The market is always changing and the animals that we own value is changing. This relationship of the market and change(weight gain, weaned, later stage of pregnancy) in the animals creates opportunity to sell the overvalued buy or keep the undervalued animals and pick up the cash difference.
This is very important in a high market. By pulling the cash out of the inventory while maintaining the inventory a cushion is being built in cash reserves for the down turn in the market when it happens.
Example:
| What you do: | Sell 5 year old cow/calf pair for $2900 Keep Weaned Heifer cost of $1500 $2900 – $1500 = $1400 income |
Keep Cow Calf Sales income of $1250 |
| Annual Cost to Carry: | – $1.50/day (heifer eats less than a cow) x 365 days = – $550 | – $2.00/day (cow eats more than a heifer) x 365 days = – $750 |
| Annual Depreciation: | $0 | – $200 |
| Value after one year: | We have a bred heifer and $850 cash. We have picked up 4 years and the cash. | We have $350 cash and a 6 year old, bred cow. |