Economics of Developing and Reselling Heifers
Can cattle producers truly create a profitable enterprise buying open heifers and reselling them as breds or pairs? That’s a question a former student approached Jon Biermacher with which resulted in the creation of a heifer development calculator for cattle producers.
Biermacher says, “We put together a detailed enterprise budget and then thought this would probably be good decision tool for other producers too.”
Biermacher works in the Department of Agribusiness and Applied Economics for North Dakota State University as a livestock development specialist in in the extension program.
The model Biermacher created in collaboration with his colleague Tim Petry and former NDSU student Gavin Eeg largely looks at the profitability of buying backgrounded heifers in April, breeding them and selling them as either long-breds or pairs come next April. There is also another comparison between the profitability of using artificial insemination in combination with clean-up bulls or relying on natural service breeding.
The more profitable option – natural service.
“The economics is about fifty-five dollars different. And I can tell you I can tell you it's even more than that if you account for labor,” says Biermacher.
The caveat of this finding is it’s challenging to calculate the difference seen in final marketing price for heifers bred to more popular sires or privately compared to at a sale barn. Keep these factors in mind.
Bull acquisition and management also impacts the final outcome.
He says, “We're assuming $5,000 bulls and we're buying bulls for two months and then we are selling them back because this isn’t a cow-calf enterprise.”
The model also takes into consideration the cost of transportation from and to the auction market, commission, interest on owning heifers for 12 months along with many other expenses. However, the largest expense comes from the initial acquisition of the heifers and their feed resources.
“Heifer purchase is 68% of the cost. 20% is the pasture, feed, hay, and mineral,” explains Biermacher.
When it comes to analyzing bred heifers vs. pairs, the difference is around $100 per head with the pairs being more profitable in this specific year and environment. However, calving out heifers comes with added risk and expense.
“There could be a little additional feed because these are long bred,” says Biermacher. “But there is some of dystocia or calving issues to consider.”
The bigger picture of this enterprise and economic model comes down to knowing breakeven prices and risk regardless of which end product is sold. This specific model is very sensitive to purchase price.
“A twenty cent difference wipes out two hundred bucks. And that's where you have to ask yourself, am I willing to take that risk?”
Learn more about which economic factors to consider before buying open heifers on the Casual Cattle Conversations podcast.
