Deciding whether building or buying replacement females offers the highest return in a given market is like tying hard and fast to a green-broke horse. It seems simple, until you wind up on the wrong side of a wreck.

"Producers who have traditionally raised their replacement females have a good handle on the management protocol, but may not have a good handle on what it costs them," says Paul Gutierrez, agricultural business management specialist at Colorado State University (CSU).

Specifically, Gutierrez says producers need to determine replacement rate and heifer development costs up-front. "Even more important is evaluating the cost of production associated with raising them beyond first conception," he explains.

In other words, guessing that 5-weight heifer worth 75 cents at the sale barn will cost $300 for expenses and beat buying a bred heifer for $700 is just liar's poker.

For perspective, Gutierrez offers one way to assess true value (Table 1). Rather than start with the opportunity cost of the heifer (what the market is paying), he uses an actual weaned cost. That's the annual cow cost, minus cull cow adjustments, divided by the weaned calf crop percentage.

Figuring specifics through the first year (using Standardized Performance Analysis figures), keeping and raising a replacement to breeding time is $677. However, by the time a producer accounts for death loss and open replacement females - 14% in this example - the cost rises to $717.

What's more when you carry that projection into the next year, the cost of one bred 2-year-old female goes to $788.

Build Or Buy Heifers? The specific numbers and equations will be unique to each operation. The point is a comprehensive snapshot like this can help individuals effectively decide if building makes more sense than buying replacements, or paying someone else to develop their heifers.

"There's not a huge amount of difference (in price) between buying like-bred, synchronized, AI-bred heifers through one of these heifer development programs and buying the top heifers at the sale barn that you know a lot less about," says Kerry Paul of Paul Angus Farms in Albany, MO.

Paul has purchased pregnant recipients carrying his embryos from such programs, synchronized to calve in 30 days. He also uses outside help to develop the heifers he produces.

"Currently, we're getting it done for a shade over $1 per day. We'd spend more on feed doing it ourselves," says Paul. "Essentially, the true cost is about the same, the feed and the hay, but the yardage and labor is free. That's the big difference I see."

Plus, Paul opens up more cow carrying capacity at home by letting someone else grow his heifers. Gutierrez says you can run 0.15 more cows year-round for every heifer that isn't taking up space; that's 15 cows for every 100.

"There are a lot of hidden costs that go into building replacements," says Joe Rickabaugh, manager of Kansas-based Genetics Plus, a commercial heifer development program. He believes producers should be more critical and demanding of their replacement decisions. For instance, "What does it cost you to calve in the last 15 days of a 60-day calving period, compared to the first 15? And that's only one year."

Likewise, genetic opportunity costs, either building or buying. "If I was a commercial producer," says Paul, "I'd have to gauge the quality of my cattle. If I were producing better cattle than I thought I could buy, I'd keep them. But, I wouldn't be scared to buy them if I thought I could improve my herd."

Timing Is Important In general, Gutierrez says low-cost producers with lower replacement rates are usually best positioned to keep their own females. "With a high replacement rate of 25-30 percent and high cow costs, nine times out of 10, you're probably better off buying heifers," he says.

For operations with 250 head or fewer, Gutierrez says the decision can be tougher, given the advantages of depreciation and faster cash turn-around offered by purchasing heifers.

Of course, timing is important, too. As the current cattle cycle heaves it last gasps through liquidation, Gutierrez says the current buyer's market may offer some producers an opportunity to buy extra heifers and have them ready for the expansion phase of the next cycle.

For that matter, buying cow/calf pairs with a paycheck at side can sometimes make the most economic sense. Jim Gosey, Extension beef specialist at the University of Nebraska, says, "We go through periods where buying young cows is a better buy than bred heifers. It's really important how you assess where you're at in the cycle."

Gosey says producers who buy heifers as the cycle drives price up, typically settle for selling their calves on the way back down.

Still, Gutierrez says true cost of production should drive keep-or-buy replacement decisions. "Low-cost producers always have more opportunities and alternatives than high-cost producers," he says.