Cattle producers are currently seeing record profits, but experts warn that there are long-term risks of buying expensive breeding stock right now. Travis Meteer, an Extension Beef Educator with the University of Illinois, says buying a cow at the top of the market now and holding her until the inventory cycle turns is a risky financial move.
“If you are going to buy a high-priced cow, you need to sell a high-priced cow. So, if we are doing that and looking at cow depreciation and that curve, the significant depreciation that occurs is late in life, and so we just have to manage that. And we know if you buy a cow for a high price at the point of the lowest inventory, then waiting for that cow to be eight, nine, or ten years old and sell her at the point where we’ve recovered the most numbers, and sell at the highest inventory of the cycle, that’s a great way to lose money. But if we’re cognizant of appreciation and depreciation, we can keep these heifers. We can turn them into bred heifers that are profitable next year. We can make young cows, and we can sell good-priced young cows and still be profitable here in the years to come.”
Meteer suggests that producers can avoid depreciation traps by developing and selling older cows while their market values are high. That is to say, buying a high-priced heifer can be offset by selling an older but still productive cow.