Editor's note: This article by Fred Knop was written in consultation with Harlan Hughes, professor emeritus at North Dakota State University.
Why make such a war at all? Time settles all things, and it will in the end tell us what will best shorten the Texas horn; what breed will thrive best and make the greatest improvement generally.”
This statement, which was made in 1882 by Illinois Shorthorn breeder J. H. Pickerell*, refers to a war being waged at that time by Hereford breeders to conquer the dominance of the Shorthorn breed in the show rings and breeding pastures of the USA.
Mr. Pickerell’s prediction at that time would determine supremacy proved to be true for the next 70 years. But the period served only as one of transition while the selection of breeding cattle changed from sight to science.
Selection of cattle by sight alone is now virtually a thing of the past for serious, beef-oriented breeders. Breeds still battle other breeds for preference, but the battlefield is performance, not perception.
Selection by science
Science has greatly increased the accuracy and efficiency of selecting breeding cattle. It will be recalled that little drove the value system more in Mr. Pickerell’s window of time than an animal being related to a grand champion at a major show. Such animals brought premium prices, and those prices themselves greatly influenced prices for progeny in future generations.
The scientific selection process achieved a toehold through the performance breeding movement that began in the USA in the 1950s. Cattle were first compared for gain and efficiency in on-farm tests and in bull test stations. Soon, the movement adopted a rear-view system of animal indexes, then a forward-view system of expected progeny differences and now a DNA-based system of direct genetic insight. Change occurred also in the value system with prices paid for breeding stock being based increasingly on EPDs.
Recently, the performance movement has stepped into the arena of direct economic comparison (dollar-value indexes). These indexes, which may soon appear on the pedigrees of all breeds, will combine numerous trait EPDs into numbers that express their worth.
An example of this indexing is seen in a Terminal Sire Profitability Index developed by the American-International Charolais Association. This index utilizes producer-supplied management information and EPD information. The AICA directs members to interpret the indices much like single-trait EPDs. If sire A’s index is $110.50 and sire B’s index is $115, sire B’s offspring would be expected to average $4.50 more net return than sire A’s offspring.
But, while dollar-value indices facilitate the comparison of one bull with others, the question remaining for commercial producers is how much can I afford to pay for a bull and how can this amount be calculated?
Calculating bull value
Just as Mr. Pickerell emphasized time as a factor in the evaluation of cattle breeds, time must be considered in determining how much to pay for a breeding bull. Generally, EPD comparisons are based on single points in time. But EPDs and dollar-value indices change over time as performance data are added to the sire-evaluation database. For this reason, price determination requires a forward-looking method.
Producers are on their own in calculating how much can be paid for breeding bulls. Breed associations have not yet (and may not) become involved in this matter. Neither have programs been developed commercially. A spreadsheet developed by Drovers for this purpose is not yet in a form suitable for distribution. But producers adept in the use of computer spreadsheets can produce very useful results.
The study that resulted in Table 1 and Table 2 above was developed in consultation with economist Harlan Hughes, professor emeritus at North Dakota State University and operator of Western Edge Consulting of Laramie, Wyo.
Doing the analysis starts with the number of steers and heifers weaned per one breeding group (one bull and cows), multiplied by weaning weights and weaning-time prices. Values earned on pricing grids are then added to these totals. These factors plus the effects of the sire EPDs for weaning weight must be calculated for each year of breeding life for bulls in service. It is also very important to establish prices for both steers and heifers for each year.
These steps will show the value of progeny over each year of the analysis. But these values must be reduced through a depreciation charge for the bulls and an opportunity charge for the money invested. The bull depreciation charge is the difference between the salvage values of the two bulls being compared for the last year of use (adjust salvage price per annual expectations). The opportunity charge can be based on any available interest rate.
Time becomes an important factor again in these calculations. Many ranchers sell bulls after three or four years of use in order to rapidly upgrade their genetics and help assure physical soundness. Other ranchers use a longer interval because each year of additional use can add significantly to progeny total value. Dealing with time in this situation involves factors that vary from ranch to ranch, including the urgency with which genetics requires upgrading.
Table 1 and Table 2 include data from a Drovers analysis reported in this author’s October and November 2004 columns (“Buy all the bull you can…”). The analysis assumed that calf weaning weights would increase from those of the base bull (AVG+15) in the amount of the EPDs for weaning weight of bulls with higher genetic potential. For example, steers out of the AVG+30 bull would wean 15 pounds heavier than those of the EPD+15 bull. In each case, the progeny total value difference was derived by subtracting the value of the base bull’s progeny from those produced by bulls with higher EPDs.
Based on these criteria, Table 1, which evaluates bulls with a service life of four years, shows that while all three alternative bulls produced positive net relative gains, only the AVG+30 bull produced an acceptable return on investment. Table 2, which evaluates bulls with a seven-year service life, shows all alternative bulls produced acceptable results.
But, it must be known that this analysis does not fit all producers and all situations. For example, the
average weaning weight used for steers was 475 pounds. A higher weaning weight, which would be common for many ranches, would produce significantly more total progeny value without increasing bull depreciation and time-value discounts on investment dollars. And this is just one of many variables that could affect results both positively and negatively.
Mr. Pickerell would undoubtedly depart from his “time will tell” philosophy if he were alive today. He would probably think kindly about an industry that
selects breeding stock through science instead of sight and in which paying up for bulls of high potential can be a rewarding strategy.
* From The Hereford in America by Donald R. Ornduff, Page 70.