Expensive bulls aren’t that expensive
Growing up I remember arguing with my parents, telling them their economic reference points were stuck in the 1950s. They would tell me about times when a loaf of bread cost a nickel, the movies cost a dime, etc.
Any son hates to admit that they might be acting like their parents, but lately I have caught myself using economic reference points that are getting a bit dated. I still think all hotel rooms should cost less than $80, I should be able to take my family of four to the movies for less than $20, and $30,000 should buy the biggest, nicest truck on the market.
If I am honest, I’ve had some of the same thoughts when reading Angus bull sale reports over the past couple of years. “Wow, can a commercial guy really afford to pay THAT for a bull?”
To recalibrate my economic reference points, I started doing some math. A few months ago, Miranda wrote about a calculator that Jim McGrann, emeritus ranch management economist at Texas A&M, developed to help determine what you could pay for a bull.
I played around with that calculator and used the “pounds of calf required to pay bull depreciation” feature for this comparison.
I used to think of $3,000 as a good average price for a registered Angus bull for a commercial herd, so I started from there. I went back in time about 5 years when feeder cattle were worth $90/cwt. and cull bull prices were $60/cwt. With those assumptions (and a 4-year productive life), that $3,000 required 21.3 lb. of calf to pay for his depreciation.
Using today’s figures of $175/cwt. feeders and $90/cwt. salvage bull price, a $5,000 bull only requires 19.3 lb. of calf to cover his depreciation. So my $3,000 average needs to be increased to $5,000 to remain on par.
Also, looking at “lb. of calf to pay for bull depreciation,” a $1,000 additional investment (going from $5,000 to $6,000) only requires an additional 5.7 lb. of calf from that bull to pay for himself.
Another way to look at it: every additional 6 lb. of weaning weight a bull can bring to my cowherd is worth me paying $1,000 more. Using my $5,000 base, if I find a bull with an 18-lb. WW EPD advantage over the average bull, he’s worth $8,000. That doesn’t even get into the added value a bull with better carcass EPDs can bring.
So going back and looking at some of the prices paid for registered Angus bulls in recent sales I am convinced most cattlemen are way ahead of me in doing this math. Paying up for a good bull really makes sense…. and dollars and cents.
-Mark
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