What's Affecting the Value of My Bred Cows? Research has Identified Several Traits that Factor InMon, 20 Feb 2017 13:50:04 CST
Mondays, Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, offers his economic analysis of the beef cattle industry. This analysis is a part of the weekly series known as the "Cow Calf Corner" published electronically by Dr. Peel and Dr. Glenn Selk. Today, Dr. Peel discusses the factors currently affecting the value of bred cows.
"Bred cows vary in value according to a number of factors including age; quality; weight; stage of gestation; hide color; time of year and location. Research at Oklahoma State University has examined 15 years of auction data in Oklahoma to determine the impact of these factors on commercial bred cow value. Purebred cows are more commonly marketed by private treaty or in production sales but the general relative impact of value factors identified in the auction study is likely to be similar.
"In the latest weekly combined Oklahoma auction data, bred cow values are reported in a range from $735 to $1585/head. The research model would suggest that the base value of a four year old (fourth gestation), average quality cow, weighing 12-1300 pounds and 5 months bred is $1000-$1050/head. This estimate is consistent with the reported market data. Changes in any of these characteristics impact the value of the bred cow. All value differences below are based on current average market levels. Price adjustments are based on percentages which means that the dollar value of price adjustments will be different at lower or higher average market price levels.
"Young cows have the highest lifetime production potential and thus first-calf heifers have the highest average value, about $35 /head more than the four year-old base cow. Cows show only modest price decreases through age six then drop sharply. For example, an eight year old cow will have a value about $110/cow less than the four year-old cow. Compared to the 12-1300 base weight, a bred cow weighing 14-1500 pounds will have an average value about $50/head higher. In contrast, a cow weighing 900-1000 pounds will have a value $85/head less compared to the base cow. Stage of gestation also impacts bred cow value with a first trimester bred cow valued roughly $50/head lower than a mid-trimester cow. Value increases for late gestation cows up to eight months bred by about $55/head over mid-trimester cows. However, bred cow value drops after eight months bred when cows are extremely close to calving.
"Cow quality has a significant impact on bred cow value with high quality cows bringing about 14 percent higher value compared to average quality while low quality cows bring about 15 percent lower than an average quality cow. In the example above, that means roughly $150/head more for high quality to $150/head less for a low quality cow compared to average quality. Apart from quality, hide color affects value. The auction data does not report breeds but does distinguish black colored animals from all others. A black-hided cow brings an average premium of nearly seven percent or $70/head more in the current market. In Oklahoma, bred cow values peak in March and are seasonally lowest in October, with generally low values from June through October. At current market levels, the seasonal swing in bred cow value would be about $140/head from the March peak to the October low.
"The effects reported above are additive and it is easy to see why a wide range of bred cow values are reported. Using the research model and current market conditions (and holding cow weight and the time of year constant) various combinations of age, quality, gestation, and hide-color result in a range of bred cow value estimates from about $730 to $1300 per head. The research model appears to be capturing current average bred cow values reasonably accurately. However, demand for high quality cows appears to be stronger than usual with current values for high quality cows in Oklahoma reported at roughly $1550/head or $200-$250 per head higher than the research model would predict. This is likely another indication that herd expansion is still going strong."
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