Extension specialists discuss replacement heifer value

University of Nebraska-Lincoln (UNL) Beef Extension Educators Randy Saner and T.L. Meyer discuss projections for respectable replacement heifer values for the 2020-21 production season with UNL Extension’s Aaron Berger in a recent UNL Beefwatch podcast dated Dec. 21. Drought and COVID-19 in 2020 have impacted beef producers in many ways and may have impacted producers’ decisions to purchase or sell replacements in 2021. 

Selection factors

                  The beef Extension duo paired with UNL Extension Ag Economics Specialist Matt Stockton to produce a Beefwatch newsletter corresponding to the podcast. In this newsletter, they explain factors related to heifer selection, and while selection factor varies by ranch and goals of the breeding operation, four factors affect the value of purchased replacement heifers and heifers retained from the herd. 

                  The first is longevity or the length of time a heifer will remain in the herd as a productive cow. Second is a cost-value comparison of the expected difference between costs and revenues, including calf prices and cost differences over the animal’s lifetime. 

                  The third is how the heifer in question fits in genetically and phenotypically with the existing herd and fourth is the rancher’s goals for their operation and management style.  

Heifer model

                  “This model looks at different replacement rates and costs of production to give guidelines,” says Saner. 

                  “As longevity of heifer replacements increase, average herd age increases and breakeven values increase, except in years when costs exceed revenue,” the newsletter explains. 

                  “Often replacements are raised and developed on the ranch, so sometimes those costs are hidden,” adds Berger. “Whether developing or purchasing heifers, the price of replacement heifers is a big deal in terms of impact on cost of production.”

                  They explain the replacement heifer forecast is made using forecasted price and cost scenarios created by the University of Missouri Food and Agriculture Policy Research Institute’s (FAPRI) 10-year projections and modified to better fit producers in the area.

                  High, average and low cost of production figures used in the forecast were $831.20, $780.50 and $716.16, respectively. Replacement rates were compared at 14 percent, 20 percent and 28 percent per year. Meyer notes UNL’s Cow Cost CowQLator is a tool available for producers to estimate the annual cost of production per cow.

                  Saner adds projected calf prices are taken into account in the model. 

Results

                  The newsletter reports a herd with a 14 percent replacement rate and the lowest cost of production is forecasted to breakeven up to a heifer priced at $2,128.23 while the 28 percent replacement rate with the high cost of production is forecasted through the model to breakeven at $1,036.24. 

                  “Those with low production costs and low replacement rates can afford to spend more money on replacement heifers than those with higher costs of production and higher replacement rates,” says Saner. “Production cost can really affect what producers pay for heifers, which is why we try to get producers to look at operation costs. If they can buy heifers that will stay in the herd longer, they can buy more expensive heifers.” 

                  Directly related, Meyer shares, “The higher the production costs and replacement rates are, the less producers can spend on replacements.” 

                  “Depending on where producers are in the cattle cycle can make a difference also,” shares Saner. “It looks like according to the baseline study we are getting to the bottom of prices, and this is a sign producers are probably going to be more profitable in the next couple years.” 

                  “Right now we have had record calf numbers in terms of cattle placed on feed with less heifers retained and decreasing cow numbers,” adds Berger. “Historically, this is a signal we are going into a time when cow numbers decrease, with a reduced number of calves, which often results in higher-priced calves. It’s a challenge in the industry and for livestock managers.”         

                  Producers can find the forecast at beef.unl.edu/beefwatch/2020/university-nebraska-lincoln-extension-beef-economics-team-annual-beef-heifer.

                  Averi Hales is the editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.