Economic Tools to Evaluate Herd Liquidation Decisions for Breeding Cattle

Abstract

The extremely dry conditions that we are experiencing in most of Texas are forcing producers to make very tough choices with respect to how they should handle their current investments in breeding cattle. The last time we were faced with this problem was in the spring and summer of 1996. However, market conditions and expectations of future prices were much different in 1996 than today. In the spring of 1996 we were faced with the lowest cattle prices since the mid-1970's, along with grain and forage prices that were historically very high, and set to move higher. What is the same now, as in 1996, are the economic and financial analysis tools and how they should be used to make a sound disinvestment or investment decision for breeding cattle. Decisions such as keeping or selling an asset like a cow, keeping a heifer for replacement or selling the potential replacement hinge on the expected value of that type of animal in your herd when compared with what the market is currently offering you for that type of animal.