3 New Market Dynamics Created By Surging Bull Prices

It’s probably not surprising that, on the heels of recent record-setting prices in all classes of cattle, prices for bulls have been setting new records this bull-sale season as well. But despite the record prices, there seems to be a lot of sentiment among producers that this is the year to purchase bulls because bull prices the next 3-4 years – especially for calving-ease bulls – are going to climb ever higher as the industry expands.

These record prices have created at least three new dynamics:

• At first glance, it appears that there is a record spread between the top 15% of bulls and the average. This is probably true from a gross-dollar standpoint, but the actual value differences might be understated at today’s prices.

For example, take bulls that are identical for every EPD but calving ease and yearling weight. Let’s assume bull A has two additional live calves and boasts 30 lbs. of additional yearling weight. Let’s assume that bull A has a yearling price of $150/cwt., and that bull A sires 100 live calves vs. 98 for bull B and that they are 30 lbs. heavier at yearling stage. That equates to a tremendous difference in value (100 x 800 x $1.50 = $120,000, 98 x 770 x 1.50 =$113,190)!

Everything else being identical, bull A is worth nearly $7,000 more than bull B. In fact, one good cattleman made the comment to me recently that he figured it was almost impossible to pay too much for a good bull, while a below-average bull would cost him money – even if it was given to him.

• Because I make my living selling bulls, the second dynamic pains me a bit. At these higher price levels for bulls, artificial insemination (AI) is becoming a more economically viable option. Don’t get me wrong; I’ve always been a huge fan of AI. However, I would always argue that the value of AI is in consistency, in getting a higher percentage of cows bred in the first 21 days of calving season, uniformity, and the lack of risk associated with proven genetics.

It’s not difficult to find yearling bulls with EPD profiles that exceed most AI sires, and to go 100% AI generally isn’t feasible. However, the economics of AI vs. purchasing a bull have improved significantly at the current price levels for bulls.

The website IowaBeefCenter.org is a great resource with which to make some of these comparisons. Labor and time have always been a concern for producers looking at AI; however, if you have adequate numbers, turnkey solutions are available. Still, AI will likely play an increasing role as we move into expansion and begin to retain heifers at an aggressive rate.

• A third interesting trend is one probably derived from the changing marketplace of higher out-weights and improving margins for additional pounds at all segments. But in addition to the premium being paid for calving ease, there appears to be a noticeable push for more power and growth in bull selection by producers. A good economist argued that the increase in carcass traits, etc., has more than kept pace with the increase in the value associated with growth, but weight is easiest to measure when the checks are written.

It does require a pretty sharp pencil and some thought when it comes to designing a genetic program. It used to be that as long as you avoided big mistakes, you were okay. Today, avoiding mistakes is still critical but little details can equate to big differences.

Article Shared from Beefmagazine.com