Different cull cow strategies can add revenue to cattle operations

SPRINGFIELD, Ill. — A significant share of a cow-calf operation’s revenue is generated by the sale of cull cows.

“Cows are the main investment of a cow-calf operation and cull cows can represent as much as 15% to 30% of the revenue,” said James Mitchell, assistant professor and Extension livestock economist at the University of Arkansas.

“Cows are a depreciating capital asset, so there’s a purchase price and a salvage value that you sell that asset for at the end of its useful life, just like a tractor or a pickup,” said Mitchell during a presentation at the Cattlemen’s Education Series held at the Illinois Beef Association Annual Meeting.

At $1.18 per pound, Mitchell said, the cutter cow price is significantly higher than last year, when it was at 92 cents per pound, and much higher than the last five years.

“Going back to 2004, the last two cattle cycles when we have a lot of cows, we have lower cull cow prices,” he said. “As we go into the liquidation phase of the cattle cycle, cull cow prices pick up quite dramatically.”

That’s the current scenario.

“We’ve had cattle inventories in decline since 2019 and as a result cull cow prices have increased substantially the last couple of years,” Mitchell said. “Even when cull cow prices are high, there’s some value in thinking strategically about how and what we do with cull cows.”

Beef cow slaughter numbers are another barometer of cull cow prices.

“The weekly beef cow slaughter is 14% lower year to date than beef cow slaughter a year ago,” Mitchell said. “Over the past two years, 2022 to 2023, we have slaughtered a lot of beef cows and we’re still slaughtering quite a few beef cows by historical standards, but it’s down enough to elevate the cull cow prices across the country.”

The other component to the equation is the dairy cow slaughter number.

“It is also about 13% lower compared to 2023,” Mitchell said. “The tight supply of cull cows is going to increase the value of those cull cows.”

For demand, the university professor said, when the ground beef market is doing really well, then cull cow markets will also be higher.

“We’ve had a couple years of really strong wholesale lean beef prices,” Mitchell said.

“On average, 42% to 48% of the beef consumption is in the form of ground beef,” he said. “So, when the ground beef market is doing really well, you get strong increases in cull cow prices.”

There are lots of reasons cattlemen cull cows; however, age and being open are the two most common.

“A lot of times, regardless of other factors, drought is the reason we’re selling cows,” Mitchell said.

“In Arkansas in 2022, we had a really bad drought, so we saw a huge increase in the number of cows going to market,” he said. “Drought is more of a forced decision than thinking more strategically about if a cow is open or old.”

After making the culling decision, the next step for cattlemen is to determine how to market the cull cow — sell her now, retain the cow and feed her through the winter or breed her and sell as a bred cow.

“If the cow is thin and you’re trying to maximize the value of gain, you need to consider the cost of gain,” the university professor said. “This is an opportunistic decision where you’re considering your feed resources and the seasonal cull cow prices.”

The November price for cull cows is 11% lower than the annual average price, Mitchell said, and the March price is 5% higher than the annual average price.

“There is a very strong seasonal pattern for cull cow prices with the seasonal lowest from October to December,” he said. “That’s when cattlemen are preg checking cows and culling cows, so there is a large volume of cull cows going to auction.”

The question for cattlemen is to decide if the seasonal increase in price is enough to offset the cost of keeping the cull cow and feeding her through the winter.

“On average, from 2021 to 2023, going from the lowest value to highest value cull cow price is a difference of almost 30 cents per pound,” Mitchell said.

There is quite a lot of variability in price for cows with different body condition scores, the university professor said.

“Improving body condition score to go from low to high dressing percentage improved the value 18 cents per pound during the period of 2021 to 2023,” he said.

For example, Mitchell said, in November 2023 the price for a 1,200-pound cow was 80 cents per pound.

Using a pasture-based system for 120 days, with an average daily gain of 0.5 pounds, in March the cow would weight 1,260 pounds.

“The sale price would be 93 cents per pound or an increase of $212 per head,” Mitchell said. “If you add a premium of $14 per hundredweight for improving from average to high dress, now the value is $388 per head, but how we do that is important.”

Other considerations are important when deciding to retain cull cows.

“There’s the opportunity cost because you could have been doing something else,” Mitchell said. “Management is important because feeding cull cows in the winter is not fun.”

Another factor is if there is a bull available to naturally service the cows.

“The value of bred cows has increased substantially in the last couple of years,” Mitchell said. “For the next two years, selling cows as bred is a strategy worth considering.”

There are risks with retaining cull cows through the winter months.

“We’ve seen cull cow prices increase year over year during the last couple of years, but there are risks that cull prices could go down,” Mitchell said. “This is not a decision you’ll make the same way every year.”