Cow depreciation is a significant cost for cow-calf producers, often ranking as the second largest expense after feed. Despite its impact on profitability, it is frequently overlooked. Depreciation represents the loss of value in a cow over its productive life and is calculated using the formula:
Purchase Price (or Replacement Cost) – Salvage Value ÷ Productive Years in the Herd
Key Insights on Depreciation
- Significant Costs: For example, a bred two-year-old heifer priced at $2,750 with an average cull value of $1,500 results in a $1,250 depreciation cost per cow. Depreciation per year can range from $250 to over $450 depending on the productive years (3-5 years) and death losses.
- Reducing Depreciation: Producers can reduce costs by lowering replacement heifer development expenses, increasing salvage value, and extending cows’ productive years.
Strategies to Lower Depreciation
- Optimize Replacement Costs
Producers should analyze the cost of bred replacements versus the expected productivity and consider alternatives like purchasing different age groups of cows. For those raising replacement heifers, detailed cost tracking can uncover opportunities to optimize development expenses. - Increase Salvage Value
- Sell non-pregnant or late-calving cows as bred cows to capitalize on market premiums.
- Add weight to non-pregnant cows and sell them in seasons with historically higher prices.
- Extend Productive Years
Reducing turnover involves tools like hybrid vigor, appropriate genetics, health programs, and targeted feeding strategies. Young and older cows are particularly vulnerable and should be managed carefully.
The Path to Profitability
By actively managing cow depreciation, producers can significantly improve their operations’ financial outcomes. For more insights into reducing replacement heifer costs, explore the UNL NebGuide on Replacement Heifer Development.
Reducing depreciation is not just about minimizing costs—it’s about maximizing long-term profitability and sustainability.
