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What Are They Worth??

What Are They Worth??. Determining the Economic Value of a Heifer. Curt Lacy Extension Economist. Current Situation. Relatively high prices Positive expected profits for the next few years Producers looking to recoup some of last few years losses

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What Are They Worth??

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  1. What Are They Worth?? Determining the Economic Value of a Heifer Curt Lacy Extension Economist

  2. Current Situation • Relatively high prices • Positive expected profits for the next few years • Producers looking to recoup some of last few years losses • Weather and other events still a major concern

  3. Outlook – Cow-Calf Producers • 2001-2004 – profits • 2005-2008 – losses • 2009 – profits/losses

  4. Cattle numbers usually increase 2 yrs. after cow/calf profits

  5. Three Alternatives to Expand Cow-Herd • Retain heifers from your own herd • Buy heifers (bred or open) • Buy cows (often either bred or as “3-in-1”)

  6. Replacement Female Economic Considerations • Production • Percentage calf crop • Weaning weight • Frame size/Muscle score • Economic • Development costs • Market value of female • Price-Position in Cattle Cycle • Expected prices • Effect of Frame/Muscle score on price (read discounts)

  7. Base 90% L/M-1/2 10% #3 muscling Alternative 1 80% L/M-1/2 10% L/M-3 10% S1/2 Alternative 2 70% L/M-1/2 15% L/M-3 15% S1/2 Alternative 3 60% L/M-1/2 20% L/M-3 20% S1/2 Possible Outcomes

  8. Comparison of Most Likely Scenario for Fall Calving Herd • Retain heifer and breed in December for fall calving • Buy bred heifer next summer for fall calving

  9. Retaining Your Own Advantages Known genetics Capability to build on past genetic decisions Price?? Disadvantages Inferior genetics Foregoing of current sales Additional management required to develop and breed heifers Buying Bred Heifers Advantages Improve genetics Saves time and trouble of managing and breeding replacements Disadvantages Unknown genetics Sources?? Price!! Tale of the Tape

  10. Doing the Math – Steps to Follow to Estimate the Economic Value of a Heifer • Develop a budget • Prepare a schedule of expenses and income (cash flow projection) of development phase • Estimate annual returns • Estimate the useful life of the heifer • Estimate the cull value

  11. Items You Will Need • Prices • Expected calf prices • Adjustments for quality grades • Cull prices • Price for the heifer??? • Production • Expected production • Weaning weights • Conception rates

  12. Items You Will Need • Budgets • Winter pasture • Summer pasture • Vet & Medicine • Shots • Eartags • Minerals • Expected Cull Rate

  13. Doing the Math - Prices & Discounts • Base Price - $90/cwt. for Steers • Discounts • Heifers $5.00/cwt. • #3 muscling $18.00/cwt. • Short-frame $25.00/cwt.

  14. Retain Heifer

  15. Buying Bred Heifer

  16. Results - Buying Bred HeiferExpected Profits Pay $700 for heifer in June Retaining Own Heifer – $188.54

  17. Results - Buying Bred HeiferEconomic Value – What can you afford to pay? Retaining own heifer = $685.23

  18. Conclusions • Producers should carefully consider their source of replacement heifers • Purchasing heifers can be a profitable alternative • Key considerations: • Price of the replacement animal • Expected profits from the asset • Price • Production • Longevity

  19. Conclusions • Considerations • Retaining your own heifers allows you to take advantage of past breeding decisions • Retaining your own heifers reduces the variability of the calf crop and makes it easier to group calves in more uniform lots • Purchasing females of unknown genetics increases variability of calf crop and returns • Purchasing females of known genetics can improve profits

  20. Conclusions • Bottom Line-Retaining and developing your own replacement females or females of known genetics gives you: • Better control – reduced variability in genetics • Predictable production • Greater uniformity in calf crop • Increased ability to sell in larger lots  higher price

  21. Heifer Percentage of FI U.S. Slaughter vs. Total U.S. Cattle Inventory

  22. U.S. Cattle Inventory and Prices Total U.S. Cattle Inventory and April prices for 400-500 m1 steers

  23. U.S. Cattle Inventory and Prices Total U.S. Cattle Inventory and April prices for 400-500 m1 steers

  24. Recent Prices

  25. Results – Retain Heifer • Expected profits - $68.65

  26. Results - Buying “3 in 1”Expected Profits Pay $750 for combo in June

  27. Results - Buying “3 in 1”What Can You Afford to Pay? Retaining own heifer = $565.34

  28. Overview • Current Situation • Outlook • Replacement Economics • Results

  29. What is the Economic Value of a Heifer? Curt Lacy University of Georgia Extension Economist - Livestock

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