Calculating the true cost of replacement heifers

When penciling out the cost of replacement heifers, it’s easy to think of all of the obvious costs, the cash costs. But Kathy Larson, research economist with the Western Beef Development Centre, encourages producers to consider the opportunity costs of raising animals as well.

“Opportunity costs are essentially non-cash costs. The biggest one being the money you gave up by choosing to keep [the heifer] when she was a weaned calf, rather than sell her,” says Larson. “That can be as much as 70 per cent in those high price years of 2014-15 when we had high calf prices. On average though it’s about 60 per cent of the value of developing a replacement heifer.”

Larson adds that this is a factor that is often overlooked.

“When you see it up on a chart — for example the 2014-born heifers that you were keeping right off the bat — that it’s close to $1,500. That is her starting value, right off the bat. You’ve done nothing to develop her. And yes, that’s an alarming number.”

When calf prices are high, it can take as many as eight calves to recover the cost of developing a heifer through to calving. Whereas, those heifers born in market lulls can be paid off in three or four years. 

“If I just do a basic scenario with some assumptions on what your cost of production is and what calf prices could be in the future going forward, it’s probably between five and six calves,” says Larson. “But it really depends on your own cost of production, and what you can reasonably sell your calves for.”

 
 

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