Cattle Economics

A Bull Purchase Is More Than Just Buying Genetics

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There seems to be a growing price gap between bulls based on the value of seedstock suppliers themselves. How much are you willing to pay for a good bull?

On one hand, bulls are worth exactly what someone is willing to pay for them, no more and no less. On the other hand, considering their contribution to a herd’s genetics, they’re priceless.

“For the average calf, the sire and the maternal grandsire are projected to have contributed three-fourths of the calf’s genes,” explains Kris Ringwall, North Dakota State University Extension livestock specialist. “Although somewhat challenging to do all the math, on average, if one goes back an additional generation, 87.5% of the genes within the calf crop are potentially accounted for by the last three sets of bulls that the producer bought.”

Even before considering the historic genetic contribution or specific genes individual producers are trying to introduce or dilute within herds, economics say some bulls are worth a whole lot more than others.

A couple of years ago, Troy Marshall, a seedstock producer at Burlington, CO, who’s also a BEEF contributing editor, offered an example based on a bull siring 100 calves. He figured, conservatively, three more calves could be achieved from a bull in the top 10% of the breed for calving ease. He figured a bull in the top 20% of the breed for carcass weight would produce calves worth $30/head more than a breed-average bull.

“There are a lot of other traits like feed efficiency that also become significant. But ignoring all of them and assuming nothing more than the easily quantified traits, and assuming that all 100 calves are marketed, the value of the above-average bull compared to the average of a particular breed is over $7,500,” Marshall says.

Again, that was using prices two years ago. And, yes, that’s hindsight tallying. There’s no guarantee which genetics a bull inherits from his parents, but genomics offer more accuracy to the genetic evaluation of young bulls than ever.

Rather than bull prices getting too high, Marshall says, “In reality, when you try to put economic parameters to EPDs with today’s prices and feed costs, the better argument is that there should be more price spread on bulls than there actually is. As is the case with the commercial marketplace, it appears the higher-priced bulls are actually undervalued, while the lower-priced animals are overvalued.”

 

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One question that’s worth asking prospective bull providers is this: “Who are your 10 best customers, and how are they using your genetics to achieve their goals?”

That sounds simple enough. Over the years, though, I’ve been amazed by the number of folks who struggle to come up with an answer. Instead of customers, these folks have buyers who they hope to see on sale day again next year.

At the opposite end of the spectrum are seedstock producers who can rattle off a long list of customers and tell you as much about customers’ herds and calves as the customers themselves. They know their customers’ goals, herd performance and how their genetics can help that customer achieve specific goals. They are partners in the success of their customers’ operations.

Looking around last fall — and I suspect it will be obvious this winter and spring — there seems to be a growing price gap between bulls based on the value of seedstock suppliers themselves.

Service is part of it. This includes such things as free delivery, no-fault breeding season guarantee, low-cost extended warranty, herd consultation, guaranteed bids for calves or some other kind of marketing assistance.

More than anything, though, commercial producers seem to be placing more value on trust.

Visit with longtime customers of the most successful seedstock producers and you hear comments like:

  • “I know I can count on them to make it right if there’s a problem.”
  • “I trust them to keep me out of a jam.”
  • “They know what we’re trying to accomplish in our herd, so they know which are the best bulls to help us achieve our goals.”

Considering the current and future equity at risk in the U.S. beef industry, it makes little sense to settle for less than that kind of relationship. 

 

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Discuss this Blog Entry 2

James McGrann (not verified)
on Jan 30, 2014

AI should be a cost effective alternative to the higher priced bulls for replacement heifers.

Stephen (not verified)
on Jan 30, 2014

Just because a bull has good genetics it doesn't guarantee a live calf. Parentage DNA on 450 ranch cows showed the bulls that sired the most live calves were not those with the highest EPD's. Similar findings were obtained by Cornell at the Bell Ranch. This isn't to say "good " genetics shouldn't be a priority but in the real of the commercial world production should be a distant second to reproduction.

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What's Cattle Economics?

Wes Ishmael provides tightly focused analysis and commentary on specific beef quality and marketing issues of practical importance to beef producers.

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Wes Ishmael

Among the industry’s most insightful thinkers, Wes Ishmael concentrates on industry price and market perspectives for BEEF magazine. Along with his monthly “Cattle Economics” column...

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