Market Advisor: The Economic Value Of A Preg-Checked Heifer

My numbers suggest that 2011 profits in the Northern Plains were over $160/cow – up from $113/cow in 2010. And, I project profits per cow to continue to be high for the next four years

My primary source of long-run planning prices is the Food and Policy Research Institute (FAPRI) at the University of Missouri and Iowa State University. I utilized the latest FAPRI prices (yellow section, Figure 2) to generate my current expanded set of planning prices (white section). I project strong feeder-calf prices for the next several years (500-600-lb column).

This presents FAPRI’s cull-cow prices and my projected cull-cow values.

I used 2010 average North Dakota cost-of-production data as my base, and increased cash costs of production by $20/year (2.9% annual cost increase) for years 2012 through 2019. No debt service was considered, but a $100/head family living draw was taken into account. These long-run net cash flow projections are presented in Figure 4. In general, average net cash flow per cow is projected to trend up for the next four years, then down for four years.

One further biological adjustment should be made to these annual net cash flow projections. North Dakota’s herd performance data (Cow Herd Appraisal Performance System – CHAPS) shows that females grouped by age perform differently. Thus, I suggest that a typical female peaks in her profit generation at 5-7 years old. I’ve adopted the pattern in Figure 5 as being a typical annual profit pattern for a Northern Plains straight-bred heifer.

Figure 6 combines my long-term net cash flow projections and typical biological lifetime profit pattern into a current projected economic value of a preg-checked heifer that annually produces seven lifetime calves and then is culled. The column labeled “net income” is the annual adjusted income based on the projected annual profit per cow and her lifetime biological profit pattern.

Figure 7 calculates the economic values for heifers that produce one to seven consecutive lifetime calves. For example, a heifer that produces one calf and is then open for her next calf and culled, is projected to generate $805 worth of net cash valued at $789 in today’s dollars.

Another critical biological phenomenon is the fact that not all females produce seven consecutive calves in their lifetime. Research data suggest straight-bred cattle tend to rebreed at a lower rate than cross-bred cattle.

An example may help explain the economic impact of calving rate by age of dam. Let’s assume a rancher buys 100 preg-checked heifers. With an 82% rebreeding rate for these two-year-old heifers, 82 head will produce live calves at weaning. That means 18 heifers checked open or lost their calves and were sold.