Alternative Cow Herd Investment Strategies: Constant Size and Constant Investment
Two heifer replacement strategies were compared over a 25-year period. One strategy retained the same number of heifers each year to maintain a constant herd size. The second strategy retained the same dollar value of heifer calves each year based on their opportunity cost as feeder calves. The constant investment strategy herd size varied throughout the period, but generated higher average profit and higher net worth than did the constant herd size strategy. Constant investment is a simple strategy to adjust the level of investment in beef cows and the resource base (pasture, labor, winter feed) in response to market signals driven by the cattle cycle. This strategy automatically increases heifer retention when the opportunity cost is low and reduces the number retained when cost is high. The effect is a lower average cost of cows in the herd, lower overall investment, and a higher net return on investment. Iowa producers, who often have greater flexibility in land use than producers in other major beef cow regions, can better utilize this strategy that generates greater profits and net worth growth.