Currently there are many indicators pointing towards beginning expansion of the beef cow herd. Wisconsin has typically not seen the reduction in beef cow numbers other parts of the United States have, and there is talk of continued expansion.
Aaron Berger, University of Nebraska Extension Educator provides the following information for beef producers to take into consideration when answering the question of how much can you afford to pay for bred beef females.
This is not an easy question to answer as it depends on several different factors. In evaluating how much an operation can afford to pay for a bred female several things need to be considered.
• Anticipated annual cow costs (anticipated inflation needs to be included)
• Expected number of calves the bred heifer or cow will produce before being culled
• Projected weaning weight and market price for steer and heifer calves
• Estimated cow salvage value
• Probable death loss
• Debt service requirements if money is borrowed for purchasing
• Discount rate – expected rate of return if money invested in the bred females was put in some other investment with similar risk
All of these factors together allow for the calculation of what economists call a Net Present Value. This value is what a person would be able to pay for a bred female today and meet a desired rate of return on the money invested based on projected production, costs, and prices. Assigning a number to these factors requires estimating future values.
There are two Excel®-based spreadsheet tools available that allow producers to put in these values and calculate an estimated Net Present Value. These are the KSU Beef Replacement (http://www.agmanager.info/livestock/budgets/production/) spreadsheet and the OSU Cow Bid Price Estimate Calculator (http://go.unl.edu/r8se) spreadsheet. Using either of these spreadsheet tools allows the producer to make sure that all costs are included and allows the producer to see how changing values impacts the Net Present Value.
used with permission of Aaron Berger