Efficiency and economics of purchasing bulls discussed
“Every bull sale is a good sale – either for the buyer, the seller or both,” notes Kansas State University (KSU) Beef Cattle Institute (BCI) Professor Bob Larson. “There’s no such thing as a bad sale for all parties.”
Larson shares the perspective of the seller includes what they would like to sell bulls for, and the producer purchasing yearling bulls needs to take into consideration what they can afford, but also what they need to pay for introducing quality genetics into their herds.
Joined by KSU BCI Professors Brad White, Philip Lancaster and Dustin Pendell during the KSU BCI CattleChat podcast from March 12, Larson comments the topic of bull economics is loaded in terms of dollar value and genetic potential.
Paying too little
Larson notes he can easily picture producers not spending enough on bulls to add quality to their cowherds through the bull’s half of genetics.
“When producers are spending at the very low end, there is the potential they don’t know much about the bull, the producers who raised the bull, or if they do know about him, the bull is below average,” he says. “To me, this is likely a situation, and a bull, I would avoid.”
He adds, “I don’t want to spend too little on the bull because I want to know something about him, the ranch that raised him and I want to see some expected progeny differences (EDPs) and other numbers which provide some predictions on how this particular bull will perform.”
Higher quality bulls with more valuable EPDs are likely to sell for more.
Overpaying for bulls
On the flip side, Larson explains producers can spend too much for a bull that doesn’t add enough to their herd for his price.
“On average, bulls we add to the herd will have 25 to 30 calves per year, and the bull might stay in the herd for four years,” he notes. “His value has to show up in this total number of calves throughout the years.”
Larson adds, “If producers pay too much for a bull, they are raising their cost per calf sold or their cost per pound of calf weaned above what they can really afford.”
Keeping many factors in mind, he cautions spending too little or too much for a bull.
From an economic standpoint, Pendell shares deciding if a bull is worth purchasing at a higher price or if an operation isn’t spending enough on bulls depends on a lot of factors including how long the bull stays in the herd and how many calves he is expected to produce each year.
“Is the bull staying in the herd for four or five years, or just two?” he asks. Additionally, Pendell notes the number of cows the bull is expected to service makes an impact, stating, “Adding an extra five cows to what the bull is expected to breed to produce another five calves come calving season will bring the bull’s service costs down.”
Pendell adds although it is not common, some producers may use the same bulls for both spring- and fall-calving herds, which should be taken into consideration.
“If producers compare a $3,000 bull with a $5,000 bull, there is an obvious $2,000 difference,” he states. “But, is it really a big difference when thinking about the return of the calves he produces?”
He continues, “I recommend producers sit down and pencil these details out to figure out what they can afford to spend on a bull.”
Efficiency of genetic merit
During the discussion, White shares the efficiency of the bull market is dependent on the value producers place on the bulls. Using price as a gauge of quality, he notes higher priced bulls are often higher quality but questions the validity of the theory throughout the entire bull market.
Pendell adds, “I suspect some bulls going for a lot of money are, in fact, higher quality and those bulls are going to be used for breeding a lot of different cows all over the country through artificial insemination. Though, there are probably exceptions.
“Quality in this case is in the eye of the beholder,” Larson argues. “The commercial cattleman selling calves at weaning will have a different view on what quality is compared to someone who maintains ownership on their calves all the way through the feeding process.”
He continues, “To a degree, there is some efficiency coming into play and quality is reflected in price depending on the goals of the producer.”
Quality based on production
“I think the way to look at the economics of bulls is based on producer needs,” Lancaster adds. “If a producer is spending money on a bull because he as really high carcass EPDs, but sells their calves at weaning, they are overpaying for this bull because they are paying for qualities they don’t need.”
He recommends producers consider the traits important to their sector of production.
“For example, cow/calf producers need to consider if they have enough genetic potential for weaning weight,” Lancaster continues. “If the limiting factor on weaning weight is genetic potential, rather than nutrition, it would make sense to pay more for a bull with higher weaning weight EPDs.”
“If nutrition is the issue, maybe producers need to focus on something else like reducing cow size or improving milk and other fertility traits,” he says, noting the bull buying process should take strong consideration into the genetic needs of the herd. “If producers are paying for things they don’t need, they are overpaying. Whereas, if they are not paying for traits they need, the producer is underpaying.”
This decision all starts with a good assessment of the genetic needs of the herd, Lancaster shares, especially if producers are planning on retaining replacement heifers out of a particular bull.
The BCI team shares it is important for producers to do the math on what their operation can afford in bulls before the bull sale.
White shares, “Keep in mind the math will be different for each herd. What works for one producer might now work for another.”
Averi Hales is the editor of the Wyoming Livestock Roundup. Send comments on this article to firstname.lastname@example.org.