Various factors add up to determine bred cow value

Friday, February 24, 2017

Research by Oklahoma State University’s Division of Agricultural Sciences and Natural Resources examining 15 years of auction data relative to the value of bred cows indicates beef herd expansion is still going strong.

Bred cows vary in value according to a number of factors including the animal’s age, weight, overall quality, stage of gestation, hide color, time of year and location.

“Bred cows are definitely dollars on the hoof right now, making them a good investment for many cattle producers” said Derrell Peel, OSU Cooperative Extension livestock marketing specialist. “Using the research model and current market conditions – and holding cow weight and the time of year constant – various combinations of age, quality, gestation and hide-color result in a range of bred cow value estimates from about $730 to $1,300 per head.”

Peel added the research model appears to be capturing current average bred cow values reasonably accurately. However, demand for high-quality cows appears to be stronger than usual with current values for high-quality cows in Oklahoma reported at roughly $1,550 per head or $200 to $250 per head higher than the research model would predict.

In the most recent weekly combined Oklahoma auction data at the time of this writing, bred cow values are reported in a range from $735 to $1,585 per head. The research model would suggest the base value of a 4-year-old, average-quality cow, weighing 1,200 to 1,300 pounds and having been bred for five months is $1,000 to $1,050 per head.

“This estimate is consistent with the reported market data,” Peel said. “Naturally, changes in any of these characteristics will affect the value of the bred cow, and the dollar value of price adjustments will be different at lower or higher average market price levels.”

The mathematics of bred cow value

Young cows have the highest lifetime production potential and thus first-calf heifers have the highest average value, about $35 per head more than the 4-year-old base cow used in the research model.

“Cows show only modest price decreases through age six but then drop sharply,” Peel said.

For example, an 8-year-old cow will have a value about $110 per cow less than the 4-year-old base cow. Compared to the 1,200 to 1,300 pound base weight, a bred cow weighing 1,400 to 1,500 pounds will have an average value about $50 per head higher. In contrast, a cow weighing 900 to 1,000 pounds will have a value $85 per head less compared to the 4-year-old base cow.

Stage of gestation also impacts bred cow value with a first trimester bred cow valued approximately $50 per head less than a mid-trimester cow.

“Value increases for late-gestation cows up to eight months bred by about $55 per head over mid-trimester cows,” Peel said. “However, bred cow value drops after eight months bred when cows are extremely close to calving.”

Cow quality also has a significant effect on bred cow value with high-quality cows bringing about 14 percent higher value compared to average quality, while low-quality cows bring about 15 percent lower value than an average-quality cow. In the example above, that translates to approximately $150 per head more for a high-quality cow to $150 per head less for a low-quality cow compared to average quality.

“Apart from animal quality, hide color affects value,” Peel said. “The auction data does not report breeds but does distinguish black-colored animals from all others. According to the OSU research model, a black-hided cow will bring an average premium of nearly 7 percent or $70 per head more in the current market.”

Seasonal peaks and valleys

In Oklahoma, bred cow values peak in March and are seasonally lowest in October, with generally low values from June through October. At current market levels, the seasonal swing in bred cow value would be about $140 per head from the March peak to the October low.

“The effects are additive, making it is easy to see why a wide range of bred cow values are reported,” Peel said.

Oklahoma is the nation’s third-leading producer of beef cows, fourth-leading producer of all types of cows total and fifth-leading producer of cattle and calves, according to USDA National Agricultural Statistics Service data.