What You Can Pay For A Cow

[farmers_son]

Just having fun with some numbers but I think my point is valid.

I read the various threads about the price of a bred heifer/cow and yes it is more than it was a few years back. But think about it a bit.

I took a few minutes to put together some numbers to see just what you could pay for a bred cow/heifer. This is what I looked at...

I am assuming that few producers feed the exact amount of feed each day. If there was one more cow in my herd I would feed no differently. And I am even more inexact when it comes to summer pasture. If I summer grazed one more cow I would not be able to see the difference in my pastures.

I do have some cash costs like Ivomec, vaccines, preg checking etc. Actually the Ivomec and vaccine hardly ever works out exactly right but the vet charges on a per cow basis for preg checking although the mileage cost is the same no matter how many cows are being done. But for arguments sake I deducted $52 per calf cash costs.

I calculated the value of a 575 pound weaned calf (average of steers and heifers) at $731.90 each and although I am assured the female I am in theory buying is in calf I used a 92% live calf rate and after that a 92% conception rate.

I will not have to buy any extra bull power for just a few head.

I assumed a 20% marginal tax rate and a 6% discount rate.

Using those assumptions, the most important assumption is I could add a few head to my herd without incurring any significant costs for hay or pasture, I could pay as high as $5512.99 for a cow that is capable of weaning a 575 calf most years.

Assume a typical bale will feed 33 cows a day. That means in quite a few herds enough hay to feed half a bale or enough to feed 16 cows is put out to make sure the larger herd has enough feed. In other words a typical herd, we are not talking really small herds, could add 10 maybe up to 16 cows/heifers (depending upon their present herd size) and pay as high as $5500 for each bred female and still make money.

Obviously the market is not charging that much for bred females so we are looking at a significant profit opportunity. Based on $1500 for a bred female and using these assumptions that investment would return a 45% IRR (Internal Rate of Return).

A typical herd, simply by adding say ten more females could net, after tax, $5300 a year after tax assuming there was no appreciable requirements for extra labour, feed, land which I believe in many instances can be done.

What do you think? And in case someone thinks I have lost my marbles I would add that these numbers suggest the absolute most you could pay for a cow and it only works for a few head. Add too many cows and then you are putting out an extra bale of hay, you have to buy an extra bull and so on. Still if Canada has 80,000 or so herds and if each increased their herd by 5-10 cows...well you do the math.

[AllisWD45]

Try this. This is a formula i use. The example i use
has hypothetical numbers but you plug in your own
numbers and see what you get.
Cost to keep cow/month plus 10% =$40
Breeding cost $40
Cow calving date April. Calf market date November
Price of calf today and market weight of calf (half
steer half heifer price) 500lbsx$1.40 = $700
Plus
Cow price at slaughter today
x
Cow weight today =1350 lbs x .65 = $878
Total of cow and calf= $1578
less Cost to keep plus 10% x months to market
$40 x 11 months(Dec to Nov) =$440
less breeding cost =$40
You should be able to pay $1578-$480 =$1098
Could buy a bred cow $1098
Make sense I hope so since my computer skills are
very inadequate it is somewhat jumbled.

Of course you have to plug in your own costs to
arrive at your own numbers. The 10% added in costs
are for shit that could happen and a reality check as
most of us underestimate these costs anyway.
Hope this helps i can't take credit for this as i saw
it somewhere so many years ago i can't remember
where.

[AllisWD45]

You may also be interested in this calculation. What
to pay for a bred heifer. It goes like this.
Cost to carry heifer per month plus 10% = $30
Breeding cost $40
Value of your heifer today(your own or bought)
weight x price today 700 lbs x 1.20 =$840
Cost to keep per month x months to calving
( month of calving April)
16 months x $30 =$480
Breeding cost $40
$840 plus $480 plus $40 = $1360
Break even to raise your own bred heifer= $1360
If you can buy the heifer cheaper it should pay to
do so.

[15444]

If anyone wants to pay $5500 for a cow, I've got 10-20 I could spare, maybe more.

But I don't see a death loss calculation or the breakeven age of the cow listed, let alone a plethora of other costs.

I think I'd be more confident in Allis's numbers.

[kato]

Yup, the disaster factor needs to be in the calculation. Cows you buy are more prone to trouble than the ones you raise, IMHO. We've found unless it's from a true dispersal, or from someone's yard, the attrition rate can be pretty high for the first couple of years.

Sometimes they lose a calf, sometimes they try to kill you, sometimes they don't stay in the fence, and sometimes they are older than they look. The age factor is not as far fetched as you would think. There are lots of old cows who've just been kept on because they weren't worth much, and now they are worth some money.

These are problems that all need to be considered when writing that cheque.

[15444]

What I've been told/seen is one good heifer that actually pays her way and sticks around for the long haul for every four purchased. Cows, I'd probably say 1 in 2 or 3.

