The cost of cow depreciation

Cow-calf producers usually list feed, equipment and labor as their biggest expenses. One expense often not thought about is cow depreciation. Depreciation is often a hidden expense because it’s a non-cash expense. But, it’s also very significant.

There are several ways that cattle decrease in value. They include physical injury, reproductive efficiency, and the wear-and-tear of a cow getting older.

Dustin Pendell is an agricultural economist at Kansas State University and has a calculation to account for cow depreciation.

"It’s the purchase price of a replacement heifer or female or the replacement cost, minus the salvage value, divided by the productive years in the herd," says Pendell. "If you want to think about depreciation and how you reduce this non-cash expense, you can do it in one of three ways. A: you’ve got to reduce the purchase price or replacement cost, you need to increase the salvage value of the cull cows, or you need to increase the number of years that the cow is in the herd. So, increase that productivity."

You can also lower the depreciation through the market. In your local area, figure out the highs and the lows and the best time to purchase replacement heifers or females. Also consider the cull cow market.

"Generally, we see cull cow prices a little lower in the fall, late fall, over the winter, but then in the spring is when they start to rally," he says. "So, if you can somehow carry those cows over the winter, which again you need to do the economics of feeding them and holding them over versus selling them, is it possible to make some additional money that way, and thus reducing the depreciation expense for that cow."