What is the Value of a herd sire.

[justintime]

This thread is similar to another regarding an Aussie Angus bull selling for $91,000.  I did not want to hijack that thread into the much broader topic of what is a good bull really worth?  In that respect, what is anything we have to purchase really worth? 
In the past few years I have seen more and more commercial producers paying more for their herd bulls than many purebred breeders do. Last spring I saw several commercial producers buying or bidding on bulls over $8000 and I know of one sale where several commercial producers pay over $10,000 for bulls. This outfit just held their bull sale klast week and averaged over $5600 on  232 bulls, most of which sold to commercial producers. I think most purebred producers I know would not pay this much for their herd bulls. So just what is a good bull worth?
Last week I happened to see one of our bull buyers in town. They have purchased 6 bulls in the past few years from us. This lady told me that they had just shipped one of the bulls they had purchased from us and that she was amazed at what he had sold for on the market. She said they had used him for 4 years, and that he had just being running with the cow herd all winter. She said he was in very " ordinary" condition and had weighed 2230 when sold. He brought $1.03/ lb or just a few dollars short of $2300. They paid $2000 for the bull, when they purchased him here, used him for 4 years and got more for him than they paid for him. Needless to say, they were pretty happy.  So what is a good bull worth this spring ?

I could not help but think about this more than a few times in the last week. A few days ago, I blew the motor in my one ton dually truck. Needless to say, I have been looking at various options including looking at some new trucks. I stopped at the local Ford dealer, and looked at a few trucks. I looked at 6 F350 trucks, none of which were duallys. The first one has a list price of $86940.Of the six trucks I looked at, the lowest price was $66900. Maybe it is just me, but if I was to buy a new truck, no one would think twice about it. If I were to partner with two or three people and pay $ 86940 for a bull, I expect we would all be the talk of the town and most people would question our sanity. Personally, I think I would have a much better chance of recouping my investment from buying a bull at this price than a truck.  I went to two other truck dealers and looked at trucks and the one ton trucks I liked were all priced over $70,000. My old truck is in excellent condition except it needs a motor. I did some checking around and I happened to find a low mileage motor that was pulled from an insurance writeoff, and \I can have it put in my truck for under $4000, labour included and they are giving me 5 months unlimited warranty on the motor and labour. To me, the decison was an easy one to make. So, is it just me, or can someone explain to me why a truck can be worth this kind of money, but a good bull who will influence your herd for at least 20 years, is not worth a fraction as much? There are so many other examples.....

 

[Cattledog]

I completely agree with you on this.  I will say location has to be a pretty big deciding factor on the amount of money spent on bulls.  Here in Illinois you get commercial guys griping if you have a bull priced over 2k.  They just won't pay more than that.  However, they still want the best you have!

 

[SFASUshowman]

I think that commercial producers have good reason to spend more money on a herd sire than do most purebred producers.  Most purebred producers are using AI more than natural cover, so that herd sire  generally only covers cows/heifers that dont settle AI, thus the herd sire doesnt affect as large a portion of their calf crop. But on the complete opposite side of the spectrum, we dont see very many commercial cattleman AI'ing their cattle, so the herd bull(s) affect 100% of their calf crop, thus they are naturally paying more for their herd sires because the herd sires have a much bigger impact on their operation.  At the same time, a lot of the commercial cattleman out there dont buy replacement females, many of them retain their own heifers as replacements and only purchase new females if they want to change the direction of their herd.  So that herd sire not only has an affect on the calf crops they sire, but on the future calf crops of that producers herd.
Naturally location has a lot to do with the value, in the midwest and west where we see the majority of out large commercial outfits the bulls are gonna be higher priced because there is more demand for them.  I think a lot of the price we see at market for them comes because many commercial producers ship bulls at a fairly young age while they still have a lot of breediing miles left on them.  Since these producers so often retain their own replacement heifers, they rotate bulls fairly often in an effort to keep genetic diversity in their herds.  One of the reasons that you see the big commercial bull sales averaging so high I think is that a lot of these LARGE operations that have to run several bulls to cover all their cows want to use bulls that are genetically the same, most times out of the same herd and calf crop, in an effort to keep uniformity/consistancy in their calf crop.

