Cattle and depreciation

Depreciation for a cow is calculated as follows: purchase price or replacement cost minus salvage value equals productive years in the herd.

Bred Two-Year-Old Heifer = $2750

    Average Cull Cow Value = $1500

Depreciation = $1250/head

The average number of productive years for most cows in a herd is from three to five years, assuming a 10% to 20% cow herd replacement rate.

Using five years, depreciation is $180 a head per year. At four years, it is $250 a head per year, and at three years, it is $300 a head. If you add in death loss at 2% on an average cow herd value of $1,200, then depreciation expense jumps to $204 a head for five years, $274 for four years and a $324 for three years. Cow depreciation is a significant expense.

For producers raising their own replacement heifers, replacement cost should include all costs starting with the value of the weaned heifer calf until the time she enters the herd as a bred female.

To increase the salvage value of cows leaving the herd often provides the greatest opportunity to reduce depreciation. Frequently, cow-calf producers pregnancy-test spring calving cows and cull nonpregnant cows in the fall of the year. This time of the year also is historically when annual cull cow values tend to be the lowest for the year. A prudent strategy to sell when prices are good can increase sale prices significantly.

Tim Hadley

Accredited land consultant

Keller Williams Realty Land, Top Hand