On today’s Cow-Calf Corner, Scott Clawson, M.S., Oklahoma State University Cooperative Extension Service NE Area Agricultural Economics Specialist writes about the importance of cull cow values.
As I roam the two-lane highways in eastern Oklahoma going to producer meetings, cull cow prices and the decision to rebuild the cowherd are common points of discussion. In fact, if I ask who has sold some cull cows lately more smiles show up thinking about that check than anything else. The story behind the great cull cow prices has been discussed (see the March 11, 2024, edition). That leaves the expansion discussion up for grabs, and exactly what do cull cow prices have to do with it?
Much of the unease of the expansion decision is tied to the sheer size of the investment. If we decide to retain our own heifers, we will turn down a price that we have rarely seen for a weaning age heifer. Additionally, producers have reported that private treaty and special sales are fetching strong prices for bred females.
One of the most common ways to analyze an investment is to use a net present value (NPV) analysis. That is just a fancy way to say that we are going to invest in something (cow), and we expect it to generate cash (calf sales minus expenses) for a certain number of years (cow longevity) then we will salvage it (cull the cow). NPV guides us in answering the question, what is that investment worth or what should we pay for that replacement? While we process that, there are several issues to unpack. Calf prices, annual cost to run the cow, and longevity usually see the most focus and they are all important.
However, in which year of the cow’s productive life will she return the most cash to our investment? Most commonly that will be the year she is culled. In that year, she will likely calve for the last time in the spring and in the fall we will sell her and her calf. This highlights the impact that cull values can have on the math of this investment. On average, we tend to run a cow to failure. More specifically, we will keep them around until she comes up open, has a bad bag, comes up lame, etc. In those instances, we usually get the worst of what the market has to offer.
My speculation is that our current cull cow markets have changed the math from the red to the black on some cattle that we retained over the past decade while prices were more moderate, and expenses increased. Going forward, are there things that we can do to avoid getting the worst of the market? Selling as a bred, improve body condition, selling younger, etc. are all factors that we can manipulate in our culling decision and maximize the cash returned in the final year.
You can visit https://extension.okstate.edu/programs/beef-extension/calculators/ and use the Cow Bid Price Estimate Calculator to evaluate different options for your ranch.
