What is in this article?:
- What Is A Beef Cow Worth?
- The cycle's "owning" phase
The economic value is calculated utilizing each female's lifetime annual net income values plus her cull cow income discounted back to today's dollars.
- Find out how to calculate the economic value of a preg-checked heifer here.
Last month, I suggested that a fall 2004 preg-checked bred heifer that will produce seven consecutive calves has a calculated economic value of $1,560. A rancher paying $1,560 for that bred heifer this fall should expect to earn a 6% return on his investment.
The same economic analysis can be applied to bred cows of all ages. For example, a fall 2004 bred cow that produces six consecutive calves has an economic value of $1,489. Her economic value with five consecutive calves is $1,398; four consecutive calves it is $1,290; three consecutive calves is $1,159; and two consecutive calves is $1,049. Each economic value is calculated utilizing each female's lifetime annual net income values plus her cull cow income discounted back to today's dollars.
So what's a bred female worth today? I distinguish between the sale barn value of bred female and the economic value of a bred female in a rancher's herd.
The sale barn value is what a bred female would bring at the local sale barn where the driving factor is the gross value of today's feeder calves. As gross value goes up, the sale barn value of a bred female goes up. Now that feeder calf prices are quite high, the sale barn price of bred females is rising.
The economic value of a bred female, meanwhile, is the sum of future annual net incomes generated by all the calves she produces, plus her salvage value as a cull cow. These future incomes must be discounted back to today's dollars. Note this is net income, not gross income as I frequently hear ranchers use.
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I suggest ranchers bring females into their herds when the economic value exceeds the sale barn price. The higher the economic value relative to the sale barn price, the more profit potential.
The beef cattle cycle, its resulting beef price cycle, and ranch resource costs are three key factors affecting the economic value of a bred female — regardless of her age. Finally, the economic value of bred females is ranch specific.