When it comes to buying bulls, the difference in price between what you need and what you think you can afford may be less than it first appears.

“Bulls are too frequently treated as an expense,” says James McGrann, Texas A&M University professor emeritus, who also happened to pioneer Standardized Performance Analysis in the industry. “Bulls are an investment that must be viewed in terms of their productive lives.”

More specifically, McGrann points out that whatever a bull's purchase price, the productive life of the bull, the number of cows that bull services and the number of calves actually sired by the bull can quickly make an investment wise or otherwise.

For example, using a spreadsheet provided by McGrann, consider a bull costing $2,000 and another costing $3,000 (Table 1). Now assume each bull will service 25 cows in a herd with an 85% weaning rate. Assume further that the salvage value will be the same for both bulls after four years of use, and their calves will average the same weaning weight (525 lbs.) and bring the same average price of $125/cwt.

With 8% interest on the average annual investment (purchase price + salvage value ÷ 2), that $1,000 difference in purchase price equates to $14.12 more bull cost per weaned calf, or an additional $2.70/cwt. weaned.

Incidentally, McGrann calculates depreciation as: total purchase cost, minus total expected salvage value, divided by the years of productive use. For the example here, we're figuring both bulls will weigh 1,800 lbs. when we're done and bring $65/cwt.

So, what could possibly make calves worth another $2.70/cwt.?

On the genetic side, the value of marbling as measured by the annual average USDA Choice-Select cutout value continues to grow. It was $14.80/cwt. the first week of January.

Muscle continues to gain value as well. Oklahoma State University research a few years back found that, compared to heavy muscling, discounts associated with medium-muscled steers had grown to $9.37/cwt. ($4.82/cwt. for heifers) and light-muscled steers were being discounted $26.48/cwt. ($8.10/cwt. for heifers). The same study found a difference of $19.42/cwt. between the highest and lowest value of 10 different breed types — represented by feeder calves at auction.

Such attributes come before the extra cost some buyers are willing to pay for cattle whose peers' genetic potential for feeding and carcass performance has already been documented. Never mind all the value steppingstones or stumbling blocks when it comes to management and marketing — everything from castration and dehorning, to preconditioning, to larger lot sizes, condition and fill.

What's more, you can obviously and drastically change the bull cost per weaned calf, and cost/cwt. of calf weaned, if a bull breeds more cows, and sires more calves than expected. Or, if he'll wean a few more pounds on average than another, or make an extra bidder want his calves.

When you use the estimated price of future calves in calculating bull cost per weaned calf, it's also interesting how closely the numbers fit dog-eared industry rules of thumb about bull prices. The $2,000 bull's purchase price is the equivalent of about three weaned calves, compared to 4.5 weaned calves for the $3,000 bull (Table 1).

That's in line with what Donnell Brown of the R.A. Brown Ranch at Throckmorton, TX, says his family has found over the years. No matter what the price of calves, their bulls tend to average the value of 4 or 5 weaned calves.

The point is it can be too easy to consider a bull too expensive — or a bargain — based on price alone.

As McGrann says, “The added cost of a quality bull isn't that significant when you consider the total number of calves it should produce.”

Table 1. Bull cost per weaned hundredweight (cwt.)*
Purchase Cost $2,000 bull $2,500 bull $3,000 bull $3,500 bull
Annual Operating Cost1 $440 $440 $440 $440
Depreciation2 $208 $333 $458 $583
Annual Interest3 (average) $127 $147 $167 $187
Death Loss4 $20 $25 $30 $35
Annual Ownership Cost5 $355 $505 $655 $805
Total Cost6 $795 $945 $1,095 $1,245
Bull cost/cow7 $31.80 $37.80 $43.80 $49.80
Bull cost/weaned calf8 $37.41 $44.47 $51.53 $58.59
Bull cost/weaned cwt.9 $7.12 $8.47 $9.82 $11.16
*Assumes: bulls are used four years; bulls service 25 cows/year; weaned calf crop of 85%; calves at weaning weigh 525 lbs. and bring $125/cwt.
1Grazing and supplemental feed $400; vet/medicine $40
2Depreciation = Purchase Cost - Salvage Value ÷ No. of years bull used (1,800 lbs, $65/cwt. and 4 years in this example)
3Average Investment = Purchase Cost + Salvage Value ÷ 2; Average Annual Interest = Average Investment X Interest Rate (8% in example)
4Death Loss = Percentage Death Loss X Purchase Price (1% in example)
5Sum of Depreciation, Annual Interest and Death Loss
6Sum of Annual Operating Cost and Annual Ownership Cost
7Total Bull Cost ÷ No. of Cows Serviced
8Total Bull Cost ÷ No. of Weaned Calves (in this example: 25 cows X 85% weaning rate = 21.25 calves)
9Total Bull Cost ÷ Total Pounds Weaned from serviced cows (in this example: 21.25 cows × 525 lbs. = 11,156 lbs.)
Source: Based on information provided by James McGrann, Texas A&M University, professor emeritus