You know it. Calf prices are good. Cowmen are losing perspective. More cows are being retained. More heifers are being bred. And the cattle cycle is headed for a downturn. Is there a defense against this?
Yes. Buy all the bull you can —now, this winter, next spring. Buy bulls with high EPDs — bulls with balanced EPDs that are much better on weight — 20 pounds, 30 pounds, 40 pounds better. Buy bulls that are better on carcass — much better.
Easy to say. But would this be a profitable strategy? It should be. There will be more pounds per calf, better carcasses and no increase in cost except for bull cost. To test this idea, I made several assumptions and entered the numbers in a spreadsheet.
I first assumed a well-managed, spring-calving cow-calf operation using moderately sized cows and bulls, which marketed weaned calves in September. The bull-to-cow ratio was 1:30 and the weaned-calf percentage was 90 percent (27 calves per 30 cows). My second assumption was that foreign markets for beef will reopen and that we will have a relatively stable market for three more years (2005-2007). After that, prices will drop on the same schedule as in the downleg of the last cattle cycle (1992-1996).
My third assumption was that grid pricing at harvest will make values in this cycle’s down-leg different from the last cycle, which was before the value-based system became significant. My fourth assumption was that all weaned calves carry a harvest value, either for their producer or a future owner. I used carcass premiums and discounts from a Tyson grid with which I have personal experience.
I assumed an operation using EPD+15 herd bulls for weaning weight (across-breed EPD) and a progeny carcass record of 40 percent for Yield Grade 2 and 40 percent for Select quality grade (none in other yield or quality categories). Then, beginning with the 2005 breeding season, I compared the progeny of such bulls with the progeny of bulls whose across-breed EPDs were 30, 40 and 50 for weaning weight. And, I assumed the following carcass values for their progeny: 4 percent Yield Grade 1, 7 percent Yield Grade 4, 7 percent Prime, 20 percent branded-product-eligible and 15 percent Select. Value additions earned on the grid were added to weaning values.
The accompanying table shows that the progeny of the EPD+50 bull returned $6,510 more than the pro-geny of the EPD+15 bull over a seven-year breeding period. Considering a salvage value of $889 against a purchase price of $4,500, there was a net return of $2,899.
So, is it necessary to spend $4,500 to improve profits? Maybe yes, maybe no. Bulls that are EPD+50 for weaning sell for various prices depending on breeding and breeder prominence (especially on snowy days). And, it isn’t necessary to buy at the EPD+50 level to improve profits. I analyzed EPD+30 and EPD+40 scenarios with bulls priced at $2,500 and $3,500, respectively, and found seven-year gains of $3,748 and $5,198.
Now, I don’t claim omniscience in any matter, especially genetics. There is no way, except through omniscience, that this analysis could be totally correct. The rule that an EPD+50 bull will add 35 pounds to the average weight of progeny of an EPD+15 bull doesn’t always work out in nature. Your personal parameters for weaning weights, weaned calf percentage and a multitude of other factors may change my results. However, I hope that I have stimulated your thinking to the point that at some seedstock sale this winter, you may be less reluctant to put your hand in the air and buy all the bull you can.
There is no better time to prepare for the next cattle cycle’s lean days than now, now, now.
To contact Fred Knop, write Drovers or send e-mail to firstname.lastname@example.org