THE BEEF COW REPLACEMENT DECISION

Abstract

This analysis examines effects of several common assumptions on net present values (NPVs) of beef cows. While effects on NPVs vary over a price cycle or successive price cycles, several generalities manifest themselves. A cow is not likely to recover the lost revenue from not having just one calf. Incorporating genetic improvement into the herd increases the probability of an older cow being culled. Variable net replacement/culling rates make sense in the context of cattle inventory and price cycles because of the effects cyclical series of prices have on NPV. Simplifying assumptions are often necessary in order to proceed with conceptual and empirical work. In studies of livestock inventories and dynamics, these assumptions include constant genetics (no genetic improvement) in replacement females, constant culling and replacement rates over the cattle cycle, the formation of producers’/ decision-makers’ expectations and other factors that motivate decisions affecting inventory changes, and sources of replacement females. Each of these assumptions distorts model outcomes in specific ways. These assumptions have implications for total cow and heifer inventories, especially when viewed as a series of decisions over inventory and price cycles. This study extends earlier work on the beef cow replacement decision (Jarvis, 1974; Yager, Greer, and Burt, 1980; Melton, 1980; Blake and Gray, 1981; Bentley and Shumway, 1981; Ritchie, 1995; Rucker, Burt, and LaFrance, 1984; Trapp, 1986; Bourdon and Brinks, 1987; Spire and Hotz, 1995; Foster and Burt, 1992; Frasier and Pfeiffer, 1994; Tronstad and Gum, 1994; Marsh, 1999; and others) by examining the effects of selected assumptions on empirical net present value (NPV) models of the beef cow replacement decision. The contextual thrust of this analysis is on the cattle cycle, especially the effects of decision making at various points during the cattle cycle. Effects of the interaction between NPV and inventory and price cycles are specifically examined under assumptions of genetic improvement, varying portions of heifer