Dr. Patsy Houghton is the owner and general manager of the McCook, NE, heifer development facility, Heartland Cattle Company.
“It is very difficult to find quality replacement heifers right now,” said Houghton, who is the owner and general manager of the McCook, NE, heifer development facility. “There is a short supply out there, which is obviously fueling the cost of the replacement heifers.”
Kit West, who owns and manages the heifer development facility, Heifer.Pro, in Chugwater, WY, has also seen a tight supply. “It is definitely a little more difficult to find replacement heifers this year,” he said. “I have been receiving calls since December from ranchers looking for replacements,” he said.
Houghton said the renewed interest in developing and purchasing high quality replacement heifers has added more people to an already long waiting list. “There is no doubt the excitement is high in the bred-female market right now,” Houghton said. “When you get these kind of prices, everyone wants to participate. We have worked off a waiting list since we opened our doors in 1990, but that list has increased substantially over the last 18 months,” she explained.
Heartland Cattle Company is in the process of expanding their facility, which they hope is completed by the end of the summer, to include an additional 1,000 head of heifers. “This expansion was part of our long-range plans – not because of the current market. However, it has come at a good time for us,” she said.
Nearly all the customers who develop heifers at Heartland Cattle Company have been with the business 15-22 years. “The bulk of our customers have been here since day one,” Houghton said. “We are working with serious, long-term cattlemen who have long-term genetic plans in place. In some cases, we work with three generations of ranch families,” she said. “This new addition will allow us to take some new customers in the coming year. Up to this point, we have had a 97-98 percent annual return rate on our existing customers. Last year, two customers retired, but their pens were quickly snapped up by existing customers,” she said.
“There is high demand for pen space for developing heifers right now,” she continued, “even though every input cost has increased substantially in recent years, including feed, and overhead costs like fuel and insurance. Selling prices are higher, but input costs are also substantially higher,” Houghton explained. “I would argue that when costs get higher, it actually is a more difficult business. In high cost times, we try to narrow our margins to help our customers stay in the game,” she added.
West said the higher cost of feed has been a hard pill to swallow. “The cost of feed has went up tremendously during the last year,” he said. “Last year, distillers grain was $1.08 a day, and this year it is costing $1.50 a day. That is a tremendous increase. Most of it is caused by higher fuel and corn prices,” he said.
When producers realize everything that goes into the cost of producing a heifer, the game isn’t much different in terms of profitability and margin, it is the increased risk. “There is increased risk with every transaction, because it costs so much to do business these days,” Houghton explained. “We are dealing with low interest rates – 4-5 percent. But, if it takes twice as much money to operate, the net result is equivalent to 8-9 percent interest rates because it is taking so much more money to operate,” she added.
Houghton said it doesn’t help that the initial cost of buying a heifer calf is more expensive. “Replacement heifer calves on the ranch, before we even put wheels under them, are costing $75-100 more than our historical bred heifer price coming out of this program,” Houghton stated. “This should give you a good idea of how crazy this price situation has become,” she noted.
West said he has also noticed more ranchers retaining their heifers. “I think they are seeing the value this year,” he said. “I have noticed many ranchers are selling their steer calves, but holding on to their heifers. Some are selling them a few months later because then they will be worth just as much as their steers are right now,” he explained. “Others are seeing the value in the bred heifer market. They are developing, breeding and putting them back into the herd, and they are selling the ones they don’t need. The ranchers are looking at it as another entity in their ranching enterprise they can profit from,” he explained.
“These higher prices are forcing ranchers to take a closer look at their books, more so than they’ve done in the past,” he continued. “They are considering every profitability scenario, even ones they haven’t considered in the past,” he added.
West said many ranchers are taking advantage of the higher prices to improve their cowherd through better genetics and more profitable cows. “Some are culling poor producing cows, and replacing them with higher quality replacement heifers,” he said. “Some are improving their AI program and buying better bulls.”
West said in his own heifer development program, he has noticed several ranchers have requested moderate frame heifers that will mature around 1,200 pounds.
“I still have other ranchers who request bigger frame cows that mature at 1,300-1,400 pounds,” he said. “I think it depends a lot on what you’re comfortable with as a producer, and what you have penciled out will make a profit for your program. Everyone has their own perspective on what makes them the most money,” he added.
Although many of the heifers West develops at his facility are black, he is also seeing a surge in requests for Red Angus. “Red Angus heifers are in high demand right now,” he said. “Blacks are a good base breed, and always will be, but the demand for high quality Red Angus heifers has really increased,” he said.
Most of the heifers being developed at the Heartland facility are Angus or Red Angus, but Houghton is seeing more demand from customers looking for brockle and baldy heifers to add some hybrid vigor into the maternal end of their operations. “In recent years, I am seeing more interest in crossbred heifers,” Houghton explained. “Our industry has become very straight bred over the last several years, so many of our commercial herds have lost the advantage of hybrid vigor, in terms of fertility, longevity, and other efficiencies that hybrid vigor will provide,” she said.
“With the high market, plus the short supply, it is very difficult to find a quality baldy heifer out there for our bred heifer buyers,” she continued. “Folks that do have them are keeping the best heifers at home for themselves. There is just not a lot of quality baldies on the market that are replacement quality prospects,” she added.
Houghton has also seen a division in the breeding system for the heifers at her facility. “Twenty to twenty-two years ago, we started synchronizing heifers to breed April 15 and we would finish by the end of May,” she explained. “The first two weeks in May was the peak time of the breeding season, and the most popular breeding dates. In the last five to six years, I have noticed a division into two spring breeding seasons,” she said. “The bulk of our customers either want April breeding, or late May and early June breeding. It is interesting that what once was the peak in the breeding season is now becoming the break in the breeding season,” she explained.
West has seen a similar trend. “We AI breed for the end of February calving, then hold the bulls off 30 days for first of April calving,” he explained. “I have found that most ranchers want to calve one of those two times, but I am seeing more choosing April and May calving,” he said.
Houghton has long-term customers from border-to-border and coast-to-coast. Her clientele from the southern states are still trying to recover from the 2011 drought and remain skeptical if the dry spell is completely over. “They want to be careful about repopulating their drought-stressed pastures too quickly, and are just proceeding with caution at this point,” she said.