Producers should consider economic value of bull purchases this yearWritten by Saige Albert
Cattle prices have reached new highs, and bull sales are similarly trending upwards this year. As a result, producers may be left wondering just how much they should spend on bulls this year.
“There are a lot of different things I would look for in a bull,” says UW Extension Livestock Marketing Specialist Bridger Feuz. “One of the big things is matching a genetic plan with the marketing plan.”
Feuz also emphasizes that each operation should focus on what best fits their operation.
Inside the numbers
Looking at the economics of buying bulls involves analyzing the hard costs of buying and owning bulls.
“There are a few different tools available to look at the numbers,” Feuz says. “There is a genetic investment tool on my website that helps people look at how much more they might have to spend on a bull this year. It also calculates how much more a rancher would have to make per calf to pay for the bull.”
The Genetic Investment tool is available at uwyoextension.org/ranchtools.
Producers can also conduct a time-value analysis that looks at the investment costs compared to the result of selling calves.
“Producers should take the difference between the cost of the bull and what it will be worth as a cull animal,” Feuz says. “That difference is the value producers have to make up with calf sales.”
UW Extension Educator Dallas Mount breaks down the equation with an example.
“When we spend a dollar on an input, in this case a bull, we need to be sure we are going to capture back that dollar plus some for a profit,” he says. “In years like this, when cattlemen have money in their pocket, they may get loose with this rule.”
If a producer buys a bull for $8,000, uses it for three years and then sells it for $2,000 salvage value, the cost of the bull is $6,000. If we also assume the annual cost of keeping a bull is a conservative $600, including pasture, hay, fertility test and health costs, then the total cost of keeping this bull for three years is $6,600.
“A lot of people will tell us that the average years of service is higher than three years, but if we look at bulls who drop out after one year or less, the industry average is about three years,” Mount says.
Industry averages show that one bull breeds approximately 25 cows each year or 75 cows over his service time. By dividing $6,600 by 75, the bull costs $88 per calf to own.
“I’m not sure most cowherds can spend $88 on getting a cow bred and have money left over for profit,” concludes Mount.
More than a calculation
Feuz, however, mentions, that producers should be cautious about using only the numbers when considering bull buying options.
“A lot of the bulls that are really high priced are low birth weight heifer bulls,” he explains. “While we see a benefit for calving heifers, after a few years, a lot of producers end up putting their low birth weight heifer bull in with the cowherd, which isn’t necessarily the best option if we want to maximize growth and calf weights.”
At the same time, Feuz says that for producers who are looking to improve their cowherd, spending the extra money on a bull may be worth it.
“For producers looking to retain heifers from the bull, there might be some reason to pay more to improve the genetic makeup of the herd overall,” he comments. “It is hard to put a number on what that should be, though.”
He encourages producers to use all of the tools available, including EPDs and DNA-adjusted EPDs, to analyze their decision.
“EPDs can provide a good estimate of what a bull might contribute to the herd,” he says.
“It is really dependent on the ranch, in terms of where they are with their genetics and where they are trying to go, as to how much they can pay for a bull,” Feuz comments. “The high-priced bull may be a bargain for some ranchers, but it might not make sense for others.”
In preparing to buy bulls, Feuz also notes that producers need to make sure they are educated before delving into bull sale catalogs.
“People should really do their homework before they look at bull catalogs,” he says. “They should find out what the breed averages are before looking at EPDs because it is hard to know what is good unless they have something to compare it to.”
Feuz also encourages producers to be aware of marketing ploys and to do their homework related to genetic evaluations before making decisions related to buying bulls.
“We also have to sort out what our marketing program looks like when selecting genetics,” he continues.
Mount adds, “I really think that genetics is lower on our list of monumental decisions that we make on the ranch.”
He further acknowledges that genetics is a passion for many of Wyoming’s producers, and while it is important to the operation he says, “When we look at the factors that determine the profitability of a ranch, genetic makeup of the cattle is pretty far down the list. There are much more heavily weighted management areas and decisions that should come before genetics.”
“I challenge ranchers to make sure they are also budgeting time to think about those important managerial questions,” Mount says.
Buying bulls influences the genetics of the cattle herd, and UW Extension Educator Dallas Mount says that the cow’s genetics are very important as far as her ability to perform in her environment with as few interventions as possible.
“When we get to genetics, many people start to think about what color of cow they want and what the breed make-up should be,” he says. “Ranchers need to have an animal that fits their environment first and foremost.”
He notes that cows must be suited to the environment they will be raised in, including their feeding program.
“Will we ask these cows to graze out year-round?” Mount asks. “Or are we going to feed them hay for six months?”
The production schedule, including calving season and time of weaning) must be considered before selecting low milking, low requirement cows or those cows with higher milk production and higher nutrition requirements, for example.
Beyond simply selecting a bull, Mount also notes that many other things should be considered when buying bulls. Look for more information on this topic in next week’s Roundup.