I think something that many people loose sight of when spending so much money on females and then cheap bulls.  If you are a producer running 100 head of cows naturally serviced.  Each cow affects 1/2 the genetic make up of the calf she produces, while that bull affects 1/2 the genetic make up of every calf produced.  Another way of looking at it is the bull is responsible for 50% of the entire calf crop, While each individual cow is only responsible for .5% of the entire calf crop.  SO where does it make more sense to spend money, on the cow or the bull??

 

[Sammy]

Yep - and in addition to a truck with all the bells and whistles that won't make a dime for them those same commercial guys have 1 or more $250,000 + combines, several six-figure tractors and an assortment of other expensive equipment and toys - plus are paying $200 a bag for seed corn - by comparison in my mind a $5,000 to $10,000 commercial bull should be cheap and they can brag to the neighbors at the coffee shop about their bull just like they talk about 250 bushel corn- depreciate on taxes and he leaves behind superior replacement females - makes a lot more sense than several hundred thousand in equipment that sits idle for 90% of the year, at least that is my sales pitch - the current cattle prices and better record keeping by producers may tend to prove to producers the value of a better bull - feel free to use my "you would not get your seed corn for this years crop out of the grain bin" pitch as well -

 

[aj]

A bulls value is what it is. Its not what someone thinks it should be. Its what a bull will sell for. If you don't retain ownership of calves and you don't retain heifers can be a factor also. I have noticed that a fair number of guys say they can't afford to keep heifer calves to keep as cows this year. To much bottom side potential and they are not set up to grow heifers. But they will go out and buy a group of bred heifers or cows at say 1450$ a piece. I am sure it varies by area and weather problems or percieved problems.

 

[SWMO]

What really floors me is the fact that most bull buyers will pay more of a yearling bull than they will for an 18 to 24 month old bull? 

It will be interesting to watch the bull market here in Missouri this Spring to see if the price of bulls reflects the increased price of feeder calves.  The real test here in Missouri will be this month.

 

[SFASUshowman]

Of course they will pay more for the yearling bull.  Most of these big producers are going to do a pre-breeding season vet work up on the bull.  Make sure they are sound, clean of any disease, and fertile before turning them out and realizing when nothing gets bred that he was sterile.  It takes time to do all this, and you have to have time to replace one if he comes up bad.  So as a yearling you give yourself time to test and all that, and have him in the herd working by the time he is 18-24 months old!

 

[cdncowboy]

If you sold all those trucks at auction I'm sure you'd see alot of difference in their "value".  I've owned the same truck for the last 10 years and in the same time I've owned 4 different bulls, the bulls have cost about the same amount as the initial investment on the truck.  The difference - the bulls paid for themselves as well as the truck and its constant up keep.   
Its been said many times and it will always hold true IMO a good bull doesn't cost he pays.  His influence should be felt in the herd well past his own expiry date.  More cattle people will talk about that bull they had 20 years ago than the truck they used to haul him home.
Why do people pay more for a yearling - simple most will take him home and put him to work the first year.  He's worth more to them because they will get one more year of income from him.  Or the same reason you see so many purebred sales have heifer calves out sell breds, people look at them and dream what they will be instead of looking at what they are.

 

[aj]

I noticed in a couple Red Angus sale catalogs that there were sire groups of bulls. They would have 20 mission statement sons and 16 making hays and 7 Nebulas or whatever. Is this a cause or an effect of being a successfull bull provider?

