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Previous issues of the BEEF Cattle letter

Issue # 577

March 5, 2008

Analyzing the Cost of a Bull - Scott P. Greiner, Extension Beef Specialist, VA Tech and Matthew Miller, Extension Farm Business Management Agent, VA Tech

With the steady increase in input costs for cow-calf operations, beef producers will look to save money and cut costs in multiple fashions. One area often targeted for cost-cutting measures is money spent on bulls. Often producers focus on the initial cost of a sire, and realize "sticker shock" when purchase prices move upward. Considering that the herd sire has significant impact on numerous of traits with economic importance (coat color, calf vigor, weaning weight, carcass grade), an individual sire has a pronounced impact on profitability. Bull purchase price needs to be put in perspective by evaluating price relative to years of useful service the cost per cow exposed. Table 1 compares the cost per cow or a bull with a $2500 purchase price and one with a $1500 purchase price. Assumptions are as follows: 4 years of service, salvage weight of 2000 lbs, salvage price of $50 cwt. Cost per cow exposed is shown for each purchase price given the number of cows exposed. This table considers all annual costs for the bull, and includes purchase price, annual carrying cost, and health/veterinary expenses. It is important to note that initial purchase price typically only represents 20-40% of annual bull costs, and this percentage decreases the longer the bull is in use. The majority of bull costs are incurred in feed costs. No consideration is given to genetic merit differences between the bulls. While it is unrealistic to assume a bull will breed 60 to 80 cows in a given breeding season, many producers utilize two calving seasons and therefore the higher number of cows exposed apply to breeders calving in both the fall and spring and utilizing the same bull for two separate calving seasons.

Assuming the average Virginia herd size of approximately 30 cows we see that there is a $9 per cow exposed cost difference between the bulls. Does this mean that the cheaper bull saves you approximately $270 a year ($9 x 30 cows per year)? If the bulls are identical in genetic merit this may be the case, however the difference in purchase price is likely attributable to superior genetics offered by the higher-priced bull. As an example, if we assume a weaning weight advantage of 15 lbs on 25 calves for the $2500 bull, and an average value of $0.80 for each additional pound of weight, this equates to a $12 per head advantage. This $12 per head advantage more than offsets the difference in breeding costs, and quickly puts into perspective the minor difference in the real cost between the bulls. In fact, the less expensive bull actually cost more money all things considered in this scenario.

Quality of the herd sire almost always is undervalued. The differences described in the table above are very small considering the many opportunities to derive return on investment for the superior bull. If the $2500 bull is superior in calving ease, which results in one more live calf to market, the difference in purchase price has paid for itself.

Although more difficult to measure, daughters of a superior sire have favorable impacts on future calf crops. Thus the compounded effects a sire has on his calf crops and those of his daughters warrant consideration.

In most situations, sound investments in superior bulls 'don't cost, it pays." As we embark on what many consider a new era in the cattle business, which will partly be defined by producers' ability to control costs, a close examination of opportunities to do so is warranted. Costs associated with genetics is likely not an area to cut corners. In fact, it is likely that the market differentiation between the "good ones" and "average ones" will continue to grow, and the ability to produce the "good ones" is directly related to genetics and management.

Ohio Beef Expo to Feature Educational Seminars

The Ohio Beef Expo has added a new attraction for attendees for the March 14-16 event. New for this year, Educational Seminars will take place in the trade show area during the day on Friday and Sunday. These seminars will allow producers the chance to learn how to better their operation through different management and marketing techniques. A complete list of these seminars is listed below as well as on www.ohiobeefexpo.com. Farm Credit Services is sponsoring the technology for the seminars.

Friday, March 14

10:00 a.m.: Practical Feeding of Co-Products, by Dr. Francis Fluharty, Sale Ring 1

This presentation will focus on practical aspects of feeding diets containing distillers grains, corn gluten feed and other 'alternatives' to corn. Topics covered will include diet inclusion levels with considerations for energy, protein, fat, sulfur and phosphorus. Suggestions for avoiding problems with mycotoxins or sulfur toxicity will be given. Finally, ingredient costs will be covered and suggestions for comparing ingredients priced on a per-ton versus a per-bushel basis will be given.

10:30 a.m.: Animal Health at the Producer Level, by Livestock Concepts, Sale Ring 2

Learn what you can do at the producer level to improve animal health and success of your operation. The pros and cons of each castration strategy will be discussed. Learn implanting strategies of show cattle, cow/calf operations finishing operations and more. Find out more about proper techniques for restraint or immobilization that are safe for the animal and the producer. Discover custom programs that will work for your operation.

