It is increasingly common for commercial cow-calf producers to purchase their replacement heifers, or sometimes cows, instead of developing replacements themselves. There are a number of sound economic and management reasons that this is becoming the preferred route for many producers.
These reasons include the cost of heifer development, particularly compared to an operation that specializes in producing replacements. It also streamlines the type of herdsires they need. When retaining replacements, a producer needs herdsires capable of producing replacements with outstanding maternal traits, calving ease for the first-calf heifers and profitable feeder cattle for feedyard closeouts and on the rail.
This is a lot to ask, and these “do everything bulls” are often expensive. There is also the extra labor, facilities and feed resources needed to develop your own replacements. Add it all up, and it just makes sense for many to purchase their replacements. However, determining what the value signals are when buying heifers, or in some cases cows, is information a producer must be armed with when going into the market.
Much can be gleaned from Kansas State (K-State) University’s recent study on the factors affecting sale price of replacements, which was published in the journal Applied Animal Science (Smith et al. 2021, 217-224).
The study utilized data from Superior Video Auction’s sales between 2010 and 2018 for bred heifers and 2011 to 2018 for bred cows. This represented 1,870 lots that averaged 47.5 head per bred heifer lot sold in 168 different video auctions, and 1,237 bred cow lots that averaged 43.6 head per lot marketed in 163 sales.
The average weight of the bred heifers and bred cows was 999 pounds and 1,180 pounds, respectively. Some of the main factors that affected sale prices were breed description, U.S. region and sale year.
Our industry’s focus has gone from a “war on fat” and portion control, to new targets where carcass size, quality and the amount of tolerated fat waste is a 180-degree turn from 30 years ago. It was during the “war on fat” that the industry started to make a concerted move to value-based marketing.
The breed description of lots was a significant factor in their value, but interestingly, it differed depending on whether they were bred heifers or cows. For the purpose of this study, the breed descriptions were: English and English crosses, English-Continental crosses, Angus sired, Red Angus sired and Brahman influenced. With Angus registering more cattle than all other breeds combined, the most populous number of commercial bred heifer lots were Angus sired.
However, the same was not the case for bred commercial cows, where English and English crosses were easily the most common breed description. In terms of value, whether it was bred heifers or cows, the Red Angus-sired cattle commanded a statistically significant premium. Compared to the next closest breed group, the Red Angus cattle received a $112 and $185 premium for the bred heifers and cows, respectively.
This is logical when considering that the Red Angus Association of America decided over 25 years ago their best fit in the beef industry was as “the maternal common denominator in commercial producers’ crossbreeding systems.” With this goal, they produced a series of the industry’s first data collection and selection tools, which included Whole Herd Reporting, Stayability EPD, Heifer Pregnancy EPD, female reproductive sire summary and mature cow maintenance energy EPD.
On the other end of the spectrum, Brahman-influenced bred females returned significantly less than the next lowest selling bred heifers (English, English cross) at -$73, as well as the lowest selling cows at -$43, despite not being significantly different statistically than the English-Continental crosses. There is certainly part of this nation—particularly around the Gulf Coast—where having some level of Brahman influence is called for and, in some cases, necessary. However, the size of the region that utilizes this genetic tool for needed adaptability seems to be shrinking as our industry puts more and more emphasis on carcass quality.
Lastly, there is an interesting difference between bred heifers and cows in the value of the other breed types. On bred heifers, there was no statistical difference between English and English crosses, English-Continental crosses and Angus-sired females at $1,514, $1,588 and $1,527, respectively. However, the same relationship did not hold true on the bred cows, where these three breed groups were significantly statistically different at $1,470, $1,396 and $1,567, respectively.
In terms of regionality, Rocky Mountain/Northcentral bred heifers sold for significantly more than heifers on the West Coast, Southcentral and Southeast. In addition, heifers in the latter three regions were not statistically different in their selling price. On the cows, the magnitude of differences seen in the heifers was not observed between the three regions reported—West Coast, Rocky Mountain/Northcentral and Southcentral regions.
As would be expected in a historic cyclic industry like the beef complex, sale year significantly affected sale price. The period of time this research covered was particularly volatile, as much of the western U.S. experienced a historic drought, which resulted in a rapid selloff of replacement heifers and downsizing of herds, with corresponding rising feeder cattle prices due to supply and demand.
In 1995, the Red Angus Association of America (RAAA) implemented a mandatory Total Herd Reporting (THR) program data collection system, which was the first of its kind in the industry.
When the weather turned and restocking started, the industry went through a rare time when all segments—seedstock, commercial cow-calf, feedlot and packers—were making money for a lengthy period of time. This resulted in an unwarranted overly optimistic outlook by many people for continued uninterrupted high prices and profitability that resulted in record prices for replacement females.
The end result was bred heifers and cows during the depth of the drought bottomed out at $1,086 and $1,228 respectively, and then during the restocking phase, topped out at $2,276 and $2,174. Under normal conditions, prices will exhibit a certain amount of volatility when studied over a period of years, but most agree the amount seen during the years this research was conducted was rare and extreme.
The move toward purchasing bred commercial replacement heifers, and in some cases cows, is one that will only increase over time. Economically, it just makes sense for many commercial producers. However, it is important to know the drivers of value and how they affect the market. — Dr. Bob Hough, WLJ correspondent