The Enid News and Eagle, Enid, OK

November 2, 2013

Is this the right time to buy cows?

By Rick Nelson, Extended Forecast
Enid News and Eagle

ENID, Okla. — Many beef cattle producers now are in a position to consider rebuilding cowherds devastated by three years of drought.  

Reasons for these considerations include timely spring, summer and fall rains that led to the rejuvenation of pasturelands in many areas of the state, and the fact producers still may be in possession of proceeds from forced cow sales during the drought.

Additionally, the relaxation of income tax guidelines instituted by the IRS as the result of cow sales by drought-stricken producers will come to an end next year.

Other motivations producers have for purchasing cows include the profitability found in the beef cattle market and the fact raising cattle is in their nature and the only option for use of much of the land they own.

An economic return is the primary reason to restock the cowherd, and producers must have some confidence a profit resides in the purchase of replacement females.  

Cow prices are extremely high, but so are calf prices.  

Predictions a few years back indicated cows would take up to six years to break even on their purchase prices, ownership costs and out of pocket production expenses.  

Those estimates included the seemingly endless increases in feed costs, fertilizer and fuel prices, and the interest or opportunity costs of buying or owning land.  

However, many costs have leveled and with lower interest on borrowed money, and almost non-existent opportunities to achieve a reasonable percentage return on other investment, the overall costs of cow ownership are allowing chances for greater profit potential.

Production expenses per cow have risen up to $300 over the last few years, according to the Livestock Marketing Information Center in Denver.

Profits had corresponding declines; however, LMIC is predicting profits up to $125 per cow this year, which is enough to warrant the purchase of replacement beef females if forage conditions are good.  

On the production side, producers have the opportunity to redesign the makeup of their cowherd with new replacements.

An eye can be given to greater uniformity, cow size and milk production more conducive to the environment, and genetics that contribute to growth rate, carcass merit and other characteristics important to other segments of the beef industry.

Along with that, producers may want to consider incorporating retained ownership of calves from new replacements for their own benefit, and allocate existing resources to that purpose which may have been previously reserved for cows.

Darrell Peel, livestock marketing specialist for Oklahoma State University, says the current feeder cattle market has some profit built into it for those with the cattle and resources to use it.

Given that perspective, producers may want to wait on buying cows to see if recent market and weather trends hold and instead buy stocker cattle that can be sold anytime they show a profit and which don’t have to be owned for multiple years to secure a break-even investment.

For information more specific to individual beef cattle operations, producers are encouraged to contact their local OSU Extension office.

Nelson is Oklahoma Cooperative Extension Service ag educator for Garfield County.