Author: Kenny Burdine

As we roll through fall, spring-born calves will be weaned and many of those heifer calves will be held for replacement purposes. At the same time, a large number of bred heifers will hit the market and be available for the same purpose. It is not uncommon for someone to comment on how expensive bred heifers are and assume that they can develop their own heifers for much less. While this is true in some cases, I also think it is easy to underestimate some of those costs. The purpose of this article is to briefly highlight three things that are crucial to consider when a cow-calf operator tries to make this comparison. And I would argue these are even more significant given the strength of the current cattle market.

The opportunity cost is the biggest cost

I hope this one is obvious, but the largest cost of developing a heifer is the opportunity cost of that heifer at weaning. High quality weaned heifers, in the 500-600 lb range, are bringing $2,000 and higher across most US markets. Whatever those heifer calves are worth in the marketplace is the first cost of heifer development. By not selling that heifer calf, one is forgoing that income. This cost is huge right now due to the strength of the calf market and higher interest rates, which makes forgoing that income even more significant. While the heifer herself is the easiest opportunity cost to quantify, this applies to all the costs of developing her (feed, pasture, breeding, facilities, labor, etc.). 

They won’t all make the cut

After the initial cost of not selling the heifer at weaning, another year of expenses will be incurred to get that heifer to the same stage as those bred heifers on the marketplace. She will be carried through a full winter and summer grazing season and be bred to calve the following year. There are significant costs in doing this, but it is also important to understand that not all those heifers are going to end up being kept for breeding. Some will fail to breed, and others will simply not meet the expectations of the farmer. Heifers not kept for breeding will end up being sold as feeders and likely won’t cover all those expenses. The “loss” on these heifers becomes an additional cost of the heifers that do enter the cow herd as replacements.

Next year’s calf should be very profitable

This is another one that doesn’t get much attention but really matters in a time like the present. It’s easier to think about this one applied to a specific timeline so I will frame it for a heifer born this spring. A heifer calf weaned in the fall 2025, kept for replacement purposes and bred in 2026, won’t wean her first calf until fall of 2027. Conversely, those bred heifers on the market in fall of 2025 should wean their first calf in 2026. While nothing is guaranteed in the cattle markets, fundamentals suggest that 2026 should be a profitable year for cow-calf operations. The potential profit on that calf in 2026 becomes capitalized in the value of those bred heifers in 2025. For this reason, comparing the cost of a bred heifer in fall 2025 to the cost of developing a heifer weaned in fall of 2025, can be misleading.

The purpose of this article was not to suggest that either replacement strategy was best. There is merit in both approaches, and it largely comes down to the goals of the operator. While I am an economist, I also recognize there are a lot of non-economic considerations that come into play. But the economics of the decision is complex, and carefully thinking through all aspects of the decision is likely time well spent.

Burdine, Kenny. “Three Considerations When Comparing the Cost of Buying Bred Heifers to the Cost of Developing Them.” Southern Ag Today 5(41.1). October 6, 2025. Permalink

Much has been written recently about the strength of the current cattle market. With beef cow inventory at a 60+ year low and demand being very strong, cow-calf operations are clearly in the driver’s seat. Calf values are more than double what they were three years ago, which speaks to considerable opportunity for cow-calf operators to invest in their cowherds. Expansion is often the first opportunity that comes to mind in a strong calf market, and there is likely merit in expansion, if doing so is consistent with the goals of the operation. However, some producers may not be interested in growing the size of their cowherds due to land constraints, management limitations, or other reasons. The following are a few other investment opportunities worth consideration.

Genetics – Some producers may choose to use the current increase in cow-calf revenues to improve the genetics of their herds. Investment in genetics often has long-run implications, resulting in more valuable calves to sell over multiple years. Sires certainly come to mind, but the current calf market combined with the strong cull cow prices may provide an opportunity to cull a bit harder and also purchase some higher quality females.

Facilities – Working facilities are crucial resources for cow-calf operations for numerous reasons. Value-added opportunities such as health protocols, post-weaning programs, castration, implants, etc. are made much easier with quality working facilities. The same is true for receiving, sorting and loading of cattle. If facilities have historically been a constraint, the current market may be providing an opportunity to make improvements and position the operation to sell higher value calves in the future.

