Value Of Bred Female Cattle
DR. ANDREW P. GRIFFITH
KNOXVILLE, TENNESSEE
Several years ago, research lead by Dr. Chris Boyer, Dr. Karen DeLong and myself at the University of Tennessee evaluated factors influencing bred female values in the cattle industry. In addition, we calculated expected net present values and variability of net present values for these females. There are several factors influencing the price of bred females including breed/color, age, months bred, expected mature size, cull cow price, and other factors. However, we also discovered a simple method of estimating the value of bred heifers. This method is subject to variability, but what was found was that five to six month bred heifer values were approximately 2.5 times the value of a 500-pound weanling heifer. This is a rule of thumb, but does provide a starting point.
It is common for producers to ask what bred females are worth, and this research assists with making that determination. Similarly, it is also common for producers to ask how long it will take to pay off a purchased female, which this research also address. However, the thought process of the research and most cattle producers tends to be the animals have to be owned until their useful life as a breeding female is complete, and this does not allow for dynamic decision making of selling the animal at any point during her useful life.
With great interest in growing the cattle herd due to high cattle prices, it is useful to put a value on bred females and discuss options and alternatives for them. The research mentioned earlier calculated bred heifers to have a value of 2.3 to 3.0 times the value of a 500-pound weanling heifer with the average being 2.5 times the value. At the time of this writing, a 500-pound heifer in Tennessee was valued at $2,175, which would suggest bred heifer values between $5,000 and $6,525 with the expected price at $5,437. These values have certainly occurred for bred heifers in recent weeks and months, but they have generally been for the highest quality females with most heifers being traded in the $4,000 to $4,500 range.
The question of how long it will take to pay for a purchased heifer is not the best question in that it could be a few months, a few years, or she may never be profitable. As an example, a person may purchase a bred heifer today for $4,500. If the female calves two months later and has a 90-pound healthy calf and it is clear she is producing an adequate quantity of milk then the animal can probably be sold for more than was paid for it. The reason for this is because the buyer of the bred heifer took on the risk of calving the heifer. An alternative may be to take the calf to weaning and rebreed the female. The producer can then sell a weaned calf and a pregnant three-year old. The cost of carrying the female must also be added to the purchase price, but a person may be able to make a profit on the purchase of the female in less than a year.
The alternative for most producers is to keep that female for many years and ride through the fluctuation of calf prices and input prices. It is much more difficult to predict the profitability of the purchase of a bred female in this situation due to changes in prices. It does not mean retaining those animals for many years is not the most profitable, but it does carry the risk of markets over a longer time period. The same thought process holds for females at any age, but it is important to consider salvage value of the female at the end of her useful reproductive life.
This may or may not answer any questions producers have, but it does provide a thought process and some alternatives to the typical path of most cow-calf producers. The market dictates what should be done, but the best outcome is not known until the time passes. Thus, people get paid for the risks they take that are successful and tend to lose when taking the risk is unsuccessful. ∆
DR. ANDREW P. GRIFFITH
UNIVERSITY OF TENNESSEE