Sometimes in decision-making, we want to sit on it for a while, reflecting on the options or waiting for another event to occur to provide additional insight into the direction of the decision. This often happens relative to deciding on the voluntary culling of cows – which ones and when. Of course, many times involuntary culling is necessary because of injury, disease, unable to get pregnant, etc.
However, often there are cows in the herd that need to be culled because they have become unprofitable or the facilities are too over-stocked. In addition, if a cow remains non-pregnant and the decision is to sell her, the decision has to be made as to when it is the best time to take her to the market.
Use the following steps to make the decision when to voluntarily cull cows from the herd based on income over feed costs (IOFC) and non-feed direct/variable costs:
1. Determine IOFC for the herd.
Calculate feed and variable costs for the herd. For example, the herd is averaging 85 pounds/day of milk. Milk price is $20/cwt. Feed intake is 55 pounds/day of dry matter, and feed cost is $13.5/pound of dry matter: (85 * 0.20) – (55* 0.135) = $17 – 7.43 = $9.57/day IOFC or $11.26/cwt IOFC.
2. Determine the average non-feed direct expenses for the herd.
Sometimes, farmers do not have quick access to this information. The feed costs averaged 59% of the direct expenses for dairy farms during 2020 and 2021 from data in the Ohio Dairy Business Summary.
Thus, the non-feed direct expenses averaged 41% of the total direct expenses. Therefore in our example, the feed cost is $7.43/day or $8.74/cwt ($7.43/0.85) and the non-feed direct costs can be estimated at $5.16/day ((41/59) *7.43) or $6.07/cwt.
3. Now that we have determined average feed and non-feed costs for the herd, then we can use this information to decide which cows likely need to leave the herd.
When the IOFC for a given cow is less than the average non-feed direct costs for the herd, then she will likely need to leave the herd, unless there are prevailing reasons otherwise. For example, if a given cow in the herd is producing 45 pounds/day of milk and feed intake is 42 pounds/day and assuming the same milk price and feed price, then IOFC = ((45*0.20)-(42*0.135) = $9 – 5.67 = $3.33/day.
Based on the average non-feed costs of $5.16/day for the herd, the IOFC ($3.33) is less than the non-feed costs, thus the cow would need to be culled. In other words, there is not enough IOFC to cover the animal’s non-feed direct costs.
4. It is important to use actual milk yield and composition for the milk revenue from a specific cow given that the percentages of components will likely be higher in late lactation cows and therefore the price per hundredweight will be higher than the herd average milk price. Also, use the actual cost of the ration rather the average feed cost for the herd because cows in later lactation may be fed a ration less costly than cows in early or mid-lactation.
However, what about the market price for cull cows? During some years and certain times of the year for animals of sufficient health, it may be advantageous to hold on to them for their weight gain and maximum price per pound at the market. However, this is not the time of the year to hold onto cull cows to increase market price (see figure).
Typically because of the increased number of beef cattle being released onto the market so farmers do not have to feed them during the winter, prices begin to decline after August or September. If you have cows that need to be culled at this time of the year, lingering on the decision could result in less return. This is another example of “time is money.”
Multiple things may need to be considered in the voluntary culling of cows, but the fundamental one is their profitability, which is impacted by market conditions. Anticipate the market conditions for culling cows to weaken during the remainder of the year.
