What is the maximum worth of a dairy heifer?
Purchasing heifers to replace lactating cow that either were culled or died is a standard practice on dairies. But there may be times when it is more prudent to leave facilities under stocked, according to University of Florida Extension dairy specialists Albert de Vries and Russ Giesy.
They have developed a spreadsheet to determine the maximum worth of a dairy heifer at any given time. The calculation determines the present value of the cash flow associated with a heifer purchase, taking into account anticipated variable receipts and expenses, as well as interest rate and eventual cull value. Fixed costs, such as labor and facilities, would not change if a heifer is filling an open spot in the herd, so are not included in the calculation.
In one example, the calculation produces a maximum value of a replacement heifer added to the herd at about $2,200. If the market price was $1,800, then the net present value of the purchase would be $400, and the investment would be sound. But if the market price for heifers was greater than $2,200, the best decision would be to forego the purchase and leave the dairy facility partially vacant.
Even slight changes in expenses or receipts also affect the maximum worth of a heifer significantly, so it is important to regularly assess the true value of replacements as market conditions change. The researchers noted that the maximum worth of a dairy heifer to a farm does not imply that the enterprise is profitable when a heifer can be purchased for less than the maximum value, because fixed costs for the entire business still need to be covered.