dyates":2uv9et1v said:
I just don't get the logic that it costs more to retain a heifer than it does to buy one. I actually lost sleep last night trying to figure out the math. I have that problem when I get something stuck in my head. After a whole lot of cipherin, I can only put it one way without writing any numbers. It costs Farmer B and Farmer A the same amount to get an animal to breeding age. Don't you think anyone who is finishing heifers is going to pass their cost on to you, plus a profit? If it really does cost more to produce a replacement than buy one, you have one of three problems. 1)You have an underpriced source of heifers that won't last long 2) Your inputs are way too expensive and drive up your finishing cost or 3)You have management issues that are eating up profits in other facets of your enterprise as well. :roll:
O.k. I'll try to explain, although many people have explained it already:
You have a cow, lets call her A. A costs you $500 to keep up for the whole year. Whether A has been a good girl and calved, or if she came up open, she's still costing you $500 a year. This cost is a fixed cost from the respect that you will have to spend a certain amount to upkeep cattle. Money for medecine, hay, etc. So regardless of anything else old A costs you $500 a year.
Now you finally got A bred and she has a heifer calf that we'll name B. A had B in March 2007 and after 205 days B is weaned. At this point you could sell B and use that money to offset the upkeep of her mother A. You run B through the auction and she has $600 bid for her. Excess money ($100) would be profit. Say B looked so nice, that you had to keep her as a "replacement" heifer. You brought her back from the auction to keep. No problem, but you do not realize the $600 sale. You get no money for B at that point. You also do not get to offset A's expense for 2007. At this point B is 205 days old. You put her in a special section of pasture to make sure she turns out right. You decide to breed her at 12 months, March 2008. B is now 365 days old, and you haven't made any money off of her. For 2007 you didn't make any money off of A either since you kept her calf. In March 2008 A has another calf and it's a bull, C, so you band it and 205 days later you sell it at the stockyard for $600. A has not made any GROSS revenue for you in 2007, but made $600 gross revenue ($100 net profit) in 2008. In effect, you lose out on $600 gross revenue when you decided to keep B in 2007. A is back to making money in 2008, since you sold her calf, C. So for A - you made money in 2006 (lets assume you sold a calf from her), you made nothing in 2007 (because you kept her heifer), and you made $600 gross revenue in 2008. A still costed you $500 each of those three years - so for 2006 to 2008 you made $1200 from the sale of her calves, but it cost you $1500 to keep A going.
Now on to B. At 365 days old you breed her. She will be pregnant for 283 days. Skip forward and she now has the calf, a bull (thank god). So at 648 days old, B has her first calf. You cut this calf because you saw some egghead posting about banding calves was bad. ;-) 205 days later you wean the calf and sell it for $600 at the stockyard. B, it's moma, is now 853 days old(2.3 years old). It took you 2.3 years, or 853 days for B to grow up and have a calf big enough to sell. During those 853 days you had to feed her (if you want to get specific you can subtract the first 205 days since she was suking off of A). You had to pay a cost to upkeep B, but she was not able to provide you any revenue for 853 days.
Now follow this - It costs you $500 for upkeep on a cow per year. That's $1.37 per day. So B cost you (853-205) 648 x 1.37 or $887.76 before she gave you any revenue.
The total picture is:
By selling B you would have taken in gross revenue of $1800 for 2006 to 2008. Since it costs you $500 per year to keep A going ($1500), you would have realized a $300 profit for 2006 to 2008.
Since you decided to keep B, you only had gross revenue from A for 2006 and 2008, which was $1200. It costed $1500 to keep A going for 2006 to 2008, so you have a net loss of $300.
So by keeping B you lost money on A (-$300), and you also had to keep B for 648 days of upkeep (-$887.76), before you could sell her first calf for $600.
If you would buy a bred heifer instead of keeping B you would basically have ($300 + $887) or $1187.76 to work with. This purchase price can be depreciated on your taxes, since it is a purchased farm expense. You cannot depreciate B because you did not purchase her.
Long winded, but does it make sense now?