Money Trading Hands In Cattle
DR. ANDREW P. GRIFFITH
KNOXVILLE, TENNESSEE
Sometimes there are data heavy articles that are used to tell a story and support a thought while other times there are articles that lean heavily on a person’s experiences to tell a story. The story being conveyed today is more of a “WOW” story in that it is difficult to comprehend how much money or value is trading hands today in the cattle markets. Thus, this article will attempt to put into perspective the value being placed on cattle and how many dollars people are seeing pass through their hands.
It may be good to just start with the average cattle herd in Tennessee and build from that base. The majority of the cattle herds in Tennessee are less than 50 head. Thus, if it was assumed a person had 25 cows that produced 22 calves that would be marketable in the fall of 2025 then a value can estimated fairly easily for this cattle herd. If it was assumed the heifers were sold weighing 525 pounds at a price of $332 per hundredweight then they would be worth $1,743 per head while a 550 pound steer priced at $360 per hundredweight would be valued at $1,980 per head. Assuming there were 11 heifers and 11 steers in the calf crop, the total heifer value would be $19,173 while the total steer value would be $21,780. This means the total calf crop would be valued near $40,953. That certainly is not all profit, but about half of it would be.
Now to valuing the cows. This is a little more difficult, but a minimum value can easily be established using the cull cow value. If the cows weigh 1,300 pounds and the slaughter cow price is around $160 per hundredweight then the minimum value of each cow is $2,080 per head for a total of $52,000 across the entire herd. If the cows are rebred and still have reproductive value then a conservative estimate of the average value may be $2,900 per head, which would mean the cow herd is valued at $72,500. Thus, the average size cattle herd in Tennessee has a total value ranging from $92,953 to $113,453. If someone wanted to scale this to a 100 cow herd then multiplying by four would estimate the value range between $371,812 and $453,812.
Tennessee not only has cow-calf operations, but there are several stocker and backgrounding operations. Assuming a stocker producer wanted to grow one load of 550 pound steers to 800 pounds then that producer would invest $1,980 per head to purchase 62 steers totaling nearly $122,760 and if the market holds up then the cattle may be sold for about $330 per hundredweight, which means the producer would receive $2,640 per head or $163,680 for the entire group. Again, the difference in purchase and sell value would not be all profit, but there should be enough value there to make a profit. Similarly, if one scaled this to a person purchasing four loads of cattle then it would require $491,040 to purchase the animals and the total value at sell time would be $654,720.
These values are extremely large, and they may even encourage people to want more cattle. However, these values do not include any of the negative risks that are inherent in the cattle business. The bigger story it tells is just how much capital is needed to participate in the cattle business. Similarly, just as quickly as the value of cattle increased, history tells us the value can decrease just as quickly. Not wanting to discourage people from entering the business or growing the business, it is actually easier to start when prices are lower than where they are now. However, higher prices make the business look more enticing.
It is clear there is a lot of value in cattle today, and there is a lot of money changing hands with every head traded. Again, this is not meant to discourage anyone, but it is meant to be a word of warning. Caution should be taken when purchasing and selling cattle in this high-priced environment. There is money to be made and there is money to be lost. ∆
DR. ANDREW P. GRIFFITH
UNIVERSITY OF TENNESSEE