Cow-calf producers are expected to make $709 per cow over cash costs, including pasture, in 2024.

These levels are quite similar to the inflation-adjusted highs experienced by producers at $534 in 2014 dollars and $708 in 2024 dollars.

With prices this high, the question asked by producers is where prices will be over the next two to three years and ultimately what this means for a culling, retention, or expansion decision this fall, said Elliott Dennis, livestock economist.

A few current market trends to consider:

Weekly prices for feeder cattle in Nebraska are at $350 per hundredweight for 500–600-pound steers.

Feedlots have been able to work through cattle inventories as the percent of cattle on feed longer than 90 and 120 days is now lower than the five-year average.

Approximately 38.5 percent of all cattle on feed are heifers. This is down from the high of 40 percent last year and similar to the levels seen between 2019-22 but higher than in 2014-16, which was about 36 percent.

The total amount of beef cow slaughter is 15 percent lower year to date than in 2023.

For slaughter cows, about 90 percent lean prices are at $114 per hundred, down from the high of $129 in April. But still considerably higher than $85 in 2023 and $60 per hundred between 2018-22.

If you choose to expand your operation by buying more replacements, then the expectation is that each cow or heifer purchased will pay for her expenses and return a profit over her productive life. The longer she lives, the greater potential she has to return a profit.

Cull rates are typically used as a proxy for reproductive life. For example, if a herd has a cull rate of 16 percent, this means a cow lasts 6.25 years in that herd on average. In other words, a cow has 6.25 years to return a profit back to the operation.

Thus, the total revenue over her productive life is the revenue from calf sales (number of calves multiplied by the price) plus her salvage value.

There are a couple ways to calculate this purchase value. Included are the University of Nebraska, Lincoln, (UNL) annual beef heifer replacement forecast and the Kansas State University replacement cow calculator.

They are used to calculate the amount one could pay for a cow, using a combination of assumptions regarding market prices of feeder cattle, interest rates, weaning weights, annual cash cow costs, number of calves born, and others.

Net present value (NPV) indicates for different annual cow costs and calves born to a cow. NPV can be used as a tool to determine if a cow would return a profit if purchased at a certain price.

If an operation’s annual cow cost is $925 and you expect that a cow you are going to purchase will have seven calves, then the total amount one should pay for her would be $2,770.

Different costs, calves, and assumptions change the amount one would pay.

Producers can rebuild individual herds in several ways. Each would have different implications for the timing of when feeder cattle will enter the market. The quickest is to buy a cow-calf pair.

You get the cow plus the opportunity to sell the calf. Both current and short-term future revenues increase.

Next, you can buy a bred cow. You will get a calf and, depending upon the age of the cow, a calf for the next several years.

Last, you can buy a bred heifer, which will give you a cow and the longest reproductive life. However, the price for different avenues of expansion varies quite a bit.

Age, months bred, and weight of calf are the primary factors by which the USDA Agricultural Marketing Service (AMS) distinguishes replacement cattle.

Consider an open cow with a calf weighing less than 150 pounds. Prices range from $3,302 if the cow is between two to four years old to $2,525 if she is over eight years old.

Assuming the value of the calf was constant at the current value of $904 (200 pounds multiplied by $4.52), then the open cow without the calf is worth between $2,400 and $1,600.

At a cull value of $119 per hundred, to break even, the cow weight would need to be between 2,000 and 1,360 pounds.

Adjusting the value of the calf to a weaned 550 pounds decreases the break-even cull weight to 1,150 to 505 pounds. Clearly, the market is pricing the value of that calf at some future weaning date.

Monthly prices for medium and large mid-age cows between seven to nine months pregnant have stayed relatively stable across the past six months.

This fall, potential herd expansion will look different than the previous expansion in 2013.

A key difference is borrowing rates. In 2014, the average borrowing rate for feeder cattle was 5.75 percent. The current rate is 9.3 percent and has been nearly that high for the last two years.

Higher rates make borrowing more expensive and challenging for some operations to pencil in a profit.

Highly leveraged operations tend to be more common among new and beginning producers.

Operations with strong equity, or those that don’t need to borrow funds for operating, could see an opportunity to expand.

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