Oftentimes, you decide to cull cows based on hunches, gut feelings or the outward appearance of a cow. Factors such as the cow's age, body condition, health, and days open may also influence the decision. While these factors are important, the economics of selling the animals should be considered. In other words, you should put pencil to paper to prove your gut instinct.
In order to prove your decision, you must consider the following variables: current milk price, current milk production, whether you have self-raised heifers to use as replacements, the cost of purchasing the replacement animals, and the current cull cow market.
Consider the following example. Assume that Joe ran a herd analysis report from his dairy herd management software that showed him a list of 100 cows that were producing 35 pounds of milk per day. He must decide if he should beef all 100 head and purchase springers and/or young cows at a higher price or keep milking the low-end producers. Joe does not have 100 springers from his heifer program that would be coming in fresh, so he must pay market price for replacement animals.
Should Joe do it? Making the decision becomes easier by calculating how the decision will influence income – as the chart below shows. As you can see, the most viable economic option is scenario No. 1. Assuming a $14 milk price, and assuming your ability to purchase animals with the potential to produce at least 75 pounds of milk daily for a price of $1,350 per head, you should be able to realistically recoup your investment in less than six months (excluding interest payments). After six months, the profit generated from those 100 head should be advantageous.
However, in scenario No. 3, you pay $1,350 for springers that produce just 65 pounds of milk and it takes approximately 10 months for the animals to make a profit.
It is important to note that the calculation assumes the cost of feed between the younger animals and cull animals would be similar. Additionally, this example also does not consider any federal or state income tax that may arise from the sale of 100 cows.
When you suspect it is time to sell cows, don't rely on a hunch. Instead, use this worksheet as a format for making an economical decision.
Click here for an example of economic culling considerations.
Cody Goswick is an financial consultant with Sousa and Company, a certified public accounting firm in Tulare, Calif.