Making decisions about replacement heifers comes annually for cow-calf producers. Many factors help determine that decision including current and future costs, productivity and revenue projections for cows, calves and related items. The University of Nebraska offers an annual beef cow replacement value forecasting tool to help.
This prediction tool was released by the beef economics team of Randy Saner, and Shannon Sand, both Nebraska Extension educators and Matt Stockton, a Nebraska Extension Ag Economics Specialist. According to the team, this tool provides a starting point for evaluating whether to buy, sell or trade replacement cows.
The information can be modified to fit each producer, depending on their circumstances and expectations of future productivity, costs, and revenues. The forecasted price and cost variations were those created by the University of Missouri Food and Agriculture Policy Research Institute (FAPRI) as the current 10-year projections.
Selecting replacement heifers differs from ranch to ranch, but the value for both retained and purchased replacements generally depends on:
- Longevity - the replacement heifer’s ability to stay in the herd as a productive unit
- Productivity - both current and future expected difference between costs and revenues (calf price and production costs differences over the heifer’s productive life)
- Genetic and phenotypical compatibility with herd mates (the animal conforms with the production system and performance goals)
- Operator goals and management style (heifer’s contribution to future of the ranch)
- Financial standing, specifically debt related to cow purchases.
What this means practically is producers need to ask themselves what the productivity of their cowherd is, Saner says.
“We know some cows are going to fall out of the herd, but basically how productive are they?” Saner says. “Do they sell most their cows at 10 years? Are they replacing 14, 20 or 28% to keep that herd the same? Basically, the more productive cow herds don’t replace theirs as often. Because those cows have more longevity that’s something producers need to know when they make decisions because that’s going to tell them where their costs are and what they can afford to pay. Knowing the longevity of a cow and their cost of production are two big factors in knowing whether they would want to keep the heifer or not.”
Saner also says if producers are buying replacement heifers they need to consider purchasing from similar production systems.
“If you’re buying heifers, buy from somebody that manages them like you because everybody manages a little different, and cows are going to adjust right to your management,” Saner says.
In practical terms that means if cows are used to being fed a lot and a producer wants to manage them on less feed resources, those cows won’t work well in a new system, he adds.
“A lot of times people buy really nice looking heifers out of a herd that’s been pampered all their life, and then they put them in their herd, and they all fall out,” Saner says.
Producers need to remember the more information and data they have about their individual operations, the more accurate they can be in their predictions.
“The closer an operation’s actual productivity and costs align with simulation assumptions, the more accurate the breakeven values become as a decision-making tool,” Saner says.
The Nebraska Beef Economics Team has created a table which shows the breakeven values of beef cow replacements based on annual production costs and replacement rates.
“You know how many cows you have; you know how many heifers you’re saving, and that’s how you figure replacement rate,” Saner explains. “What percent of that cow herd are you replacing every year?”
Final Takeaways from the Experts
To maintain profitability, producers should consider the following replacement cow relationships:
Cow Longevity: The longer a cow is productive the greater the likelihood she will surpass her breakeven value.
Strategize Replacement Purchases/Retentions: Avoid overpaying or over-retaining replacements, especially in a strong market. Know the difference in the cost and productivity of buying versus retaining animals.
Adapt to Market Trends: Be prepared for markets to change direction. Stay informed about replacement costs relative to salvage values and calf prices.
Mitigate Risk: By diversifying replacement purchase strategies. Balance herd replacement management strategies with revenue expectations. Increase cow longevity cost effectively. Look for opportunities to forward price when conditions provide suitable profit margins. Look for ways to economically increase calving rate or lower cow cost while maintaining productivity.
“Producers can also mitigate some of their risk by doing Livestock Risk Protection (LRP) on their calves, so they know what price they’re going to get, or at least a better idea of price one year out,” Saner says.
Read more: 7 Ways to Help Beef Producers Evaluate Potential Replacement Heifers
