Call it the yin and yang of bull economics. Depending on the deal, leasing bulls can cost more money each year than owning them. On the other hand, leasing offers the potential to use more genetic power and breed options than the up-front cost of ownership might allow.
"I think the biggest thing is economics," says Dewey Schaffer of Dewey's Bull Bonanza in North Platte, NE. "If you pay $500 to lease a bull for a breeding season and he breeds 25 cows, you've only got $20 (lease cost) in each calf. Producers don't have to worry about death loss or injured bulls, and they don't have to keep bulls around in the winter time."
Since 1983, Schaffer has leased bulls to operations of all sizes. These are operations that like the lower up-front investment associated with leasing and the fact that if anything happens to a bull they're using, or if they just don't like him, he'll be replaced at no extra cost.
Updating Genetics More Quickly These days, Schaffer leases out about 700 Angus, Charolais, South Devon and Black Simmental bulls - yearlings to 3-year-olds. Last year, clients paid $500-550 per bull for a 60- to 90-day breeding season. Schaffer buys the bulls from breeders who build them with him and his clients in mind.
"Also, the average purchased bull in the commercial industry today is probably used four or five years. With a lease, the producer has a chance to update genetics faster," says Mark Tracy, the staff veterinarian and sales manager for Power Genetics (PG), Holbrook, NE.
PG is a sprawling integrated operation that includes its own breeding herd, partnerships with cooperator herds that use their genetics to build bulls for the company, and three feedlots that aim cattle for a value grid negotiated with Excel. PG sells about 500 bulls each year, but also offers three-year leases on the same 5/8ths Angus, 3/8ths Continental (Simmental, Maine Anjou or ChiAngus) bulls. Currently, they have 1,000 bulls out on lease.
Folks who lease bulls from PG - currently paying $650 per year - keep and manage the bulls until the end of the lease, much as you would keep and care for a leased vehicle as if you owned it. Lessees also agree to sell back all the calves, or partner with PG for two of the three years of the lease.
In both of these examples, producers can choose from the bulls that are offered. But, in any leasing opportunity, genetic selection is limited by the breeds and within-breed performance selected by the folks who own them.
That's one reason Jim Gosey, University of Nebraska beef Extension specialist, says some producers are reluctant to consider leasing, especially if they're massaginggenetics for value-added markets and can't lease genetics that allow them to aim in that direction.
Plus, Gosey says, the bigger issue for some boils down to the health concern of using bulls that have been used previously in other herds. If bulls are leased by the season, rather than the breeding life of the bull, it pays to ask potential lessors how they handle health. Schaffer, as an example, tests all his bulls for transmittable diseases - like trichomoniasis - when he gets them back home. He hasn't found a trich infection yet.
Still, figuring out the value of risk on both sides of the fence demands understanding that the cost of bull power is more than lease and purchase costs divided by the number of cows that should be exposed to a bull. Consider Tables 1-2, and the costs - arguably conservative and incomplete - are astonishing, especially when viewed as a cost per calf weaned rather than as a cost per cow exposed.
"We did quite a bit of penciling when we first considered it," says Mark Bowman of the I.N. Ranch Corp., Alliance, NE. But the Bowman family dove into the concept three years ago, leasing 14 half-brothers from PG.
"It excites me to get the carcass data back and have a goal (even when they don't partner on the calves)," says Bowman. "You have a guarantee on the bulls and you have a product they want to buy back, and you have a chance to get some profit back on the whole deal."
With potential in mind, ranchers considering lease bulls should be as persnickety as if they were buying them.
"Go and look at the bulls," says Schaffer. Likewise, Tracy suggests, "They need to look at the carcass performance and EPDs of the bulls, according to what they're trying to do."