Ranchers weigh options on replacement heifers amid historic high prices

Source: AgriLife Today
When it comes to replacement heifers in beef cattle operations, producers are faced with a dilemma: Raise them, buy them or sell them and “take the money and run,” said a Texas A&M AgriLife Extension Service economist.
It’s becoming an all too familiar situation among Texas ranchers,said Stan Bevers, an AgriLife Extension economist at Vernon who recently presented a study at the Texas A&M Beef Cattle Short Course.

“We looked at what the market is right now for replacement heifers,” he said. “We were targeting heavy bred heifers, and they were anywhere from $1,650 to $2,300 a head. The second number was what it was costing the rancher to raise them themselves.
“One operation we tracked were heifers weaned in 2010 and 2011, what those heifers were and what their accumulated expenses were over the two years to the point where they were heavy bred. Their expenses totaled $1,100 to $1,400 a head. That ranch was pretty efficient and did a good job of reducing their expenses.”
Bevers said since this ranch was located in Oklahoma, one would need to add $300-$400 a head to that for Texas ranchers and regional market prices to develop replacement heifers.
“That comes out to $1,400 to $1,800 to develop replacement heifers in Texas,” Bevers said.
He said if you look at the current market price, it shows it’s cheaper to “raise them yourself if you are a pretty efficient, cost-reducing type operator.”
“The final number we looked at is if I have to pay much over market cost for them or if I choose to raise a heifer on my own, what is she going to return me over her life?” he said. “We started with a two-year-old heifer that’s going to be having her first calf and added eight years to that. That means we’ve gone out 10 years into the future, so now she is 10 years old,and we came up with what I can pay for her, which was $2,301 a head.”

Bevers said that leaves three numbers to consider.
“We know the market is $1,650 to $2,300, and it takes $1,400 to $1,500 to raise her, and now she is worth $2,300 in my herd economically.
“What do you do with those numbers? Well, if nothing else, it illustrates how complex this decision is right now,” he said. “It’s not right or wrong. It’s based on what type of operation you have and your costs. You finally have to decide to pull the trigger and say this is what we are going to have to do.”
Bevers threw in a fourth number – what feedlots are paying for commercial heifers destined for the beef market. Right now, it’s about $1.93 to $2.03 a pound, he said.
“You are talking about a heifer in the 750-pound range that’s worth $1,500 on the market and that’s for beef,” he said. “So, if you don’t keep her as a replacement heifer, you now have a floor price of about $1,500 a head. If you don’t want to take her and put her back in your operation, the feedlot is going to take her for $1,500 and turn her into beef later down the road.”