11:15 a.m.: By McArthur Lumber, Sale Ring 1

11:45 a.m.: Urban/Cattle Legends, by BioZyme, Sale Ring 2

Howard Jensen, Director of Technical Services for BioZyme Incorporated will lead a discussion about cattle health and nutrition issues. He will discuss a variety of health and nutrition legends and explain to attendees if they are legend or fact.

12:30 p.m.: Making Genetics Work for You, by ABS Global Inc., Sale Ring 1

Learn how to use your genetic goals as a map for your herd's future. Evaluate the impact of bull selection for your herd. Learn how to select the correct bulls for heifers and the best bulls for cows. Gain the skills to get the conception rates that you expect. Let ABS show you what artificial insemination can do for your cattle.

1:00 p.m.: How to Market Beef Cattle Online, by www.etcow.com - The Wendt Group, Ring 2

This seminar will discuss the power of marketing cattle via the internet and new technology that will allow beef producers to open up new market areas using online auctions, web sites, e-mail target marketing, videos and photographs to sell your cattle 24 hours a day 7 days a week with a click of your mouse. The Wendt Group and Kevin Wendt Auctioneer, CAI are pioneers in the sale of marketing livestock via the world wide web with their first auction held in 2004. Since that time they have sold over 4 million dollars worth of genetics online and will share the secrets and power of this new form of marketing.

1:45 p.m.: Concepts of Profitable Beef Forage Management, by Fowler Seed, Sale Ring 1

This seminar will teach inexpensive, simple pasture maintenance. Learn how to renovate and improve beef pasture. Become prepared for and know how to manage through drought. Find out why improved grass and legume varieties produce superior hay. Manage fertility for forage quality and yield. Utilize ways to fit forages into row crop system and become proficient in the economics of growing quality beef.

2:15 p.m.: Fitting Demonstration, by Purina Show Feeds, Sale Ring 2

This seminar will feature Dave Guyer who will be demonstrating proper clipping and grooming practices. This seminar was a feature of the 2007 Ohio Beef Expo!

3:30 p.m.: By Gallagher, Sale Ring 2

4:15 p.m.: Protecting Your Farm Business for Future Generations, by Haughn & Associates, Sale Ring 1

This seminar will show you why having an estate plan in place is very important. Presenters will discuss how having a good attorney and purchasing adequate insurance is essential to protecting your farm assets. Discover the importance of understanding your liability exposures and your insurance coverages to protecting your farm business. Session will discuss different types of insurance options such as Long Term Care Insurance, Disability Insurance, Life Insurance and Farm Insurance.

Sunday, March 16

10:30 a.m.: Animal Health at the Producer Level, by Livestock Concepts, Sale Ring 2

For complete details on the 2008 Ohio Beef Expo, visit www.ohiobeefexpo.com. The Ohio Beef Expo is a function of the Ohio Cattlemen's Association (OCA). The OCA is an affiliate of the National Cattlemen's Beef Association and is the state's spokesperson and issues manager for all segments of the beef cattle industry including cattle breeders, producers and feeders. It is the grass roots policy development organization for the beef business. Through the Ohio Cattlemen's Association, cattle producers work to create a positive business environment, while providing consumers with a safe and wholesome product.

Forage Focus: Improved Forage Management Key to Surviving High Grain Prices - Dr. John B. Hall, Extension Beef Specialist, VA Tech

High grain prices are a new fact of life for the beef industry. Barring major changes in energy policy or an amazing worldwide grain crop, feed grain prices will remain inflated for the foreseeable future. Feedlots will probably be more interested in heavier calves than feeding light weight calves. Commercial and purebred cow-calf operations will need to make more efficient use of forages. In addition, these operations will need to consider strategies to maximize calf weight on forage-based diets before heading to the stocker operation, feedlot, or bull test station.

Increasing prices for fuel and fertilizer make increasing hay and silage production an expensive solution for feeding cattle. In contrast, investments in improvements to grazing management and extending the grazing season will pay greater dividends. The types of improvement used will depend on the individual operation and location. Below are a few examples with links to additional information.

