Excel spreadsheet that estimates the average annual breeding costs per calf
A Quick Shot for Thought: Take Aim at Controlling Breeding Costs
University of Nebraska Extension, Farm Management and Marketing Group
With the recent 2014/2015 cattle markets at record highs cow-calf producers may find themselves competing for production inputs at a higher level, meaning that prices are likely to escalate. One such input is likely to be the costs of breeding animals such as herd bulls. Given this situation the question that may naturally follow might be something like "What is a breeding bull worth?" or more appropriately "How much per calf is my breeding costs?" and "How much can I afford to pay?"
This brief thought paper discusses this issue and will hopefully provide some insights into some of the things that should be considered when looking at decisions related to factors that affect breeding costs.
Ideally when considering costs, the resulting effects on revenue should be considered. Since the removal or addition of a cost is usually associated with some gain or loss in productivity. In the case of added expenses the increases in revenue needs to be at least as much and hopefully more than the costs, in the opposite case, the removal of expenses/revenue would ideally remain unchanged or at least equal in magnitude. Otherwise why incur or remove these costs?
This work does not identify or consider any changes in revenue, which should be considered in the real world by those in business making choices about costs. This paper discusses the effect of four factors; 1) Bull prices, 2) Calving rate, 3) Cow to bull ratio and 4) Cull bull price. Each is taken separately and analyzed while holding all other variables in the "Cow/Heifer Breeding Cost Cow-Q-Lator" constant. This decision tool was developed at the University of Nebraska West Central Research and Extension Center located in North Platte Nebraska. A list of the relevant factors used in this electronic decision tool found at www.agmanagerstools.com under livestock decision tools, is listed in the table below. These factors are given values not intended to reflect a particular individual producer's actual costs or situation but to be representative of producers' costs in general. These values are fixed over the life of any particular bull and don't consider possible future changes. Please note that it is assumed that all bulls on average breed the exact number of specified cows.
The outcome of using these representative or base values results in estimated average breeding costs of $110.26 per weaned calf, where the average calving rate (percent cows weaning a calf after being exposed to a bull) is 87%, with cull bulls averaging 2,000 pounds, lasting 4 years, with a mortality rate of 2%, an expected 6% interest rate, a ratio of 25 cows per bull, an average purchase value of $6,000.00, a cull value of $120.00 per cwt, and an annual depreciation and costs of maintenance of $2,218.38.Bull Price Analysis
For the purposes of this analysis, bulls were purchased within the range of $2,000.00 to $10,000.00. All other base scenario information was left unchanged, it was found that for every one dollar bull value about $0.014 (just less than one and half cents) of breeding cost (defined here as cost per weaned calf) were incurred. For example a bull purchased for $7,000.00 on average increased the costs of producing a calf by $14.12, versus using a bull purchased for $6,000.00. In the case of the base scenario breeding cost went from an estimated $102.05 to $116.17 per weaned calf. If one were simply maximizing profits, given the choice between the two bulls, the calves from the $7,000.00 bull must on an average return of at least an additional $14.12 per weaned calf (this assumes the bull would exactly meet his quota of calves), any amount less than this and the bull buyer would have been better to have purchased the $6,000.00 bull. Please recognize nothing is being said about overall profitability; only that given the choice among bulls the bull that returns the most value above the added costs relative to all others would be the best purchase among bulls compared. When this idea is applied to the comparison of two bulls it goes something like, bull A is more expensive than bull B and if bull A contributes at least as much if not more than the added cost of his purchase he would be a superior buy to bull B. On the other hand if bull A adds less than the added value of his purchase, bull B is a better buy. This method seems simple but determining what value is gained from a particular bull can be quite complex. For example are his heifer calves more valuable as replacements, does his genetics add to longevity and the list goes on. It is left to the purchaser to consider the revenue effects and make an accurate comparison. The difficult task is being objective and honest about individual bulls despite superficial differences among bulls.
Calving Rate Changes
For clarity, calving rate is defined as the percent of cows weaning calves exposed to a bull during the breeding season. The base scenario calving rate averaged 87%, (the 94% pregnancy rate times the 94% weaning rate). For each 1% increase in calving rate breeding cost diminished by approximately $1.20 for each weaned calf, with the opposite being true in the case of a calving rate decrease. This amount seems almost insignificant. But please remember that breeding costs are only a portion of the costs, which include all the costs associated with keeping a cow that does not have a calf to sell, such costs include feed and veterinarian expenses etc.. In addition to these incurred costs there is also a loss of revenue. For example, a 1% change in calving rate for 100 cows amounts to an addition or subtraction of a single calf. If this added animal is sold at weaning, weighs 500 pounds and has a sale value of $285/cwt it would be a loss of revenue amounting to $1,425.00. These facts point to need to focus on management factors that may have the greatest impact to profits.