Grazing systems – Winter feeding days are typically the most expensive days for cow-calf operations as stored feed (hay) is being fed. Improved grazing systems (interior fencing, additional water sources, portable mineral feeders, etc.) allow for more efficient use of existing forage during the grazing season. This has the potential to increase the number of grazing days and reduce the number of hay feeding days. In most cases, this results in lower costs per cow per year and puts an operation in a better position when calf prices fall.

Debt service / financial management – Strong markets also provide an opportunity to make financial moves that set an operation up for the long run. Increased revenues may allow an operation to pay down some debt and thereby lower their cost structure going forward. Similarly, it may provide an opportunity to build some working capital and lower dependence on operating loans. In both cases, future interest expenses are reduced, which has implications for profitability.

To be clear, the purpose of this article was not to discourage expansion. There are likely operations that need to do just that. But I also live in an area where land constraints are real and know that expansion is not always feasible. Plus, I have seen situations where operations expanded during strong markets and wished they had not done so a few years later. The main point is that the current calf market provides a significant opportunity for a cow-calf operation to position itself for the long-run, and that will look different for each one of them.

Burdine, Kenny. “Cowherd Expansion is Not the Only Way to Capitalize on a Strong Calf Market.” Southern Ag Today 5(32.1). August 4, 2025. Permalink

I doubt many would take issue with me calling the last couple of years a “bull market” for cattle. The combination of tight supplies and strong demand has resulted in cattle markets tracing an upward trajectory over the last couple of years. As an illustration, the chart below tracks the daily nearby CME© feeder cattle futures price over the last 26 months. In January 2023, the nearby feeder cattle futures price was in the $180’s. As I write this article, the nearby feeder cattle futures price is in the $260’s.

While it is hard to dispute the overall strength of the recent cattle market, it is also important to note that during the last 26 months there have been multiple times when markets saw significant downward swings. The most recent of these occurred since the end of January and was likely sparked by the resumption of live cattle imports from Mexico, continued talk of trade disruptions, Avian Influenza, and any number of other factors. The market also fell by more than $40 per cwt from September to December 2023 and more than $30 per cwt from late May to early September 2024. For producers who sold cattle during those pullbacks, the impact on returns was significant.

There are a lot of potential strategies to manage price risk, and the simplest one may be a forward contract. By forward contracting cattle, price risk is largely eliminated as the seller and buyer agree on a purchase price prior to delivery of the cattle. A similar strategy would be selling cattle through an internet auction and specifying delivery at a later time. In both cases, the seller entering the forward contract still has production risk as they must meet the specifications of the contract (weight, quality, etc.), but market swings are no longer a concern.

Futures and options markets are also common tools for price risk management. Short futures positions allow producers to capitalize on the expectation of cattle prices in the future that are manifested in CME© futures prices. When utilizing a short futures position to offset potential decreases in cattle prices, farmers are essentially exchanging price risk for basis risk. Producers utilizing short futures positions also need to plan for potential margin calls if markets move substantially higher. Put options give producers the right to sell a future contract if they choose, and they pay a premium for this flexibility. This effectively sets a price floor for cattle as the strike price on the put option and the premium paid sets a minimum price for the cattle being sold.

Finally, I have talked more about Livestock Risk Protection (LRP) insurance than any other risk management strategy recently. It works almost exactly like a put option but is much simpler and has the advantage of flexibility on scale. Unlike several other price risk management tools, LRP insurance can be purchased on any number of head, which is much easier for smaller operations to utilize. LRP has been made more attractive over the last several years through increased premium subsidies and allowing producers to pay premiums after the ending date of the policy.

The specific tool or strategy that cattle producers utilize to manage price risk is less important than their overall risk management plan. I encourage producers to know what risk management tools are available to them, understand how changes in sale price impact their profits, and plan to cover themselves from downside price risk. I still feel good about the fundamentals of the cattle market, but I think the first couple weeks of February have been a good reminder that price risk always exists, even in a bull market!

Burdine, Kenny. “Price Risk Always Exists, even in a Bull Market.” Southern Ag Today 5(11.1). March 10, 2025. Permalink