I’ve got a feeling that the person who came up with the phrase “cash cow” never ran cows.
Aside from 2014, the calf check in the fall seems to get dispersed pretty quickly between all the bills that are due. The data backs this up, as Harlan Hughes reported in BEEF magazine in September that the average profit for the last cattle cycle for a weaned calf was $189. Take out 2014, it drops to $120 per cow.
This doesn’t leave us a lot of margin in a calf before we run into the red. If we want to create a herd of proverbial cash cows, those cows need to do three things:
- Wean a calf
- Breed back right away
- Stay healthy in the process.
To illustrate, consider this—how much did it cost the last time you had to have a cow’s foot fixed or a prolapse replaced? These are fairly common problems in cows which typically incur vet bills somewhere between $60-$150 per treatment. That means with one or maybe two treatments, the best we can do on a cow that year is break even. If she needs a C-section, it will take years for her to make up the lost income in vet bills.
Now couple this with our breeding goals. If a cow moves back one or two cycles in breeding due to this injury, we’ve lost 21 to 42 days of growth on her next calf. That is roughly 50-120 pounds of calf we won’t sell next year at weaning. At today’s prices, that averages $145 less for that calf. This includes the price-slide advantage. Therefore, at best her next calf will also break even, if she has no problems and weans a healthy calf.
That puts us three calves out on making money with this cow, that we just treated for a known problem, with the hope she stays healthy and bounces back to first cycle breeding. Now I might put a few dollars down on a game of cards, but that seems like a lot of risk to me to keep this cow, hoping everything goes right. Add the potential to propagate this problem genetically and our herd will be out of the running to be "cash cows."
Here’s an alternative approach—treat the cow and sell her after she weans her calf. Yes, we’re money down, but we’re also not digging the hole deeper. In addition, we begin to create a herd of cows that stay healthy on their own. If you are keeping replacement heifers, this trend can grow generationally.
Now in this crumby market, many will ask if it’s a good idea to dump all their problem cows for a lower price. If your long-term plan is to stay in the cattle business, now may be the perfect time to sell those cows, because your buy-back costs are as low as they can be. The difference in the high and low prices for cull cows is measured in a couple or a few hundred dollars, while for replacements the difference is measured in several hundred dollars. (Case in point—replacement heifer cost today versus 2014.)
As cattle producers, it’s our nature to jump at fixing our cow’s problems at first sight. But margins are too tight to fix her second and then third problems, as well. To create a herd of cash cows, once a cow has a problem, fix it and then sell her. Considering that this is the opportune time to buy her healthier replacement, you’ll be in better shape when these prices swing back upward in the coming years.