1. Frost seeding clovers is an economical method of increasing nitrogen availability and enhancing pasture quality and yield.

http://www.ext.vt.edu/pubs/forage/418-007/418-007.pdf

2. Although fertilizer is expensive, lime is still an economical soil amendment. Raising the pH of pastures to 6.8 or 7.0 will increase productivity.

http://www.ext.vt.edu/pubs/forage/418-050/418-050.pdf

http://www.ext.vt.edu/pubs/cses/418-134/418-134.pdf

3. Adopting managed rotational grazing will also increase pasture quality and carrying capacity.

http://www.ext.vt.edu/pubs/ageng/442-130/442-130.pdf

http://www.ext.vt.edu/pubs/livestock/418-012/418-012.html

http://www.attra.org/attra-pub/rotategr.html

4. Proper grazing management coming out of drought will enhance forage availability in the future.

http://www.ext.vt.edu/news/periodicals/livestock/aps-00_04/aps-0207.html

http://www.ext.vt.edu/news/periodicals/cses/2002-09/revivingva.html

See recent article by Ben Tracy in VA Cattlemen's Magazine

5. Stockpiling forage to extend the grazing season will reduce winter feed costs.

http://jas.fass.org/cgi/content/abstract/79/E-Suppl_1/1-h

http://www.ext.vt.edu/news/periodicals/cses/2004-08/stockpiling.html

http://www.ext.vt.edu/news/periodicals/fmu/1997-06/stockfescue.html

6. All operations should consider earlier weaning. This will reduce overall feed consumption and maintain cow condition. Earlier weaning allows for higher quality forage to be used by calves as well as allowing the option to retain calves to heavier weights post-weaning.

http://www.ext.vt.edu/news/periodicals/livestock/aps-07_07/aps-703.html

http://www.ext.vt.edu/news/periodicals/livestock/aps-07_07/aps-704.html

http://www.ext.vt.edu/news/periodicals/livestock/aps-99_07/aps-0081.html

http://www.ext.vt.edu/news/periodicals/livestock/aps-99_07/aps-0082.html

http://www.ext.vt.edu/news/periodicals/livestock/aps-07_12/aps-1203.html

7. Improved storage and utilization of stored forages should be a goal for all operations. Better forage management is an important tool for reducing feed costs in the face of high grain prices.

http://www.ext.vt.edu/pubs/beef/400-002/400-002.html

http://www.ext.vt.edu/pubs/ageng/442-454/442-454.html

I have never subscribed to the notion that beef producers are just grass farmers that market their grass through cattle. Beef quality and consumer acceptance are too important to let it be meat that comes from anything with four legs, a tail, and a moo. However, I do believe that cow-calf and stocker producers make the best beef by providing highly nutritious, low cost feeds to cattle with superior genetics. The best low cost feed for the cow calf operation is properly produced forage.

EDITOR's NOTE: Fertility and intense pasture management are just two items which will be explored during the upcoming Ruminant Livestock: Facing New Economic Realities programs in Knox, Athens and Highland Counties. Find more details and reservation information in recent Ohio BEEF Cattle letters.

Weekly Roberts Agricultural Commodity Market Report - Mike Roberts, Commodity Marketing Agent, Virginia Tech

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were mixed on Monday with nearbys up and deferreds down. The APR'08LC contract closed at $92.65/cwt, off $1.675/cwt and $2.175/cwt lower than Monday before last. JUNE'08LC futures were up $0.950/cwt at $94.375/cwt but $0.65/cwt lower than a week ago. The October contract broke even with the deferreds beyond that point reporting gains. The nearbys suffered because of higher grain prices and technical selling. June/April spreading was noted in positioning ahead of rolling positions in the next few days. Cash cattle were $1-$1.50/cwt higher last week as USDA put the 5-area price at $93.00/cwt on Monday. Also on Monday USDA put the choice cutout at $151.24/cwt, up $1.43/cwt. In export news, Japan has halted beef imports from Smithfield in Arizona. According to HedgersEdge.com, estimated packer margins were put at $8.30/head, up $0.90/head from a week ago. Estimated breakeven price was placed at $92.24/cwt with the average buy at $91.58/cwt. Cash sellers should sell cattle on rallies. It might be a good idea to hold off pricing corn inputs at this time.

FEEDER CATTLE at the CME were down on Monday. MAR'08FC futures closed at $101.675/cwt, off $1.975/cwt and $2.525/cwt lower than a weeks ago. MAY'08FC futures were down $0.150/cwt $104.950/cwt; $2.000/cwt lower than Monday before last and $5.550/cwt lower than two weeks ago. As with fat cattle, feeders were influenced by higher grain prices. Cash feeders were holding firm though. The latest CME Feeder Cattle Index for February 28 was placed at $103.42/cwt, down $0.03/cwt. It might not be such a good idea to price corn inputs until later in the week. It is a good time to hold onto cattle.

Visit the OSU Beef Team calendar of meetings and upcoming events

BEEF Cattle is a weekly publication of Ohio State University Extension in Fairfield County and the OSU Beef Team. Contributors include members of the Beef Team and other beef cattle specialists and economists from across the U.S.

All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status. Keith L. Smith, Associate Vice President for Ag. Admin. and Director, OSU Extension. TDD No. 800-589-8292 (Ohio only) or 614-292-1868

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