Developing and Breeding Heifers For Sale – Will It Pay?
By John Ritten, UW Extension Economist
With the current interest in herd expansion given record cattle prices, some of you may be wondering if developing and breeding heifers for sale may be a worthwhile endeavor this winter. We have all heard what bred heifers were bringing this year, and while I am not sure all of those sold will be profitable to those who bought them, there are some opportunities for those on the selling side.
While we currently don’t know what the market for will be for bred heifers next year, we have a general idea what of the cost to produce these animals will be.
If you are thinking of keeping extra heifers back this year and developing them for sale next summer, it will be important to properly prepare them to increase the likelihood of getting them pregnant.
Costs to consider
For this analysis, I will assume we have a 550-pound heifer as of Oct. 15.
After weaning, we utilize existing forage until December, at which point we will feed 15 pounds of hay and four pounds of protein until they leave our operation. I have also run the numbers with grazing occurring after breeding, but the cost difference is only a few dollars when charging ourselves for grazing.
For my numbers, the feed costs come to just over $360 per head.
Of course, another important cost consideration is breeding. Artificial insemination (AI) is an enticing option for many producers. In my analysis I charge $80 per head – with $60 in consumables, including semen, drugs and a CIDR, and $20 for a technician. I assume this will result in 65 percent conception rate, given the nutritional program mentioned above. The open heifers will be exposed to a cleanup bull.
Another option is to utilize only natural service. In both cases, we need to fully account for our bull costs. Heifer bulls tend to be more costly on a per-calf basis than bulls used on mature cows. I assume a heifer bull will only be used for two seasons, after that he will likely be too large for our heifers, and we don’t want to use him on our mature cows. This is due to the fact that he was chosen as a heifer bull for specific reasons, such as calving ease and low birth weights, and exposing mature cows to him will likely result in lower weaning weights – a negative long-term impact on the profitability of our herd.
When accounting for the lower useful life of heifer bulls, a $4,000 bull will cost $72 per head when exposed to 25 heifers, and if we gave $6,000 for him, the per-head cost rises to $112. So, the costs of breeding should range between $70 and $150 per heifer exposed. Remember this is per heifer exposed, not bred – we will likely end up with only around 90 percent bred.
Another cost consideration is vet bills, which I assume will be around $20 per head on average.
You may also want to charge yourself yardage. If someone else was feeding your heifers hay, they would likely charge around $0.35 per head per day, which would run about $80 per head over the course of the season. I ignore this cost in this article.
One of the biggest – and most overlooked – expenses, especially this year, is the value of the calf and subsequent interest. You need to charge yourself the forgone revenue of your heifer calf. You would have had money in the bank right now if you would have sold her. A 550-pound heifer would have brought around $1,500 this October, and interest on her would be about another $60, considering a five percent interest rate through next summer.
You also need to account for death loss. I assume one percent of heifers retained will die before marketing next summer.
So, depending on your feeding program and breeding decisions, it will likely cost at least $500, and possibly up to $900, above the value of a heifer calf to have a heifer that has been exposed to breeding available for sale next summer.
When using a lower-end number of $525, this pushes the cost of a “heifer exposed to breeding” at roughly to $2,100 next summer. This number does not include any returns to your time, labor or management.
Will it pay?
The big question is, “Will it pay?” That depends on a few unknowns.
One of the most important is, what will the bred heifer market be next year? The second is, how many of those females exposed will actually be bred.
The first is beyond your control. The second you should be able to influence with proper nutrition and breeding, and I encourage you to talk to your vet and/or beef specialist for more info.
As of the time of this writing, a 900-pound, open heifer is expected to bring around $1,900 July 1 of next year in Torrington, which is likely to change a lot between now and then. So, with the relatively low development costs of $525 per head, assuming 90 percent conception, your bred heifers will need to bring at least $2,200 to breakeven.
Again, this implies you haven’t paid yourself anything for your time or labor.
If you have 90 percent conception and bred heifers bring $2,500, you will make about $300 per head.
If your costs of development are higher or your conception rates are lower, this number will also have to rise significantly.
Will this happen? Good question.
While we’ve all heard the stories of astronomical bred heifer prices this past summer, the summer average for the state of Wyoming was less than $2,100. Remember, there are a lot of animals sold for less than average, and we usually only hear about the good ones.
National herd expansion should help support bred heifer prices, but any disruption to domestic or global demand could very easily have an adverse impact. Any sort of global response to the Russia/Ukraine conflict, increased impact of the ISIS confrontation or expansion of the Ebola epidemic could hurt global demand.
Domestically, reports suggest falling poultry and swine prices at the retail level in the coming year, which may dampen consumers’ willingness to pay for beef.
Also, in order to support heifer prices, there will need to be grass available, so we are dependent on weather. Feed costs could also adversely impact breeding stock prices next year. A necessary condition for elevated bred heifer prices is another good crop year, as low feed costs will encourage feeders to continue to aggressively bid for placements, which in turn supports breeding stock values.
So, the likelihood of profitably keeping heifers back with the goal of selling them as bred heifers next summer really depends on your costs and conceptions rates and external market forces. Regardless, the heifers retained this year will be the most expensive heifers we’ve seen.
You need to weigh the potential upside against the risks, as well as the value a heifer calf sold will add to your operation right now. I think keeping heifers back this year is a risky strategy, but it may work for some of you. Personally, I’d sell any extra heifers I have right now and put the money in the bank.
If you’d like to discuss any of this in more detail, I’ll be at the Southeast Wyoming Beef Production Convention Nov. 18 in Torrington. For more information on that meeting, point your browser to bit.ly/sewyobeef.