The Economics of Raising Replacement Heifers

 
With cattle prices up and feed costs down, many producers are contemplating holding back additional replacement heifers from their 2014 calf crop. But does this make good economic sense?
 
The current projected total cost of developing 2014 heifer calves into preg-checked felmales in fall 2015 is $2,201.07/head. These heifers’ first calves will be born in spring 2016, with the heifers calves potentially marketed that fall, or grown out and sold as feeders in summer 2017. In either case, it takes two years to increase the number of calves sold.
 
Figure 1 summarizes this year’s projected cost of raised replacement heifers. The analysis is based on 1,350-lb. cows producing 550-lb. weaned heifers in fall 2014. The current projection for 2014 weaned heifers sold in the fall is $245/cwt., or $1,362.85/weaned heifer calf. Thus, the opportunity cost for raised replacement heifers is $1,362.85.
 
The winter growing period is projected to be 224 days, and the winter feed costs are based on wintering the heifer calves on barley grain, hay and supplement. The costs used are $3.25/bu. barley and $80/ton hay, which generates a winter feed cost of $311.16/head.
 
1.  Feed Costs
 
1.01  Ground Barley
 
224.00
days on ground barley
                                                x
6.50
lbs/heifer/day
                                                ÷
48.00
lbs/bu
                                                x
$3.25
/bu
                                                =
$98.58
/heifer
1.02  Hay
 
224.00
days on hay
                                                x
18.10
lbs/heifer/day
                                                ÷
2,000.00
lbs/ton
                                                x
$80.00
/ton
                                                =
$162.18
/heifer
1.03  Supplement (Salt, minerals, vitamins, ionophore)
 
224.00
days on supplement
                                                x
1.00
lbs/heifer/day
                                                ÷
2,000.00
lbs/ton
 
                                                x
$450.00
/ton
                                                =
$50.40
/heifer
 
The heifers were moved to pasture on May 1, at a pasture rent of $.69/head/day for 140 days, at a grazing cost of $103.27/heifer for the year (see Figure 2). Breeding costs were based on a $4,000 heifer bull used for four years and then culled, generating a breeding fee of $34/heifer.
 
The projected total economic cost of a raised replacement heifer came to $2,147.58/head before culling. After adjusting for an 88 per cent conception rate, the market value ($1,800) for the open heifers sold increases the final cost of raising replacement heifrs to $2,201.07/preg-checked if the heifer was purchased at $245/cwt.
.After all the adjustments, the development cost of each heifer exposed averages $798.99/head. If we add the $1,362.85 opportunity cost at weaning, and add the cost of the opens of $48.23, we have a projected total economic cost for raising a replacement heifer of $2201.07/head.
 
The cost of growing replacement heifers through the winter varies from operation to operation, so calculating an individualized cost is crucial. Each producer is encouraged to estimate winter feed and summer grazing costs. Whatever winter and summer feed costs you use, raised replacement costs for your 2014 heifer calves are predicted to be record-high.
 
Breakeven Calculations – Figure 3
  • If the intended sale price of the bred heifer is $2,100, to break even and cover total cost the purchase price of a 550 lb heifer can be 231.87/cwt.
  • If an operation is only intending to cover operating cost, the amount spent for that 550 lb heifer can be $254.95/cwt.
  • If the intent is to cover operating and labour costs, the amount spent for that 550 lb heifer calf can be $247.07/cwt.
  • To cover operating and fixed cost, the amount paid for that 550 lb heifer can be $239.75.
 
Again, all these costs only allow the producer to break even. For this to be a profitable enterprise, either the purchase price of the 550 lb heifer has to be lower than $231.87/cwt to cover total costs, or the sale price of the bred heifer has to be more than $2,201.07/bred, after the 88 per cent conception rate is factored in. These costs are only taking the bred heifer into fall of 2015. Extra costs will have to be added if feeding into the winter.
 
For more detailed information on beef replacement heifer cost or any other beef-related costs of production, visit www.gov.mb.ca/agriculture/business-and-economics/financial-management/cost-of-production.html#beef.
 
Figure 1 - Projected Cost of Raised Replacement Heifers
 
A.  Operating Costs
Cost/Head
 
    1.  Feed Costs
 
 
    1.01  Ground Barley
$98.58
 
    1.02  Hay
$162.18
 
    1.03  Supplement
$50.40
 
    Total Feed Costs
$311.16
 
    2.  Other Operating Costs
 
 
    2.01  Heifer Cost
$1,362.85
 
    2.02  Breeding Cost
$34.00
 
    2.03  Straw
$13.44
 
    2.04  Veterinary Medicine & Supplies
$16.15
 
    2.05  Annual Fuel & Repair Costs
$7.83
 
    2.06  Utilities
$4.20
 
    2.07  Replacement Heifer Selling Cost
$38.40
 
    2.08  Insurance
$12.36
 
    2.09  Manure Removal
$8.33
 
    2.10  Pasture Costs
$103.27
 
    2.11  Barn & Office Supplies
$1.20
 
    2.12  Death Loss
$17.12
 
    Subtotal Operating Costs
$1,930.31
 
    2.13  Operating Interest
$90.31
 
Total Operating Costs
$2,020.62
 
B.  Fixed Costs
 
 
    3.  Depreciation
 
 
    3.01  Buildings
$16.28
 
    3.02  Machinery & Equipment
$52.53
 
    4.  Investment
 
 
    4.01  Buildings
$4.97
 
    4.02  Machinery & Equipment
$9.85
 
    4.03  Pasture Land
$0.00
 
Total Fixed Costs
$83.63
 
Total Operating and Fixed Costs
$2,104.25
 
C.  Labour
$43.33
 
Total Cost of Production
$2,147.58
 
 
Figure 2 -  Pasture Costs
 
 
 
 
 
 
Pasture Rental
$0.69
cost/head/day rental
 
 
÷
140
days on pasture
 
 
 
x
100
pasture usage
 
 
 
=
$96.60
/heifer
 
 
 
Pasture Checking
$200.00
cost per year
 
 
 
÷
30
replacement heifers
 
 
=
$6.67
/heifer
 
 
    Total
=
$103.27
/heifer
 
 
 
 
 Figure 3 - Breakeven
 
Heifer Calf Purchase
Bred Heifer Selling
 
Price ($/cwt) @
Price ($/hd) @
 
$2,100/hd market price
$245/cwt heifer price
Operating Costs
$254.95
$2,054.58
Operating Costs & Labour
$247.07
$2,104.57
Operating & Fixed Costs
$239.75
$2,151.07
     Total Costs
$231.87
$2,201.07