The Texas AgriLife Extension Service and Oklahoma State University have developed a spreadsheet program to help cattle producers make culling decisions due to extreme drought.
The Cow Bid Price Estimate Calculator is available at http://agfacts.tamu.edu/~lfalcone/newweb/droughtmgmt.htm.
“This is the latest in a string of these types of problems due to drought, much like what we saw in the spring and summer of 1996, again in 1998 as well as 2006, 2008 and 2009,” says David Anderson, AgriLife Extension livestock economist. “However, market conditions and expectations of future prices were much different than today.”
In the spring of 1996, producers were faced with the lowest cattle prices since the mid-1970s, along with grain and forage prices “that were historically very high, and set to move higher,” says Anderson. “Today, cull cow and calf prices are much stronger even though we face higher grain and forage prices. What is the same now as in 1996 are the economic and financial analysis tools and how they should be used to make a sound disinvestment or investment decision for breeding cattle.”
Larry Falconer, AgriLife Extension economist in Corpus Christi, says beef producers must decide whether to keep or sell a cow, and how much feed they can afford to buy to keep a cow or heifer in the herd.
“These decisions hinge on the expected value of each animal in a herd when compared to what the market is offering for that animal,” says Falconer. “These decisions can be analyzed with this tool. Deciding what a cow is worth in a herd is not always simple when comparing what you have to pay for the same age and quality cow over the scale at your local auction barn.”
The spreadsheet uses data on calf-crop percentage; weaning weight; steer, heifer and cull cow price; annual operating costs per cow; and financing information. By entering the data, a rancher can determine the expected net present value of the cow to use in making a culling decision.
“The use of these tools can provide benchmarks to calculate what might be best to do with the hand that you as a cattle producer have been dealt,” Falconer says. “This analysis should be carried out for your particular situation, because the right answer depends on the cost structure for your ranch and what you expect future prices to be.”