Value Proposition of Bulls

Mark Z. Johnson, Oklahoma State University Extension Beef Cattle Breeding Specialist

 

Definition of Value Proposition – a statement that defines how a product or service can meet a customers needs and help them achieve their goals.

 

Each bull you consider for purchase in a cow-calf operation needs to be evaluated relative to the benefits offered to your operation’s bottomline. For example:

 

You are an Oklahoma cow-calf producer who needs two more Angus bulls this spring and has narrowed the selection list down to the following five bulls which you have available to purchase private treaty:

 

ID

CED

BW

WW

YW

CEM 

HP

MW

Marb

$B

Price

1

12

0.2

70

120 

9 

13

76

0.35

154

$10,000

2

4

2.9

82

141 

12 

6

96

0.79

180

$8,000

3

15

0.1

78

145 

14 

17

86

1.80

215

$12,500

4

5

3.5

91

157 

8 

5

99

0.71

185

$7,500

5

11

0.7

63

108 

8 

10

65

1.90

189

$5,500

 

The bulls are all spring yearlings and will be approximately 15 months of age at turnout and accordingly should be expected to cover 15 cows this year. All the bulls have passed a Breeding Soundness Exam and sell with a registration paper and a Breeding Soundness Warranty. So the buying decision boils down to identifying the right bulls for this operation. The right bulls to buy are the ones most capable of adding value to the calf crop sired relative to their purchase price. In order to do so the bulls need to:

  • Complement the females to which they will be mated
  • Offer genetic values of economic relevance to the marketing endpoint of the calves they will sire.

 

Your operation intends to use the bulls as terminal sires on spring calving cows, four to six years of age. After weaning, the calves will run on cool season grass until marketed as yearlings. In this operation the trait of primary economic importance is Yearling Weight (YW).

 

What bulls would you buy and why?

 

In order to calculate the profit potential of each bull, we will assume each bull will sire 125 calves over their lifetime of service, each will have the same salvage value and the value of a pound of YW sired will be $2.50.

 

Using the least expensive bull as our starting point:

 

Bull 5 serves as the baseline for least YW sired with a 108 YW EPD at expense of $5,500

 

Bull 1 is expected to sire 12 pounds more YW per calf, this multiplied by 125 calves results in an additional 1,500 pounds. 1,500 pounds of YW at a value of $2.50 equals $3,750. The purchase price of bull 1 is $4,500 more than bull 5.  $3750 - $4,500 = $ -750.  So, Bull 1 is a worse choice than bull 5 by $750.

 

Bull 2 is expected to sire 33 pounds more YW per calf, this multiplied by 125 calves results in an additional 4,125 pounds. 4,125 pounds of YW at a value of $2.50 equals $10,312.50. The purchase price of bull 2 is $2,500 more than bull 5. $10,312.50 - $2,500 = $7,812.50. So, Bull 2 is a superior choice than bull 5 by $7812.50.

 

Bull 3 is expected to sire 37 pounds more YW per calf, this multiplied by 125 calves results in an additional 4,625 pounds. 4,625 pounds of YW at a value of $2.50 equals $11,562.50. The purchase price of bull 3 is $7,000 more than bull 5. $11,562.50 - $7,000 = $4,562.5. So, Bull 3 generates $4562.50 more relative to his purchase price than bull 5.

 

Bull 4 is expected to sire 49 pounds more YW per calf, this multiplied by 125 calves results in an additional 6,125 pounds. 6,125 pounds of YW at a value of $2.50 equals $15,312.50. The purchase price of bull 2 is $2,000 more than bull 5. $15,312.50 - $2,000 = $13,312.50. So, Bull 4 is a vastly superior choice than bull 5 by $13,312.50.

 

Another way of looking at the “Value Proposition” of each bull. Over their lifetime of service:

 

Bull 5 will sire 125 calves at a cost of $5,500. Using Bull 5’s YW EPD of 108 as the baseline for YW:

 

Bull 4 will sire 125 calves while paying this cow-calf operation $7,812.50 for the opportunity. Value added of $15,312 minus purchase price of $7,500

 

Bull  2 will sire 125 calves while paying this cow-calf operation $2,312.50 for the opportunity. Value added of $10,312.50 minus purchase price of $8,000

 

Bull 3 will sire 125 calves at a cost of $937.50

Value added of $11,562.50 minus purchase price of $12,500 

 

Bull 1 will sire 125 calves at a cost of $6,250

Value added of $3,750 minus purchase price of $10,000

 

 

Takeaways:

 

Initial cost of the bull is only one part of the profit equation. Value added to calves is equally important.

 

Identifying the trait (or traits) of primary economic importance is critical to determining the Value Proposition of each bull.

 

You need to have a budget. Your budget needs to be realistic.

 

When multiple traits have economic importance, determining the Value Proposition of a bull is more challenging. Will require looking at current levels of production in traits of importance in order to determine where to focus selection pressure.


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