How do producers decide what to spend on their bull purchases? In this post I explore a few different thoughts on how to rationalise the investment. I’ll look at:
- Cost per calf
- Putting a dollar value on genetic merit
- Making a return on your investment (ROI) in genetics
Cost per Calf
As price takers, the only aspect of our enterprise that we have full control over is our cost of production. The most important (and easiest) equation to consider is the cost per calf of the bull. To estimate the cost per calf, we need to be realistic about how many calves a bull will sire.
How many calves will he produce?
In our commercial self-replacing production system, and probably most others as well, first calvers join the mature cow mob after weaning their first calf. Therefore a bull’s first daughters join the mature cow mob in his fifth year of service. As we avoid mating them over their daughters, this puts a limit of 4 years use on all of our bulls. .
In the Southern Australia, the industry average for years of service per bull is 3.
You may argue for different numbers so I’ve included 3 different totals in the table below.
What doesn’t change is the big effect of the bull purchase price.
What are better genetics worth?
‘Genetics’ is obviously a broad term so let’s narrow in on the scenario we’re exploring today. Let’s put to one side cross-breeding, or major issues like horns, tropical adaption, coat colour and even dystocia, how do we evaluate the difference between an average priced bull and high priced bull in a pure-bred commercial breeding operation?
Breeding Indexes (by BreedObject) are available for most breeds in Australia. They help you identify the cattle aligned to your breeding objectives. Indexes estimate the profitability (in dollar terms) of each animal based on its EBVs. The Angus Breeding Index (ABI) is an example.
We can compare two bulls by their index values to estimate their profitability in an enterprise for which the index is relevant. We can also estimate the value of their progeny by dividing the difference in index values by 2 (as the bull is only half the genetics, the cow being the other).
Bull A: +$140
Bull B: +$110
($140 – $110) / 2 = $15
Progeny from Bull A have $15 more genetic merit than Bull B.
Note that the dollar value represents profitability of the animal throughout the entire supply chain. The ABI for example puts significant emphasis on dressing percentage, saleable meat and marbling. This isn’t a bad thing – Angus breeders enjoy a premium over other breeds because of a long held consumer focus by the stewards of the breed. However, it’s also useful to be able to hone in on the traits that more directly impact on-farm profitability. A customised index can be created to limit an index value to represent the profitability for the breeder only.
I’ve attempted to create custom indexes for two production systems that are widespread throughout North East Victoria:
- Autumn calving, self-replacing herd, selling weaners
- Spring calving, self-replacing herd, selling feeder steers
As these indexes don’t place much emphasis on the traits that are important beyond the farm gate, they are smaller numbers and have less range than indexes such as the ABI. Looking at an upcoming sale catalogue of one of Australia’s highly regarded larger seedstock enterprises, the difference between a bull in the top 15% and the bottom 15% are:
- Autumn Weaner Index: $10
- Spring Feeder Index: $20
As discussed previously, to evaluate the profitability of the progeny, we need to halve those differences. So, in terms of profit per calf, the difference between the lower end bull and the upper end bull is:
- $5 in an Autumn weaner system
- $10 a Spring feeder system
I’ll add a variation to the Spring Feeder Index for the market segment that pays a premium for feeder steers with high IMF. It’s usually at least $0.20/kg live weight, which at 450kgs is $90. As it’s only for the steer portion of an enterprise, I’ll add only half of the premium to the Spring Feeder Index value (above) to give us a extra value of progeny that gain or maintain market access to the IMF premium:
- Spring Feeder IMF: $55 more profit per calf
Net effect
When we increase our spend on a bull from say $4,500 to $8,000, our cost per calf increases by $27. In most cases (see below), this cost outweighs the value of the genetic gain.
Could you make better use of that $3,500? I’d consider:
- 9 tonnes of SuperPhosphate?
- 35 tonnes of lime?
- 70 genomic tests?
- a week in a beach house?
The best time to implement your breeding strategy was 20 years ago. The second best time is now.
Genetic ROI
Obviously genetic improvement in your herd is more complex than a BreedObject index. I’ve also made lots of assumptions in the above calculations that may not apply to your enterprise. There are many influencing factors. To maximise your return on investment (ROI), remember these key points:
- Your cattle can only express their full genetic potential when their nutrition and health is optimal. (Don’t sacrifice soil fertility and herd health to acquire high performing genetics.)
- Genetic progress is slow. The best time to implement your breeding strategy was 20 years ago. The second best time is now.
- Genetic progress is additive. Implement your breeding objectives with consistency and every new crop of calves will be closer to your ideal than any previous crop. Keep more replacement heifers to progress more quickly.
- Returns increase when you value-add (e.g. grow out to feeder or finish). However, your production system has to fit your farm.
- More live calves and more early calves will make much more impact on profitability than pursuing growth traits. Use short joinings, Bull Breeding Soundness Evaluations (BBSE’s), and combine genetics with nutritional management to limit dystocia in heifers.
- Achieving/maintaining high IMF is the only strategy that generates a purely genetic boost to profitability (in Angus), assuming you can access the market that pays a premium.
Consider a bull supply contract to ensure you get the genetics you want at the right price
So how much should I spend per bull?
As little as necessary to meet your breeding objectives.
- Increasing cost per calf (by spending more than necessary) will outweigh genetic gain in most production systems.
- If you are targeting the feedlot buyers who pay a premium for better IMF, you can afford to spend a little more.
- Find a bull supplier that understands your objectives and form a lasting and mutually beneficial relationship with them. Consider a bull supply contract to ensure you get the genetics you want at the right price. You may get more bang for your buck with a smaller seedstock producers offering very similar genetics.