New online tool helps ranchers forecast operation economics
Ranchers now have a new online tool that allows them to make decisions to ensure the financial health of their cattle operations, looking up to 10 years into the future.
A key decision ranchers must make is whether to buy younger cows to replace older or culled cows, or to raise heifers themselves. These heifers are an important genetic building block of the herd.
“Over the last two years or so, I’ve been getting requests to give presentations on the economics of rebuilding a cow herd, based on my own analysis,” said Extension Livestock Economist James Mitchell. “We thought making a publicly available tool that could help with those decisions for producers and lenders evaluating those trade-offs would be a nice addition.”
Mitchell worked with Ryan Loy, his fellow extension economist within the University of Arkansas Division of Agriculture, to create the Beef Cow and Heifer Investment Analysis tool.
Mitchell said the tool is built on net present value, which is the value of a cow as a capital asset that depreciates over time.
The tool also helps ranchers anticipate “the stream of income an asset is expected to provide to the operation over its useful life, answering the question of whether it’s a good investment or not given the operation’s cost structure, lending terms, current cattle prices and what cattle prices are expected to be in the next eight to 10 years,” he said.
PHOTO: GRAZING — Part of a herd grazing at the Livestock and Forestry Station in Batesville, Arkansas. Taken April 16 2019. (U of A System Division of Agriculture photo y Mary Hightower)
