling her lifetime calves produced. It's not true. You also must consider the cow's salvage value to show a lifetime profit. Only by including a beef cow's salvage value in your analysis will she show a lifetime profit.
For those buying cows this year, take into account their cull values 6-8 years down the road. By using today's cull market price, you'll overpay for today's bred cows.
Problem is, many ranchers are using current calf and cull cow prices to justify today's high, purchased-cow prices — a sure recipe for a lifetime economic loss by the end of this decade. Future cull cow prices (Figure 5) must be considered in purchasing breeding animals.
Culling 15% of the herd each year of a 10- to 12-year cattle cycle isn't optimum. The optimum strategy is to build cow numbers when prices are low and sell bred replacement females when prices are high — such as right now. Doing this puts you in a counter-cyclical marketing strategy.
When your neighbors are selling cows, hold back heifers and build your cow herd. When you neighbors are buying cows, sell females and reduce your herd — even to the point you may have unused grass.
Money is being made in counter-cyclical marketing strategies. My high-profit IRM Cooperators taught me this in the 1990s.
Harlan Hughes is a North Dakota State University professor emeritus. He lives in Laramie, WY. Reach him at 701/238-9607 or [email protected].