 

[Dyer Show cattle]

Sounds like they were needing a tax writoff to even consider paying 90K for a herd bull. Most guys around my area will get 7years out of a bull. You figure 7 years and prob 50 cales a year for natural service equals  350 calves in a lifetime. Depending on markets you might make 300 dollars profit per calf = 105000 profit dollars that bull produced. So you make nothing on those first 300 calves that was the price of the bull so you only have 50 calves worth of profit. How much better are those calves than a 5K or 10K bull.  A 5k or 10K bull you make your return on investment back in a year and have 6 profit years. So unless those calves are really worth it I would say its insane. Esp when Im sure you could get a handfull of embyos that are brothers to that bull for under 1k a peice and reproduce almost the same bull for 1-2K. Then your back to 6 plus years of profitable offspring. And many years if your keeping heifers.Now if your producing semen for that bull that would be another story.  You could make your money back on selling 4500 straws at 90K but thats not counting the marketing your going to have to do on a bull to sell 4500 straws out of him. And these days when you have 10+ sons to choose from and 10+ brothers I dont think most people could sell 4500 straws. I think the days of 10 AI bulls that everyone uses is about over because there are so many bulls to choose from and everyone is trying new things all the time. I could see it if this bull was equivilant to a Traveler 004 that is his day everyone AId to. In this day I just dont see many bulls standing the test of time. Becasue 10-20 years ago almost everyone that AId all used the same bulls. Traveler 004, Cunia, 600U and so on. There was only about a list of 10-20 bulls out there that people used. Now those same bulls are still on the list but now the list has grown to thousands. Heck I cant even seem to lock down what bulls I even want to try every year because there are so many choices. I forget names of the bulls I want to use before I even get semen bought.

 

[sjc]

Commercial cattleman myself and I dont scrimp on herdsires. Dont pay $100,000 either but I dont mind spending $5000. The most I have ever spend was $7500 and I dont regret it either. There have been a few $5000 ones too that i wished i had passed on.

In my opinion if a purebred breeder cannot justify spending a good dollar on a herdsire, they arent much of a purebred breeder. If I can justify it, then how can someone who is supposely trying to improve the genetics in my herd not. AI is one way, but truthfully I am seeing less and less AI calves each year in these sales books and more out of a big dollar herdsire. Some purebred breeders are getting lazy in my opinion and not doing their part to better the industry. Many do not provide useful data like ultrasound info, performance info and all the other tests you can get now. With the new technology out there I am suprised by how few actually test for things or I have to tell them why I want the information. One guy told me the other day, well he has lots of hair and 43 cm testicles. I said thats nice but I asked you if the bull was ultrasounded. I for one am willing to pay more for the information and the data. Some arent. I think the purebred breeders think if they test them then it will sort out a few and the rest will not sell because they are inferior. Which may be true but I dont want to buy your inferior bulls either especially when their is technology out there that we could be using to make everyone more money.

 

[oakview]

Whenever I come across a discussion on the value of a herd sire, I am reminded of the old story "The Banker and the Bull."  This was commonly printed in sale catalogs and magazines in the 60's and 70's.  If I can find a copy I'll post it.  I'm also reminded of the first herd bull we bought.  SV Caesar 25th was purchased in the Iowa Royal as a two year old bull in 1965 for $325.  He was not the low seller by any means.  By the way, he was a son of Louada Caesar and grandson of Bapton Constructor.  Our bull would most likely fit right in with the popular 4 and 5 frame score bulls of today.  It was not uncommon for us to wean a 450 pound calf from this good ol' breeding.  The first two heifers I bought with my own money were daughters of Kair Red Gauntlet, an imported bull which added greatly to their value.  I paid $165 for one and $145 for the other.  Of course, the first car I bought cost $1,200, a two year old 1968 Chevelle.  Somebody else can do the math and tell me how many dollars this would be today.  I do know, however, my 1997 Ford F-250 4 X 4 regular cab had a sticker of about 28,000.  The 2001 F-250 4 X 4 extended cab had a sticker of about 38,000, and the 2006 F-350 4 X 4 crew cab had a sticker of about 48,000.  I looked at new pickups the other day, too, and decided I'd rather have a yacht. 

