Cattle prices have been on the rise, with significant increases observed in Nebraska feeder cattle prices over the past four months. As the summer comes to an end, producers are faced with decisions regarding early weaning and cow sell/retention. For those looking to buy cows this year, it's crucial to understand the factors that influence the value of replacement cattle and determine how high is too high when it comes to pricing.
Factors Affecting the Value of Replacement Cattle:
Productive Life: The lifespan of a cow directly impacts its value. Cull rates can serve as a rough measure of average cow life. A longer productive life translates to increased value.
Cow Productivity: Measured in terms of weaning weight, the size and number of calves produced by a cow significantly affect its value. Heavier weaning weights generate more income and allow for higher prices for replacements.
Cow Costs: While weaning weights are important, the cost of running a cow is a crucial consideration. Larger cows tend to have higher costs and maintenance expenses, which affect the value one can afford to pay for replacements.
Salvage Value: If the expected salvage or cull value of a cow is anticipated to increase over time, it can influence the price one is willing to pay for replacements. Recent years have seen higher salvage values.
Calf Prices: Expected cattle prices over the cow's productive life also impact the value of replacements. Understanding the dynamics of the cattle market cycle is essential in this regard.
Interest Rates: Feeder cattle interest rates affect borrowing costs and, subsequently, the affordability of replacements. Changes in interest rates can impact the maximum price one can pay.
Tools for Calculating Value:
There are free and accessible tools available to estimate the value of replacement cattle. Two highlighted options are the 2023 Heifer Replacement Values from the University of Nebraska-Lincoln (UNL) and Kansas State University (KSU). These tools employ different assumptions and data sources, providing flexibility in modifying the calculations to fit individual circumstances.
Considerations in Drought Conditions:
Nebraska drought concerns producers, with recent rains potentially alleviating concerns. However, increased feed costs and decreased pasture may lead to cow liquidation, impacting calf and replacement cattle prices. Monitoring future cull rates and cow replacements is crucial.
To determine the right price for a heifer or replacement cow, consider factors like productive life, costs, salvage value, calf prices, and interest rates. Use tools like UNL and KSU to create a reference point and monitor environmental conditions like drought. This helps producers make informed decisions when purchasing replacement cattle.
Photo Credit: gettyimages-erdinhasdemir
Categories: Nebraska, Livestock