That being said, the attrition rates are lower for commercial-bred cattle than purebred cattle.

[ASRG]

Farmers son: Have I got a deal for you! Half price and I'll throw in a bottle!
Seriously, I like AllisWD45's numbers, although he's maybe missing a few costs and it doesn't project the cost beyond a bred heifer?
Cow depreciation/ capital interest/operating interest should all be included in costing out what a cow is worth over her productive lifetime?
I have a formula I used to use based on costs per calf....and I guess you could work that back to cow price...BASED ON TODAYS PRICES.....doesn't mean prices won't change tommorrow....sort of a best guess!
Just a ball park guess $1200 5/6/7 year cows is a good buy...for decent cows. $1300 is a good buy for 1100-1200 lb heifers.
A cow that will crank out a big good calf is worth more......one that raises a dink isn't worth very much.

[burnt]

Like the old guy up the road said, "Yup, it works on paper. Now if we just had paper cows . . ."

I used to pencil out everything I did and while it was a good exercise, it seldom worked out in the barn or field like it did on paper.

[riders2010]

Isn't that true about things on paper and then reality. That is why I get a kick, well actually annoyed at all those pencil pushers in gov programs suggesting if only you had a proper piece of paper filled out you will succeed. No doubt you need a starting place and a plan but that does not trump mother nature, government trade deals, consumer habits, world economies etc.

[AllisWD45]

Interesting discussion. I just want to add my simple
formula is just that. If you look at it does include all
the costs that you wish to include. Personally i
would include all costs in my cost to keep whether
the cow is there or not (fixed costs) and all the
costs of keeping her alive for a year. (variable
costs).
The one thing that the formulas include are
knowns and nothing hypothetical ie: todays prices
and your own costs. Anything else is hope,
speculation call it what you want but it is a
prediction of the future and yours mine and the
paper pushers are all the same only predictions.

The reason i like these simple formulas is they are
factual and honest if you are honest with yourself
about costs and i totally agree that they are just a
starting point the final decisions can only be made
by yourself for yourself and isn't that why we are in
this wonderful business in the first place?

[riders2010]

My annoyance as i listed was not with your figures or having a starting point of plan in fact you must, but more to the point that bankers, govs, policy makers etc. more often than not believe those papers are the gospel truth without considering the x factors (weather etc.) so to speak which some years carry little weight and some years make the paper worthless.

It's kinda like sitting in front of the banker and he asks okey what is your projection for canola revenue. The answer is well I have grown 40 bushels an acre, 30 bushels an acre 20 bushels an acre and 0 bushels per acre, so which one should I pick? because my revenue will be anywhere from 0 to 450 bucks an acre. lol

[riders2010]

I forgot that it is a must to do because obviously if you do the math and the facts without the x factors tell you it won't work than likely the x factors aren't gonna make it better, unless of course the x factor is that you may wein a 1200 lb stear in the fall lol

[perfecho]

Go by your gut.......if you want to be in the game you pay the price.....unsure, sit on the sidelines.
But if the banker has to be on your team, it’s a different game.
During BSE and drought, it was amazing how people adapted.
How cheap they could feed if they had to and direct market if they had to. Sometime it’s not how it works on paper, it’s how much drive you have to make it work!

[farmers_son]

Obviously I am not going out and paying $5500 or more for a cow. But as far as an operation that sees it has the ability to add 5, 10, 15 more cows it sure looks like a money maker to me.

And I really enjoyed seeing the numbers people used.

I am a bit of a pencil pusher and keep trying to figure out how to make a little more money. Years ago I put together some numbers, and although the purpose of the spreadsheet was something else, the numbers showed me the most efficient herd size was in multiples of around 33 cows because that worked out best for bulls and bales. Of course AIing and putting out the exact amount of feed would get around that but that is not the way I was doing things. Maybe I should do things differently.

We have had several good grass years and I simply have not had enough mouths out in the pasture to eat the grass that was there. I know a drought will come along and help me out with that problem. But if I have grass that otherwise is not being used should I calculate a grass component or cost to a potential cow or grasser purchase? I see quite a bit of grass in the country side. There is a lot of potential money to made getting a few extra cows out there. We really should be expanding the herd. No reason not to.

It sure is fun to have profitable numbers to work with.

[burnt]

Don't get me wrong - I am completely in favor of knowing your costs. And a lot of farmers/ranchers don't. I have people telling me that they can raise a calf for "x" amount of dollars, far, far less than I figure.

Since I don't like to call them a liar, I start asking them questions - how much did you figure in for salt, mineral, fencing or waterline supplies, etc. How much is your mortgage, taxes per A.U.? Over how many years did you figure your grass seed costs?

They usually haven't figured in the smaller costs, not to mention the big ones! And you wonder who dumps some straggly mongrel into the sales ring thinking they are making money at $550 a head?

Perfecho, you nailed the biggest factor in the success of failure of an operation.