Impacting Cull Cow Value

First off, Happy New Year! I hope the holidays treated you, your friends and family well. 

There is sure to be a lot of discussion in the coming months regarding decreased beef production and how retail prices and consumption will respond. 

Along those lines, many economists are sure to be tracking demand, and I will likely report those findings here in the coming months. However, as many of you are hopefully enjoying a bit of a lull prior to calving season, I thought I would bring your attention to part of the cow/calf business that generally gets less attention than a lot of production decisions – cull cow marketing. 

I recently read a study out of Oklahoma State University (OSU) looking at various ways to increase the value of cull cows and decided to look how the Wyoming markets played out. I will use many of the same assumptions the OSU study used in terms of cow performance but will use historical Torrington Livestock Market prices to determine changes in cow value, ignoring feeding costs due to space considerations. 

If you wish to read the OSU study, which includes some estimates of feed costs, it was printed in the 2013 edition of the Journal of the American Society of Farm Managers and Rural Appraisers and can be found at ageconsearch.umn.edu/bitstream/161500/2/393%20Raper.pdf.

In short, there are three general ways in which we can increase the value of our cull cows over the widely utilized strategy of “check for opens and bring them to the sale barn in October.” 

One option is to simply add weight, and therefore value. Another is to increase grade and get a premium. The third involves simply waiting for market conditions to improve. 

In the graph below I show how cull prices for two grades seasonally move over the year. The lines show the 10-year average, inflation adjusted prices for USDA Grade Breaking Utility, or the Breakers market class, and USDA Grade Cutters, or the Lean market class. 

As you can see, prices are generally depressed in the fall when most people sell culls and increase over the spring months. 

The second thing to notice is that prices for Breakers are generally 11 percent higher than Cutters, regardless of the season. For this article, I am assuming Breakers are 75 to 80 percent lean with a probable Body Condition Score (BCS) of six, and Cutters are 85 to 90 percent Lean with a Body Condition Score of three or four. These prices represent the prices for cows over 1,200 pounds.

So, how much value can be gained? Again, I will use the same cow weights as the OSU example and assume culls weigh 1,350 in October. I will also show three scenarios for management. The first is maintaining weight until March, the second would likely be more accurate for pasture bound cows and have weights decreasing to 1,290 by March, and the third is a feeding intensive strategy to add weight, selling at 1,415 in March. 

If you have lower BCS cows and are in the Cutter market, you can add value, even if weight drops, as long as you hold them until February and can add roughly $30 per head by March. However if you lose too much weight and BCS drops, you may face a discount that would nullify this impact. 

If weight is held constant overtime, the increased value is $66, and by adding 65 pounds overtime, the value is increased by $105 per head, although any increase in BCS would likely result in a slight premium. 

However, this only represents the increased value of the cow and does not account for any of the costs of holding these cows. If you were to charge yourself $15 per month for grazing – a rather cheap estimate of costs – cows that lose weight actually lose about $45 even at a constant BCS, and those that maintain weight almost breakeven. As actual grazing/feeding costs are likely to vary widely across the state, I leave the true estimation of those numbers for your operation up to you. 

I have also included the same calculations for the Breaker class, and the numbers are even less favorable for cows that started in that class. 

However, if you were to start with a cow with a BCS of four and were able to increase her into the Breaker category, assuming you can increase two BCS over five months by adding 120 pounds, assuming it often requires an increase of at least 60 pounds to increase BCS by one, you can increase the value by roughly $225 per head. 

Remember, however, this is just the increased value. You still need to cover any additional costs in order to make any money using this option. You will need to increase two BCS and add 120 pounds at less than $45 per month over five months in order to make this option profitable.

In closing, it is possible to add value to culls by adding weight, increasing grade and waiting for market seasonality to improve. However, the increased value is rather small unless you can increase grade. Even then, it may be more costly than the increased value. 

One option that jumps out at me is to beat your neighbors to the market and take advantage of the higher prices prior to the drop-off in October. Find your open cows early and get them through the sale barn in August or September. This can save some forage and add value to your culls. 

If you want to further explore some of these feeding and marketing options for yourself, Utah State has a very useful online tool to show how costs and revenues change with various feeding and marketing strategies, available at cattlemarketanalysis.org/cullCowculator.html.