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Raising vs buying replacement heifers
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<blockquote data-quote="DiamondSCattleCo" data-source="post: 351687" data-attributes="member: 2862"><p>All right, I broke down the numbers. Bear in mind this is a VERY simple cash flow analysis as I did it quickly. I'm working on a complex analysis (including interest), and putting it into spreadsheet format, but thats a ways off.</p><p></p><p>A few assumptions here:</p><p>1) This is based on MY current situation. I raise livestock in a low cost area, and I don't own a pile of expensive equipment. Example: my primary loader tractor is a 1973 1130 Massey and my backup is a 1967 Case 930.</p><p></p><p>2) My land costs each year are broken down on a $/cow basis and are included in the cost of keeping the cow for a year.</p><p></p><p>3) I cull heavily. Only my top ends get kept, which amounts to 2 or 3 animals in 50. When I buy, I buy at least equal to what I'm raising. I can't afford the really top end $2500 bred heifers right now.</p><p></p><p>4) I only sell yearling backgrounders. No fresh weaned calves leave here.</p><p></p><p>5) The cost of keeping a cow includes everything. Vaccinations, medications pro-rated over all animals, power bill, work clothing costs, etc etc. The cost of the heifer includes everything. Vaccines, meds, etc.</p><p></p><p>6) You have enough land to feed the animals you have on hand. I should have calculated income off excess land. This would add more income to the keeping replacements scenario, as in each year, you have 2 fewer AUs grazing and eating hay.</p><p></p><p>7) Both scenarios start at the same point: $5000 in the bank, 1 cow. The bull/AI is a constant cost between the two scenarios, so I left him out for ease of calculation. Only 1 heifer/yr will be retained or purchased. I also left out the amortized cow purchase price, since it was constant throughout the calculations.</p><p></p><p>Keeping Replacements </p><p>Year 1 </p><p>Bank 5000</p><p>Cow cost -327 (I know I stated $350 earlier, but I hadn't looked at my books and I assumed that I was higher due to the large increase in diesel fuel costs last year)</p><p>Cost of heifer after weaning -164</p><p> </p><p>Bank 4509</p><p> </p><p>Year 2 </p><p>Cow cost -327</p><p>Cost of heifer #1 -295 (Immature heifers, even bred ones, do not eat as heavily as a mature, bred cow. U of S figures from the 70s set the rate at 85%. I use 90%.)</p><p>Cost of heifer after weaning -164</p><p> </p><p>Bank 3723</p><p> </p><p>Year 3 </p><p>Cow cost -327</p><p>Cost of heifer #1 -327</p><p>Cost of heifer #2 -295</p><p>Cost of heifer after weaning -164</p><p>Feeder cost -164</p><p>Income from feeder 700</p><p> </p><p>Bank 3146</p><p> </p><p>Year 4 </p><p>Cow cost -327</p><p>Cost of heifer #1 -327</p><p>Cost of heifer #2 -327</p><p>Cost of heifer #3 -295</p><p>Cost of heifer after weaning -164</p><p>Feeder cost -328</p><p>Income from feeders 1400</p><p> </p><p>Bank 2778</p><p></p><p>Year 5 </p><p>Cow cost -327</p><p>Cost of heifer #1 -327</p><p>Cost of heifer #2 -327</p><p>Cost of heifer #3 -327</p><p>Cost of heifer #4 -295</p><p>Cost of heifer after weaning -164</p><p>Feeder cost -492</p><p>Income from feeders 2100</p><p> </p><p>Bank 2619</p><p> </p><p>Year 6 </p><p>Cow cost -327</p><p>Cost of heifer #1 -327</p><p>Cost of heifer #2 -327</p><p>Cost of heifer #3 -327</p><p>Cost of heifer #4 -327</p><p>Cost of heifer #5 -295</p><p>Cost of heifer after weaning -164</p><p>Feeder cost -656</p><p>Income from feeders 2800</p><p> </p><p>Bank 2669 - First year of "making" money</p><p> </p><p>Year 7 </p><p>Cow cost -327</p><p>Cost of heifer #1 -327</p><p>Cost of heifer #2 -327</p><p>Cost of heifer #3 -327</p><p>Cost of heifer #4 -327</p><p>Cost of heifer #5 -327</p><p>Cost of heifer #6 -295</p><p>Cost of heifer after weaning -164</p><p>Feeder cost -820</p><p>Income from feeders 3500</p><p></p><p>Bank 2928</p><p></p><p>Buying Replacements </p><p>Year 1 </p><p>Bank 5000</p><p>Cow cost -327</p><p>Replacement heifer cost -1200</p><p>Replacement