Cull Cow Sales and Lost Opportunities

Dr. E. Bruce Godfrey
USU Extension Economics Specialist

About three weeks ago I had the opportunity to take a couple of my grandchildren to a local livestock auction. I have found this to be a great opportunity to teach these youngsters about the differences between breeds of cattle, how one type of market operates, and to help them see a part of agriculture that most children do not understand. Besides that, it is a fun activity for grandpa, particularly when it culminates with the purchase of ice cream cones for all involved.

The day we attended the auction a relatively large number of cull dairy cows were sold. As I observed the sale of these animals, a couple of thoughts came to mind. Firstly, most, if not all, of these “old gals” were destined to be slaughtered in the near future. Secondly, the variation in the prices received was much greater than I expected. As a result, I started paying more attention to the possible reasons for these differences. While there were many reasons, the one that seemed to be most common was the condition of the cow — thin cows sold for a lower price than cows that were in better condition. I also noticed that one buyer bought a large number of the thin cows. This made me wonder why he might be making these purchases. Rather than going directly to slaughter were these thin cows purchased and fed in an effort to earn a few dollars? As a result, I put a pencil to the opportunity for profit involved in buying thin cows, feeding them for a short period of time and then reselling them. The following is a brief synopsis of my “pencil work”.

If a “thin” cow was purchased for 35 cents a pound (the price is reflective of a sale two weeks ago) and she weighed 1400 pounds, the cost would be $490. If this cow was then placed on feed for 45 days and she gained two pounds a day (many thin cows will gain more than this), she would weigh 1490 pounds. It is likely that this cow would then bring near the top of the market instead of the bottom— 40 cents a pound is assumed. This would result in a cow that would sell for about $596. This would represent a gross return of about $100 or about $ 2.22 a day. It is likely that the feed needed to provide this rate of gain would cost about $1.50 a day or $67.50. This would leave a net return above feed costs of $32.50 that would be used to cover the cost of marketing and handling (a person who bought, fed and resold cows would incur costs such as marketing and transportation that would not be incurred by dairymen who retained their own cows). A dairyman who held and fed thin cows that had been culled would basically only incur the cost of feed. As a result, a dairyman who held and fed thin cows would be expected to have a higher net return than would a person who bought, fed and resold thin cows.

Observation of the cows sold the day I attended the auction indicated that a high percentage were recently milked for the last time and taken to the auction. Many of these cows were thin and would gain weight and body condition if dried off and fed for a short period of time. Had the dairyman done this instead of simply loading the cow and taking her to the market, it is likely he could have obtained $30 or more than he would have simply by taking the thin cow to the market. Thirty additional dollars may not seem like much, but if this is multiplied by 50 head the result is $1500, which is potentially a significant increase in net returns. Not all cows that are culled are candidates for this alternative, but thin cull cows need to be evaluated, and perhaps fed for a short period of time before they are taken to the sales ring. It is small decisions such as this that often make the difference in a dairyman’s bottom line. Is this an opportunity you are missing that could be captured if you marketed your cull cows instead of simply selling them?