As spring arrives, cow-calf producers face a high-stakes crossroads: which females will stay to build the future of the herd, and which will be culled? While current market optimism is high, making the right choice requires more than just a gut feeling.
On a recent episode of “Agriculture Today,” K-State Cow-Calf Extension Specialist Jason Warner breaks down the critical economic factors behind female retention and introduces the data-driven tools K-State Research and Extension offers to help producers maximize their long-term return on investment.
Strategic Planning for Long-Term Herd Growth
At this point in the year, there are many discussions to be had about female retention.
“There’s a lot of really good optimism for the cow-calf sector of the beef industry,” Warner says.
Female retention decisions are critical for producers, especially considering the economic impact on the herd. The investment cost going into females is the first factor to contemplate. Bringing new females in is a long-term investment, so looking at what their rate of return will be is valuable.
Warner says, thinking about long-term goals like herd growth or production is beneficial to retention decisions.
Knowing Your Numbers: The Real Cost of Production
Market projections are one side of decision-making, but producers should also compare their rate of relative return on females.
“Being able to be honest with ourselves on what our production costs are is a really important thing to do,” Warner says
The rate of return per female will reflect what annual production costs are. Parameters like weaning weight, death loss and interest rates influence the costs each year.
Warner says it’s important to consider the varying initial investment costs in each age group of your herd. To aid in these decisions, he recommends using the KSU Beef Replacement Tool.
Built for simple and easy use, these spreadsheets aid producers in determining the Net Present Value (NPV). This value compares if a producer was to keep a female back, take the chances investing in her and project the rate of return versus investing that same money elsewhere.
To ensure accurate projections on your rate of return, Warner explains: “You need to have a good estimate of what you think your production costs are to run those cows on an annual basis, as well as a realistic expectation of what we think feeder calf prices are going to be worth over the lifetime of that female.”
The NPV Advantage: Data-Driven Decision Making
This calculation system is further explained in “Cost Considerations for Replacements.” In the “Beef Tips” article, Warner, Sandy Johnson, K-State extension beef specialist, and Glynn Tonsor, K-State ag economist, break down the economic views of female retention.
When markets signal expansion of a herd, it takes longer for cattle to reach harvest because of a cow’s biological cycle. This pattern created is known as the cattle cycle, meaning heifers retained at times of low inventory will peak production when fed cattle supplies are increasing while market values decrease.
Timing the Cycle: Navigating Biological Lags
For instance, if the planning horizon is short and forage supplies are fixed, retaining more females may not make sense. But if longer planning outlooks and ample forage or more land are options, retaining females may be the move.
Regardless of whether replacements are raised or purchased, those dollars have an opportunity cost, meaning they could be invested elsewhere.
Using the KSU Beef Replacement Tool allows producers to find how they should look at their value. This spreadsheet system allows producers to look at the impact of a range of annual costs of production. It also has the capability to figure impacts on feeder calf or cull cow sale price projections, both useful numbers to consider.
Setting Your Benchmark for Replacement Value
The principal output of the spreadsheet is the NPV. According to the K-State experts, this value reflects the amount that could be paid for replacements such that the expected rate of return from the investment would be exactly equal to the discount (interest) rate given all the assumptions used in the analysis.
This price could be considered a benchmark, so if producers can buy or develop replacement females at a lower price than the estimated NPV, that is a better economic condition for their herd.
Your Next Read:
From Selection to Breeding: A Veterinarian’s Guide to Productive Heifers