heifer feed cost-160</p><p>Feeder cost -164</p><p>Income from feeder 700</p><p> </p><p>Bank 3849</p><p> </p><p>Year 2 </p><p>Cow cost -654</p><p>Replacement cost -1200</p><p>Replacement feed cost -160</p><p>Feeder cost -328</p><p>Income from feeder 1400</p><p> </p><p>Bank 2907</p><p> </p><p>Year 3 </p><p>Cow cost -981</p><p>Replacement cost -1200</p><p>Replacement feed cost -160</p><p>Feeder cost -492</p><p>Income from feeder 2100</p><p> </p><p>Bank 2174</p><p> </p><p>Year 4 </p><p>Cow cost -1308</p><p>Replacement cost -1200</p><p>Replacement feed cost -160</p><p>Feeder cost -656</p><p>Income from feeder 2800</p><p></p><p>Bank 1650</p><p> </p><p>Year 5 </p><p>Cow cost -1635</p><p>Replacement cost -1200</p><p>Replacement feed cost -160</p><p>Feeder cost -820</p><p>Income from feeder 3500</p><p> </p><p>Bank 1335</p><p> </p><p>Year 6 </p><p>Cow cost -1962</p><p>Replacement cost -1200</p><p>Replacement feed cost -160</p><p>Feeder cost -984</p><p>Income from feeder 4200</p><p> </p><p>Bank 1229</p><p> </p><p>Year 7 </p><p>Cow cost -2289</p><p>Replacement cost -1200</p><p>Replacement feed cost -160</p><p>Feeder cost -1148</p><p>Income from feeder 4900</p><p> </p><p>Bank 1332 - First year of "making" money</p><p></p><p>You'll notice that it takes an extra year for the "buying replacements" scenario to begin an income increase, and your bank account dips considerably lower, despite having higher income from feeders each year. What this means is that with the costs I have entered, buying replacements costs you money.</p><p></p><p>One of things I didn't do was "spend my bank empty". In other words treat the "bank" amount as an initial investment budget. This amounts to lost opportunity in that the first year I could have bought feeders, bought more replacement animals or retained more heifers (by holding onto some of the investment dollars). Had I done this, the gulf between keeping replacements and buying replacements would have been considerably higher, as I'd now have income coming in at Year 1 with the keeping replacements scenario. Also, in the purchasing replacements scenario, as you work the numbers, you'll notice that you get into negative numbers for a couple years. This means you didn't have the bank or the budget to carry through the year. I ignored it, as you would have simply needed to carry more starting budget or borrowed. Either direction, the gulf between holding replacements or buying would have been wider still, as you'd have more budget available for opportunity projects.</p><p></p><p>Sorry for the length of the post. I tried to pare it down as much as I could.</p><p></p><p>Rod</p></blockquote><p></p>
[QUOTE="DiamondSCattleCo, post: 351687, member: 2862"] All right, I broke down the numbers. Bear in mind this is a VERY simple cash flow analysis as I did it quickly. I'm working on a complex analysis (including interest), and putting it into spreadsheet format, but thats a ways off. A few assumptions here: 1) This is based on MY current situation. I raise livestock in a low cost area, and I don't own a pile of expensive equipment. Example: my primary loader tractor is a 1973 1130 Massey and my backup is a 1967 Case 930. 2) My land costs each year are broken down on a $/cow basis and are included in the cost of keeping the cow for a year. 3) I cull heavily. Only my top ends get kept, which amounts to 2 or 3 animals in 50. When I buy, I buy at least equal to what I'm raising. I can't afford the really top end $2500 bred heifers right now. 4) I only sell yearling backgrounders. No fresh weaned calves leave here. 5) The cost of keeping a cow includes everything. Vaccinations, medications pro-rated over all animals, power bill, work clothing costs, etc etc. The cost of the heifer includes everything. Vaccines, meds, etc. 6) You have enough land to feed the animals you have on hand. I should have calculated income off excess land. This would add more income to the keeping replacements scenario, as in each year, you have 2 fewer AUs grazing and eating hay. 7) Both scenarios start at the same point: $5000 in the bank, 1 cow. The