 

[justintime]

I can still remember my grandfather saying that  a rule of thumb for pricing commercial bulls was that a bull should be valued at what  7 weaned calves or 4 fat steers would sell for. That was a rule of thumb used by producers for many years  but it seems that this has been long forgotten. Using today's prices, if we priced our " average" commercial bullls using this old rule of thumb, we would be pricing them in the $4800 - $5000 range. I think they still use some formulas like this in Britain to determine values on prices for commercial bulls selling privately on farm.

I can also remember my grandfather saying that a purebred producer should be willing to pay at least 3 to 5 times what he sold his commercial bulls at, for his herd bulls. If this was used today, we would see most purebred breeders paying $10,000-$15000 ( or more) for their herd bulls. I was just a kid at the time, but I can still remember a group of some of the better purebred breeders of that day, discussing this topic at a summer show, and they were all in agreement that it was the purebred breeders duty to maintain a proper price structure of the bulls they produced and it was also their responsibility to search for and use the highest quality herd sires they could find. I understand that we live in different times and in a much different industry, but I sometimes wonder if we have almost seen a reversal of roles in the beef industry. I find that it is usually is the commercial producers who are more willing to pay more for herd bulls than most purebred breeders. In my own case, I have had to out bid commerical producers to buy two recent herd bulls, and I had to bid over $8000 on each of them to get it done. My comments are just general comments of some of what I have seen happening over the years.

 

[aj]

I think there are alot of different situations out there. I think the commercial guy will determine what he pays for a bull in a free market. It will be what the market bears.

 

[justintime]

It is going to be an interesting spring for bull sales here I think. There are a pile of bulls to sell, and I'm not sure if there are enough cows left for them all, but the first bulls sales have been crazy hot. There are three Simmental bulls sales this weekend  all of which are selling 80 - 120 bulls, and all within 100 miles of where I live. The first one was today, and it averaged over $7000... and I expect over 75% of them went to commercial producers.The next two have historically been excellent sales as well, so it is going to be interesting to see how they go.Last week another sale in Alberta sold 232 bulls and averaged $5600 with most of them selling to commercial producers.  Cattle producers have to be some of the most optimistic people on earth. Give them good market conditions for two months, and they will completely forget about the decade or more of terrible market conditions they have had.

 

[cowboybecoachin]

An old saying is, "A bull is half your herd". It is true, as he lends half the genetics for your calves.

It is sometimes hard to sell bulls for what they are really worth in our part of Texas, as so many bulls are available, and so many of our customers are small producers with 15-20 cows, and most know little about cattle, and would not know a good bull from a FAT bull. And when they were kids, a bull cost bout $1000, and they have a hard time seeing more expense. And some breeders are not in it for the money, and price their cattle (often inferior) very cheap. Recently,  bull sales and prices have picked up in response to the rising commercial market, we have been getting more for our bulls, and the demand is picking up.

If I have 30 cows, and pay $3,000 for my bull, and he lasts 5 years, and he weighs out $1500 (would be closer to $2000 today), then it cost me $10.00/cow over that time t breed my cows, plus whatever feed and pasture the bull consumes, and any vet/work/wormer/vacc./ etc.

That is pretty reasonable.IMO.

We "sell" price ($1750-2000) on short yearlings (12-15 mo.), growth (our senior herd sire is +59 for WW EPD), and phenotype.

