Can you afford to hold back heifers?
As we are seeing all-time highs in feeder calf prices, we are also looking at all-time high prices to purchase bred heifers. Logically, it would make sense to keep back your own and breed them, but at the current prices of selling calves, can you...
As we are seeing all-time highs in feeder calf prices, we are also looking at all-time high prices to purchase bred heifers.
Logically, it would make sense to keep back your own and breed them, but at the current prices of selling calves, can you afford to not sell them?
If you are a younger farmer, diversified in grain and livestock, who is trying to grow your cow herd by holding back heifers, this year might be a year to sell heifers instead of keeping them. Looking at potential losses in the grain enterprises on your farm in 2015, cash flow (and your banker) might dictate you need to sell all of your calves in order to pay down operating debt and cover loan payments, as opposed to retaining them and incurring additional debt while diminishing cash flow.
In the past, a heifer valued at $1,600 to $1,800 would take five to six years to pay for and cover feed costs. But, now that bred heifers are valued around $3,000, it might take 10 years or more to pay for her.
If you buy a cow for $3,000, over a 10-year period, average profit from her and the calves roughly equals $100 per head per year. So in 10 years, profit is $1,000. After 10 years, sell the cow for weigh-up and get a $1,000 salvage value, which totals $2,000, $1,000 short. In order to pay for that cow, we would have to profit $300 per year. Each year $100 of income, but costs of $300 leaves $200 in the negative. If the markets would stay consistent for the next 10 years, I would agree the profit would be higher, the commodity prices are likely to change.
Keeping bred heifers is a high risk. We can't price protect those animals the same way we do steers or other market animals. Heifer conception rates are less than the older animals in our herd. We have a higher feed cost to get those animals in the body score for breeding. Also, by the time those animals are old enough to raise a calf, there is no way to know what the markets will be in two more years. If the markets do decrease by then, that heifer's value will be at the high end of the market, with a lower rate of return from her calf.
If you do decide to keep heifers, it is a good idea to select for longevity and fertility in the herd. An animal sold early in her production is losing a large amount of money for the operation. An animal that is consistent in breed back and calving within the allowed time each year is profitable for your operation. Longevity and fertility are trackable with many different breeds. Pathfinder cows and the number of calves ratio in that cow year has a lot of merit that some producers overlook. When looking at selecting a bull or heifer, there are specific sires and dams that carry those genetics to contribute to those desired qualities.
Editor's note: Koupal is with the South Dakota Center for Farm and Ranch Management.