bull/AI is a constant cost between the two scenarios, so I left him out for ease of calculation. Only 1 heifer/yr will be retained or purchased. I also left out the amortized cow purchase price, since it was constant throughout the calculations. Keeping Replacements Year 1 Bank 5000 Cow cost -327 (I know I stated $350 earlier, but I hadn't looked at my books and I assumed that I was higher due to the large increase in diesel fuel costs last year) Cost of heifer after weaning -164 Bank 4509 Year 2 Cow cost -327 Cost of heifer #1 -295 (Immature heifers, even bred ones, do not eat as heavily as a mature, bred cow. U of S figures from the 70s set the rate at 85%. I use 90%.) Cost of heifer after weaning -164 Bank 3723 Year 3 Cow cost -327 Cost of heifer #1 -327 Cost of heifer #2 -295 Cost of heifer after weaning -164 Feeder cost -164 Income from feeder 700 Bank 3146 Year 4 Cow cost -327 Cost of heifer #1 -327 Cost of heifer #2 -327 Cost of heifer #3 -295 Cost of heifer after weaning -164 Feeder cost -328 Income from feeders 1400 Bank 2778 Year 5 Cow cost -327 Cost of heifer #1 -327 Cost of heifer #2 -327 Cost of heifer #3 -327 Cost of heifer #4 -295 Cost of heifer after weaning -164 Feeder cost -492 Income from feeders 2100 Bank 2619 Year 6 Cow cost -327 Cost of heifer #1 -327 Cost of heifer #2 -327 Cost of heifer #3 -327 Cost of heifer #4 -327 Cost of heifer #5 -295 Cost of heifer after weaning -164 Feeder cost -656 Income from feeders 2800 Bank 2669 - First year of "making" money Year 7 Cow cost -327 Cost of heifer #1 -327 Cost of heifer #2 -327 Cost of heifer #3 -327 Cost of heifer #4 -327 Cost of heifer #5 -327 Cost of heifer #6 -295 Cost of heifer after weaning -164 Feeder cost -820 Income from feeders 3500 Bank 2928 Buying Replacements Year 1 Bank 5000 Cow cost -327 Replacement heifer cost -1200 Replacement heifer feed cost-160 Feeder cost -164 Income from feeder 700 Bank 3849 Year 2 Cow cost -654 Replacement cost -1200 Replacement feed cost -160 Feeder cost -328 Income from feeder 1400 Bank 2907 Year 3 Cow cost -981 Replacement cost -1200 Replacement feed cost -160 Feeder cost -492 Income from feeder 2100 Bank 2174 Year 4 Cow cost -1308 Replacement cost -1200 Replacement feed cost -160 Feeder cost -656 Income from feeder 2800 Bank 1650 Year 5 Cow cost -1635 Replacement cost -1200 Replacement feed cost -160 Feeder cost -820 Income from feeder 3500 Bank 1335 Year 6 Cow cost -1962 Replacement cost -1200 Replacement feed cost -160 Feeder cost -984 Income from feeder 4200 Bank 1229 Year 7 Cow cost -2289 Replacement cost -1200 Replacement feed cost -160 Feeder cost -1148 Income from feeder 4900 Bank 1332 - First year of "making" money You'll notice that it takes an extra year for the "buying replacements" scenario to begin an income increase, and your bank account dips considerably lower, despite having higher income from feeders each year. What this means is that with the costs I have entered, buying replacements costs you money. One of things I didn't do was "spend my bank empty". In other words treat the "bank" amount as an initial investment budget. This amounts to lost opportunity in that the first year I could have bought feeders, bought more replacement animals or retained more heifers (by holding onto some of the investment dollars). Had I done this, the gulf between keeping replacements and buying replacements would have been considerably higher, as I'd now have income coming in at Year 1 with the keeping replacements scenario. Also, in the purchasing replacements scenario, as you work the numbers, you'll notice that you get into negative numbers for a couple years. This means you didn't have the bank or the budget to carry through the year. I ignored it, as you would have simply needed to carry more starting budget or borrowed. Either direction, the gulf between holding replacements or buying would have been wider still, as you'd have more budget available for opportunity projects. Sorry for the length of the post. I tried to pare it down as much as I could. Rod [/QUOTE]
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