In the representative base model it was expected that typically 25 cows per bull are maintained. It is expected that an increase of the number of cows per bull, all other factors held constant, would decrease breeding costs per weaned calf. It is not the intention or the topic of discussion here to indicate what the appropriate number of cows per bull is optimal. Cows per bull were varied from 15 to 35 per bull. If it is assumed that revenue per cow remains constant over the varying range of cows/bull in this work. This implies no changes in pregnancy rate, calf age and growth, etc. For each additional cow serviced by each sire, costs per calf weaned are reduced by approximately $4.68 per head, conversely a reduction in the ratio of cows per bull increased costs by the same amount. For a group of 100 weaned calves, this amounts to $468.40 average costs savings or added costs. If a producer could increase the number of cows bred by 5 cows per bull this would amount to about $23.42 in reduced breeding costs per weaned calf and $2,342.00 for each 100 weaned calves. The question that producers need answered before making any changes in the cows to bull ratio, "Are there any downside events that come with making this move?"; i. e. are pregnancy/weaning rates going to be any different, are weaning age/weights going to be negatively affected. More specifically does the savings of using less bull power outweigh the possible negative outcomes associated with revenue or incurring future costs, i. e. smaller and/or fewer calves, higher cow cull rates due to later calving etc.
Bull Salvage Value
Weaned calf breeding costs are inversely tied to cull bull values by an estimated 22 cents for every $1.00 change in hundred weight (cwt) prices. A positive $10.00/cwt in the value of cull animals reduces breeding cost on average by approximately $2.21 per weaned calf. For every 100 weaned calves this amounts to $221.00. Given the assumption made here for a bull 4 years of breeding service of 25 cows per year this amounts to $192.27. Therefore a bull worth $6,000 would approximately increase to $6,192.27 with the $10.00/cwt cull value increase. This does not include the added value or expenses of calves he would produce, given the calf market would likely escalate as well.
These four factors are not the only variables to consider when endeavoring to reduce or control breeding costs. Case in point would be a producer who is able to defer part of their bull costs by having a neighbor use them on cows that calve during a different season. The take home point to remember is that, the more that is paid for a bull the more the value received from his use must offset that expense, whether that be from increasing cattle values or increased performance and productivity. Increasing calving rate may have a larger impact on overall profitability then simply breeding costs. The cows to bull ratio is an important variable to consider and that it has the potential to reduce costs, but must be done judiciously since if it is abused may result in a "wreck" reducing revenues and profits. Lastly bull salvage value helps mitigate bull costs. The higher the value of the bull at salvage the lower the breeding cost will be, but this value is small and care should be used in escalating prices paid for bull simply on their cull value. All of these points make considering new or different ways of marketing, purchasing and rotating breeding bulls worthwhile. For every decision there is a consequence. Those that are able to best understand the consequences of their management choices are better able to make choices that lead then to the outcomes they desire.
General, Replacement, and Breeding Inputs
|Expected Interest Rate||6.0%||Annually|
|How many cows in the herd?||100||Cows|
|What is the cow to bull ratio?||25||Cows/bull|
|Expected marketing cost to market cull bulls||50||Head|
|Number of bulls needed||4||Bulls|
|Number of bulls culled (per year)||2||Cull bulls|
|Average bull costs (including delivery)||6,000||Dollars/head|
|Expected bull life||4||Years|
|How much does the average cull bull weigh when you sell him?||2,000||Pounds|
|Expected prices for cull bulls||$120||Dollars/cwt|
|Cull bull value per head||$1,550||Expcted value|
|What is the total spend on artificial insemination each year for all females?||0||Dollars/year|
|Average AUM (average of sum of (80% cull weight and cull weight) divided by 1000)||1.8|
|Feed Costs (per bull)||Amount||Price||Total|
|Growing season grazing||6 months||80.96/months||$486.00|
|Dormant season grazing||0 months||0/month||-|
|Crop reside (i.e. corn stalks)||60 days||.75/day||$45.15|
|Irrigated pasture||0 months||0/month||-|
|Hay (grass hay)||.5 ton||80/ton||$40.00|
|Dried distillers grain||0 pounds||0/ton||-|
|Salt and mineral||60 lbs||.06/lb||$3.63|
|Total Annual Feed Costs (per bull)||$577.58|
|Other Cash Costs (per bull)|
|Veterinary and medicine||$200|
|Bull-only cash costs on buildings and equipment||$5.00|
|Interest on purchased feed and costs .5 year||$27.68|
|Total Other Cash Costs (per bull)||$252.68|
|Total Labor Cost (per bull)||8 hours||15/hour||$120|
|Total Operating Cost (per bull)||$950.26|
|Ownership Costs (per bull)|
|Bull death loss||$77.39|
|Interest on bulls||$226.52|
|Total Ownership Costs (per bull)||$1421.40|
|Management Costs (per bull)||$25.00|
Breeding Cost Per Weaned Calf
|Expected pregnancy rate for all cows/heifers in the herd||93%|
|Expected weaning rate for pregnancy cows||94%|
|Total average costs per cow for cows in the herd bred by bulls||$95.87|
|Calculated calving rate||87%|
|Total Breeding Costs for Each Weaned Calf||$110.26|