by Dr. Jimmy T (Gunny) LaBaume
There are many purposes for budgets. One of the most valuable is to calculate how much one alternative will have to increase production in order to break-even with another alternative. For example, let’s make some assumptions and make them multiples of 10 so the numbers will be easy to work with. Plug in your own numbers and the model will work just as well for you.
Let’s say that we are considering buying a new bull. We can pay $10,000 for a top of the line registered bull, or we can pay $1,000 for a commercial grade bull. A bull’s average useful life is 10 years and there is a 3% chance that the bull will die before this. We plan to use a 1:25 bull: cow ratio. We expect an 85% calf crop and calves are worth $150/Cwt. Money is worth 10%.
Problem: What we want to know is how much more will the $10,000 bull’s calves have to weigh in order for him to be an equally profitable investment with the $1,000 bull. We only need to calculate the costs that will be different for the two bulls.
|Projected Annual Relevant Costs:|
|Depreciation (Value/10 yrs)||$ 1,000||$ 100|
|Insurance (risk of death loss) (Value X 3%)||$ 300||$ 30|
|Interest on Investment (Value X 10%)||$ 1,000||$ 100|
|Total Annual Relevant Costs||$ 2,300||$ 230|
|Additional Cost of Owning $10,000 bull||$2,070|
|Additional Weight Needed per Calf to Break-even:(25 Cows X 85% X W)Solve for W: W = $ 2,070/25 X .85 X 1.50= 65 lbs/calf more|
An additional 65 lbs is not likely. Also notice how this is influenced by the price of cattle. If we had used a price of $0.70/lb, the additional weight per calf needed to break-even would have been 139 lbs.
And on top of that single bull, what if we have more bulls than we need (and most ranchers do)?
The cost of a good commercial bull may not sound like a bad price on an individual bull basis. So again for the sake of simplicity, let’s use a $2,000 bull as an example (the same procedure will work for any priced bull).
Bulls age and depreciation is a cost. Let’s say, on average, the expected salvage value is $800. This means depreciation of $1,200 over the bull’s life. As with cows, three years is a respectable average useful life thus annual average depreciation is $400. Add interest costs of about $150, feed, vet medicine, pasturage, etc and total amounts to about $700 per bull per year.
So now, let’s conduct a theoretical exercise. Assume an 80% calf crop (90% conception and 90% weaning a calf). The table below shows what happens to bull cost/calf as the bull:cow ratio is increased from 10 cows/bull to 80 cows/bull.
Bull Cost per Cow Exposed and per Calf Weaned with Varying Cow: Bull Ratios
|Number of Cows/Bull||10||20||30||40||50||60||70||80|
|Bull Cost/Cow ($)||70||35||23||17||14||12||10||9|
|Bull Cost/Calf ($)||88||44||29||21||17||15||12||11|
Note that breeding the bull to the traditional 20 or 25 cows results in an exorbitant costs per calf weaned.
A fertility tested bull with good libido will breed 75 or more cows in 3 weeks. However, as the table shows, the economic advantages to more than 50 cows are not very great unless using bulls that cost more than $2,000.
Many ranchers are now using two fertility tested bulls per 100 cows. The capital saved in reducing the bull battery to one bull per 50 cows has often been enough to pay for the fencing needed for good grazing management.
For example in one case, the rancher’s policy was to run five bulls per 100 cows. However, when spare bulls and odd size cow herds were taken into account, the actual number of cows per bull was almost 16. The rancher had a total of over 90 bulls. When he reduced that to 30, he saved $120,000 in capital outlay and achieved a permanent reduction in recurrent annual bull costs.
Caution: This is as a part of a full package, not in isolation of the other factors in our overall management system.
In part IV we will talk about a way to improve conception and calves weaned per cow.
After: Parsons, Stanly D. Putting Profit into Ranching
Dr. Jimmy T (Gunny) LaBaume (send him mail) is President & CEO, Land & Livestock International, Inc. providing a complete line of management & consulting services to the range livestock industry.