Analyzing the Cost of a Bull
Livestock Update, March 2008
Scott P. Greiner, Extension Beef Specialist, VA Tech and Matthew Miller, Extension Farm Business Management Agent, VA Tech
With the steady increase in input costs for cow-calf operations, beef producers will look to save money and cut costs in multiple fashions. One area often targeted for cost-cutting measures is money spent on bulls. Often producers focus on the initial cost of a sire, and realize “sticker shock” when purchase prices move upward. Considering that the herd sire has significant impact on numerous of traits with economic importance (coat color, calf vigor, weaning weight, carcass grade), an individual sire has a pronounced impact on profitability. Bull purchase price needs to be put in perspective by evaluating price relative to years of useful service the cost per cow exposed. Table 1 compares the cost per cow or a bull with a $2500 purchase price and one with a $1500 purchase price. Assumptions are as follows: 4 years of service, salvage weight of 2000 lbs, salvage price of $50 cwt. Cost per cow exposed is shown for each purchase price given the number of cows exposed. This table considers all annual costs for the bull, and includes purchase price, annual carrying cost, and health/veterinary expenses. It is important to note that initial purchase price typically only represents 20-40% of annual bull costs, and this percentage decreases the longer the bull is in use. The majority of bull costs are incurred in feed costs. No consideration is given to genetic merit differences between the bulls. While it is unrealistic to assume a bull will breed 60 to 80 cows in a given breeding season, many producers utilize two calving seasons and therefore the higher number of cows exposed apply to breeders calving in both the fall and spring and utilizing the same bull for two separate calving seasons.
Assuming the average Virginia herd size of approximately 30 cows we see that there is a $9 per cow exposed cost difference between the bulls. Does this mean that the cheaper bull saves you approximately $270 a year ($9 x 30 cows per year)? If the bulls are identical in genetic merit this may be the case, however the difference in purchase price is likely attributable to superior genetics offered by the higher-priced bull. As an example, if we assume a weaning weight advantage of 15 lbs on 25 calves for the $2500 bull, and an average value of $0.80 for each additional pound of weight, this equates to a $12 per head advantage. This $12 per head advantage more than offsets the difference in breeding costs, and quickly puts into perspective the minor difference in the real cost between the bulls. In fact, the less expensive bull actually cost more money all things considered in this scenario.Quality of the herd sire almost always is undervalued. The differences described in the table above are very small considering the many opportunities to derive return on investment for the superior bull. If the $2500 bull is superior in calving ease, which results in one more live calf to market, the difference in purchase price has paid for itself.
Although more difficult to measure, daughters of a superior sire have favorable impacts on future calf crops. Thus the compounded effects a sire has on his calf crops and those of his daughters warrant consideration.
In most situations, sound investments in superior bulls ‘don’t cost, it pays.” As we embark on what many consider a new era in the cattle business, which will partly be defined by producers’ ability to control costs, a close examination of opportunities to do so is warranted. Costs associated with genetics is likely not an area to cut corners. In fact, it is likely that the market differentiation between the “good ones” and “average ones” will continue to grow, and the ability to produce the “good ones” is directly related to genetics and management.