To determine the equation for bull prices

BULL prices continue to dominate the discussion among cattle producers as records for beef breeds continue to fall this month.

Although the main focus is on the low price of the bulls and the records being set, there is an increasing number of producers considering breeding their own bulls for potential use or future sale.

It is perhaps understandable that producers feel that there is a reasonable profit in breeding bulls. This is a sentiment that is often reinforced by increases in sales averages and reported new sales records.

However, the net profit for many bulls is not always as high as some people assume. Before any decision to start breeding bulls, considering the break-even price should be the first step.

There may be some unrealistic prices as producers begin to evaluate the possibility of breeding bulls.

The most common mistake is to underestimate the cost of producing a bull. Many producers believe that the break-even price is equal to the bull’s cull or salvage value. While salvage value is a key component in determining bull purchase costs – essentially using that salvage value to offset some of the purchase cost – it’s a bit different with breeding bulls.

In the first case, there is mainly an opportunity cost associated with taking a male calf up to two years of age to sell as a bull. In the most basic evaluations, a two-year-old bull replaced the opportunity to sell a stallion or two at younger and lighter weights. This opportunity cost should be used as a basis for determining the break-even price.

Speaking to several well-known bull breeders this week (both asked not to be identified), a common starting point for ending damage was the cost of two 450kg steers. Using the sales value of steers of this weight for 2022, the average value of steers weighing 450 kg was $2,689. That would translate to a starting break-even price of around $5,378 for most bull producers.

However, there are additional costs associated with producing bulls that contribute to the increase in their net price. In addition to additional health and husbandry costs, there are specific costs related to feed costs and registrations, data collection and sales costs.

Feed costs are an interesting and often overlooked expense. The decision to keep male calves and sell them as bulls will change the feed requirement of the property. Aside from the opportunity cost of losing sales like steers, the producer will now have to run the animals on the farm for a longer period of time.

This period generally results in either adjusting stock numbers to accommodate grazing areas or initiating a supplemental feeding program to address any forage gaps. This is in stark contrast to the concept of supplemental feeding that may be associated with bulls growing to sell weights, which is a cost to consider.

Costs associated with transporting bulls for sale are difficult to determine.

However, as a general guide, the Producer Demonstration Site project in Western Australia by Dr Enoch Bergman offers a starting point. PDS suggested that one bull should move 1.5 cow/calf unit. Worked on the project to place the cost:

1.5 cow/calf unit x 82pc weaning (trial average) x

$4.00/kg (current price for weaned calves) x

300 kg (conservative weaning weight for the region)

This estimate, used as part of the PDS, established an annual cost of $1,476 for bulls. As a formula, this can be used by manufacturers as part of the process to determine their break-even price.

Interviews with breeders were conducted to interpret their break-even prices, indicating that these two factors contribute significantly to the final price.

However, additional costs, ranging from health care, administration, registration, data collection, and sales costs, average $6,500 to $7,000.

One comment from a breeder based in Queensland was that “perhaps it’s less risky to sell a steer at 450kg because even at this year’s averages – it’s by no means guaranteed.”

Perhaps the main message to take away from the discussion on the merits of starting a bull breeding program as a method of reducing livestock costs is to do some realistic budgeting before starting.

A short price exists and for lower sales averages – even in this record year, the potential margin recorded may not justify the additional effort required to successfully achieve the intended program results.

Alastair Rayner is director of RaynerAg, a NSW-based agricultural consultancy. RaynerAg is affiliated with BJA Stock & Station Agents. He regularly lists and sells cattle for clients and also attends bull sales to support client purchases. Alastair provides pre-sale selections and classifications for seed producers in NSW, Qld and Victoria. He can be contacted here or via www.raynerag.com.au

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