How much can I afford to pay for a bull?
Submitted by Travis Meteer, U of I Beef Extension Specialist for Illinois Beef magazine
A popular question this time of year is “How much can I
afford to pay for a bull.” My go-to answer is usually – “How much revenue loss
would you have from a pasture full of open cows?” After all, we often de-value
the role of the bull. We forget that he is a crucial part of the equation to
making our product.
Now, the question is a good one to ask. Especially after
watching calf prices climb seemingly all of 2014 and the prices paid for bred
heifers at year-end, it is only logical to wonder what a good bull will cost
this spring.
Old rules of thumb are good to reflect on. For instance,
“two times the value of a fat steer” or “four to five times the value of a
feeder calf”, are both common measures used by old-timers to determine the
value of a bull. So, I tested these figures with historical prices from the
Illinois Performance Tested Bull Sale and prices paid for feeders and fats from
National Agricultural Statistics Service (NASS). As it turns out, using values
from 1996 to 2014 (the last 19 years) the average bull price was four times the
value of a feeder calf and 2.1 times the value of a fat steer. Looks like those
old rules of thumb work pretty well.
Using these multipliers, we can speculate to the average
price of bulls this coming sale season. Looking at recent market reports, 500-pound
feeder calves are bringing $2.40 or more. Thus, value of a 5-weight feeder calf
is conservatively $1,200. History tells us four times that value will get us
close to the average. Thus 4 x $1,200 = $4,800 for an average bull price.
A conservative price for fat steers weighing 1,300 pounds is
$1.60. Therefore the math tells us a fat steer values out at nearly $2,100. The
previously stated multiplier of 2.1 times the value of a fat steer would yield
an average bull price of just over $4,400. Thus, we have a conservative range
of $4,400 to $4,800 for the average bull price.
That said, there will be many bulls that bring in excess of
those figures. So, what factors contribute to bulls bringing more than the
average? Are they worth the extra money?
For simplicity, let’s say a bull breeds 25 cows per year for
four years resulting in 100 calves over his lifespan. With these conservative
assumptions, even a small improvement in a valuable trait can greatly increase a
bull’s value.
For instance, Calving Ease (CE) EPD is defined as the difference
in percentage of unassisted births. So, let’s say you purchase a bull that is
five points better in his CE than the breed average for current sires. For both
Angus and Simmental, that would mean purchasing a bull in the top 10 percent of
the breed for that trait – not an unrealistic buy. The 5-point improvement
should translate to five percent more unassisted births. In the real world, it’s
fair to say half of assisted births don’t make it. Thus, a five percent
improvement in CED could easily translate to 2.5 percent more calves. Out of
100 calves sired over a lifetime, that’s 2.5 more calves. The added value from improved
CE would be $3,000 (2.5 more calves x 500 lbs x $2.40/lb.).
The most common example for added value of a bull is
improved EPDs for weaning weight (WW). Let’s say you purchase a bull with a WW
EPD of 60 (breed average for Angus is 50). That’s 10 additional pounds at
weaning per calf. If the bull sires 100 calves in a lifetime and a pound is
worth $2.40, then the result is $2,400 more income over his lifetime when
compared to the average of current sires.
Another figure bull buyers can look at are $ values (Weaned
Calf Value ($W), Beef Value ($B), All-Purpose Index (API), Terminal Index (TI)).
These values are expressed in dollars and if you match your herd needs with the
correct index, they can help you be more profitable. In the January/February
2014 issue of Illinois Beef magazine,
I discussed these indexes in a column titled “Understanding and UtilizingEconomic Indexes in Sire Selection”. You can find this piece archived on my
blog.
When selecting your next herd sire, identify the traits that
can add dollars to your operation. Don’t sacrifice functionality, structural
soundness, docility, and other traits that can affect longevity. View
purchasing a bull as an investment and treat it as such. Investing in a good
bull that can improve profitable traits in your herd can allow your farm to be
more competitive no matter the market dynamic.
Bottom line, bulls are a significant contributor to profit
or loss in your cattle herd. The have an impact now and for years to come if
you are retaining replacement females. Look for traits that hold value in your
market. Find a bull that can inject those traits. The “expense” of a bull can
be a great investment in the future of your cattle herd.
