BCRC offers estimation tool to help producers decide whether to keep or sell replacements

The age-old question of whether producers should keep or sell their heifers is especially relevant in today’s high-price market, and according to University of Florida Extension Specialist Hannah Baker, the answer involves penciling out expenses to decide the best option for each individual operation.

In an effort to help producers evaluate this decision, the Beef Cattle Research Council (BCRC) offers an estimation tool known as the Replacement Heifer Calculator to aid in the calculation of what it may cost to develop heifers on a specific operation and if it is economical to do so.

Key cost concepts

In an article published in Southern Ag Today on Jan. 3, Baker explains the costs of developing heifers include the current value of weaned heifers, also known as the opportunity cost; breeding cost; absorption cost; variable expenses and fixed expenses. 

According to Baker, the first step in using the calculator is to recognize the opportunity cost of selling weaned heifers.

The next step is to recognize the variable and fixed expenses that go into getting a heifer to 60 percent of her mature body weight for breeding. 

Baker explains variable expenses include things like feed, medications and pasture management, while fixed expenses include land rent, labor and interest.

Third, producers need to take a look at what it will cost to breed each heifer. 

“Whether they use bulls or artificial insemination, there are costs associated with breeding,” Baker states. “Using natural service involves the costs of purchasing and maintaining bulls, and annual costs can be determined by subtracting the quotient of useful years in the herd and value at culling from purchase cost.” 

“The annual bull cost plus the maintenance cost, divided by the number of heifers he will be expected to breed is his total cost,” she continues. “This total cost is then multiplied by the number of bulls needed, and then divided by total number of heifers to calculate the breeding cost of each heifer.” 

Lastly, Baker explains absorption costs represent the cost of developing open heifers.

“These costs are absorbed by the bred heifers remaining on the operation,” she says. “However, absorbed costs can be offset by the revenue from selling developed, open heifers.” 

Baker explains absorbed cost can be achieved by multiplying the cost to develop all heifers by the number of open heifers, then divided by the number of bred heifers. 

“The revenue received by the sale of open heifers is then divided by the number of bred heifers to offset the additional development cost – revenue absorbed. All totals from each section can now be summed to estimate the cost of developing heifers,” she states. 

Making a decision

To conclude her article, Baker notes when producers fully understand the cost of developing heifers, they will be able to compare the costs of selling heifers at weaning and buying bred replacement heifers.

“If the price of bred heifers is greater than the total cost to develop bred heifers, a potentially profitable investment has been made in a producer’s heifers,” she notes. 

“Of course, also important to the decision is their strategy for genetic development, which must be weighed against the value of weaned heifers, development costs and the cost of purchased replacements,” Baker concludes. “These decisions are all about the goals and risk management strategies of each operation.”

Hannah Bugas is the managing editor of the Wyoming Livestock Roundup. Send comments on this article to rounudp@wylr.net.