 

[justintime]

I think the biggest problem in this industry right now, is simply the cash flow situation. Trucks, tractors and every other piece of high dollar equipment we all need can usually be financed and termed out over a few years. If there was a way to term out our herd bulls over say 4 or 5 years, I think we would see more and more producers willing to spend some extra money to get the bull they think will advance their herds.Some lenders will do this for their best customers, but I have heard many people comment that their banker simply tells them to sell some cows to pay for their bull purchases.  To me, this is totally a sign of a lender who has no agricultural knowledge. I have always been frustrated by this fact. Several years ago, I went truck shopping and I had a new truck loan on a $45,000 truck, approved by the bank in less than 10 minutes. A few weeks later, I purchased a bull at $11,000 and paid for it from my operating line at the bank, and the bank manager almost had a canary. I had to go in and try to justify to him that this was a good purchase. It was a great incentive to me to prove to him that I knew what I was doing, and I made sure he saw how much semen was sold and how many dollars went through my account from his offspring. He never really did learn much though as he still looks at herd bulls as being simply a cost rather than an investment. Probably the smartest thing I ever did was pay off my operating line at the bank and simply operate on my own income. I am certain this has made me become a much better marketer, and it has eliminated me having decisions that affect me adversely being made by people who have little or no knowledge of the beef industry.

I think we all tend to think of the purchase of a herd bull as being just an expense rather than an investment.  I found a very interesting article with by Jim McGrann of Texas A&M, in BEEF magazine on this topic about how much a herd bull is worth. It is most interesting in that he uses a spread sheet to determione the costs of bulls under different scenerios, and it is interesting that he compares bulls purchased at $3750 and at $5250.He states that in similar cow herds of 30 cows, the cost of using the bull at $5250 is only $9.00 more per cow serviced than the $3750 priced bull. He also states that a bull at $9000 can actually be more economical  than a $2000 bull if he can be spread over more cows in two breeding seasons each year. If you consider very moderate semen sales from a good bull, a price like this can be justified much more easily.

 

[Okotoks]

A good breeding bull is not expensive. A bad breeding bull is very expensive no matter the original purchase price. I bought a bull once that Cecil Staples didn't like all that much. He said if I didn't like the calves I should sell him right away as he would only get more expensive the longer I kept him. Fortunately even Cecil liked his calves. The bull cost $1000 in 1972 about $5750 in todays dollars.
It makes me wonder why more people don't buy the good proven bulls when so much guess work is removed.

 

[Aussie]

It is going to be an interesting spring for bull sales here I think. There are a pile of bulls to sell, and I'm not sure if there are enough cows left for them all, but the first bulls sales have been crazy hot. There are three Simmental bulls sales this weekend all of which are selling 80 - 120 bulls, and all within 100 miles of where I live. The first one was today, and it averaged over $7000... and I expect over 75% of them went to commercial producers.The next two have historically been excellent sales as well, so it is going to be interesting to see how they go.Last week another sale in Alberta sold 232 bulls and averaged $5600 with most of them selling to commercial producers.  Cattle producers have to be some of the most optimistic people on earth. Give them good market conditions for two months, and they will completely forget about the decade or more of terrible market conditions they have had.

I have been giving this alot of thought and also waiting for the first bull sales of the season. JIT just on hijacking my thread I do not mind anyone taking my threads in different directions if talking cattle. That's why I come here for discussion and different points of view and ideas. Most of our bull sales are in the Autumn which is not very customer friendly seeing most commercial guys calve in the spring. Bulls sales in Victoria this week at some of the "big name" studs were an average on Angus of $6000 to $7000 with numbers of bulls between 50 and 150 bulls with pretty much a total clearance. Hereford bulls around $5000. Most bull sales improved $1000 to $1500. Locally only three Angus sales at this stage averaging $4200 up $1000. Most bull sales were up 20% which is a direct correlation to the store and fat market being up the same amount. Australia is going in to a herd building faze with a magnificent season after many years of drought. Most bigger female stores that are sold at the moment are being joined. I would have to say the 7 weaned 4 fat cattle is true although I do get frustrated with people that still want to buy bulls for $1000 to $1500. Had a guy that only wanted to spend this much or lease bulls and could not take anyone to take him on so he did a deal with the local packer to get bulls off them (cull bulls)for the breeding season. He has 300 cows. All was well until Pesti Virus went through the herd last year and his preg test came up 60%. Now that is justice.