Determining the appropriate bid price for beef cows is important for buyers and sellers in the ranching industry. The Bid Price for Beef Cows decision aid is a practical and valuable tool that simplifies the bid price calculation and enables insightful “what if” analysis based on your financial expectations and productivity projections. This tool employs a net present value (NPV) approach, factoring in the desired return or discount rate.
Several variables play a significant role in determining the bid price for a cow, including: the total debt of your operation, operating costs per cow, estimated future calf prices, cull cow prices, required loan amount, interest rate, number of calves per cow, weaning weight, weaning rate, and more. In this example, we focused on the effect of higher interest rates in the bid process.
The amount of debt required for cow purchases and the interest rates directly affect the bid price. The higher the debt and interest rates, the lower the amount a buyer can afford to pay. For instance, an interest rate of 11% will reduce the bid price by $367 per head (Graph 1) compared to the 6% interest rate we may have seen a couple of years ago...more
Using
the Bid Price for Beef Cows tool will allow ranchers to analyze
different scenarios and understand how much they should pay to restock
their operations. Find the tool here and give it a try.
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