The Economics of

Bull Investments
A ranch management economist has developed a spreadsheet to
help ranchers consider paying more for a better bull.
by Sara Gugelmeyer
Bull Investment - Annual Bull and Per Cow Cost Calculator

B
Buying quality genetics is investing for the future and it’s a low cost input. uying a bull is as important
Figure 1: $4,000 bull investment per cow cost calculator
Annual
a decision to a cow-calf
Annual Annual Service Cost producer as buying a
Bull Cost Cows per Cow per Cwt Percent of
Operating Cost Item Year Service Cost Weaned Total Cost tractor for a farmer. It’s impossible
Grazing and Supplemental Feed
Veterinary Medicine
$600
$45
$24.00
$1.80
$5.13
$0.39
to plant a crop without a tractor,
Other Cost $0 $0.00 $0.00 much as it’s impossible to raise a
Annual Interest on 1/2 of Operating Cost $16 $0.65 $0.14
Annual Operating Cost $661 $26.45 $5.66 45% calf without a sire. Similarly, bull
buyers should keep in perspective
Ownership Cost
Depreciation $595 $23.80 $5.09 that a bull is a long-term
Average Annual Interest Cost* $141 $5.62 $1.20
Death Loss (% of Purchase Cost) 2.0 $80 $3.20 $0.68 investment, which greatly affects
Annual Ownership Cost $816 $32.62 $6.98 55% the productivity of an operation.
Exposed/Yr.
Breeding Seasons Per Year 1 Cows Exposed/Bull 25 25 % of Calf Val. However, relatively speaking, a bull
Total & Cost per Cow Exposed - Cwt. Weaned $1,477 $59.07 $12.63 5.97%
Total Cost per Calf Weaned $69.49 85 Calves During Life of Bull
represents a small percentage of a
rancher’s input costs.
Purchase Cost of Bull $4,000
Useful Life - Years 4 Texas A&M University Emeritus
Bull Salvage Value
Wt. Lb./Hd.
1,800 $90.00
$/Head
$1,620
Ranch Management Economist
Interest rate Used 5.0 % Jim McGrann has developed an
Average investment is cost plus salvage value divided by 2 or $2,810
--------------------------------------- easy-to-use Excel spreadsheet
Weaned Calf Crop - Based of Exposed Females
Average Weaning Weight
85.0
550
%
Lb.
Weaned Calf Price
$180.00 $/Cwt. Head of
to help cattlemen keep bull
Weaned Calf/Exposed Female 468 Lb. $990.00 $/Head Calves/Bull purchases in perspective. He
Calves per Bull Investment 4.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------- has set up the spreadsheet to
Annual Bull Cost for Different Bull Purchase Cost consider the following factors:
Annual
Service Breeding “Purchasing herd bulls is an
Annual
Bull Service
Cost per
Cwt
Change in
Cow
Pounds of
Weaned Calf
Cow Total
Production
investment that is expected to
Cost per Cow Weaned* Service Cost per Cow* Cost pay out over three to five years,”
$/Cow $/Cwt. $/Cow Lb. $/Cow
Table Price Increment $200 Bull Per Hd. $600
McGrann says. “The ownership
Price of Weaned Calf $180.00 Per Cwt Bull as % costs (depreciation, death loss and
Bull Purchase Cost $3,400 $51.99 $11.12 -$7.08 -3.9
of Total Cost
8.7%
interest cost) are an annual cost
$3,600 $54.35 $11.62 -$4.72 -2.6 9.1% spread over females serviced and
$3,800 $56.71 $12.13 -$2.36 -1.3 9.5%
Base Purchase cost $4,000 $59.07 $12.63 9.8% calves produced during the bull’s
$4,200
$4,400
$61.43
$63.79
$13.14
$13.64
$2.36
$4.72
1.3
2.6
10.2%
10.6%
productive life. Depreciation is
$4,600 $66.15 $14.15 $7.08 3.9 11.0% the purchased cost minus salvage
*Change in pounds weaned per exposed female or percent weaned times average weaning weight.
value. Salvage value or cull bull
Comments: Bulls used for spring calving herd net sales value is a substantial
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sensitivity Analysis to Number of Cows Serviced portion of bull initial purchase
Table - Number of Cows Serviced Increment 5 Head Annually cost reducing bull depreciation.”
Number of Cows Serviced Annually and Cost per Exposed Cow
Head Serviced Annually 15 20 25 30 35 For example, paying $4,000 for a
$/Head $/Cow
$3,400 $86.64 $64.98 $51.99 $43.32 $37.13
bull that will service 25 cows a year
$3,600 $90.58 $67.93 $54.35 $45.29 $38.82 for four years means that bull cost
$3,800 $94.51 $70.88 $56.71 $47.25 $40.50
Base Purchase cost $4,000 $98.44 $73.83 $59.07 $49.22 $42.19 is just $12.63 per hundredweight
$4,200 $102.38 $76.78 $61.43 $51.19 $43.88
$4,400 $106.31 $79.73 $63.79 $53.15 $45.56
(cwt.) or 6% of each calf’s value if
$4,600 $110.24 $82.68 $66.15 $55.12 $47.25 the 550 lb. calf is worth $180/cwt.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Author: Jim McGrann - Professor Emeritus, Texas A&M University, 11-1-2012.

Bull Investment Cost

78 / March 2013 Printed Hereford.org
Bull-Investment-Cost-Per-Cow-Perspective-11-1-2012.xlsx 2/13/13
 Bull Investment - Annual Bull and Per Cow Cost Calculator

at weaning. And that figure is based Buying quality genetics is investing for the future and it’s a low cost input.
Figure 2: $4,500 bull investment per cow cost calculator
on weaning an 85% calf crop from Annual
cows exposed (see Figure 1). Annual Annual Service Cost
Bull Cost Cows per Cow per Cwt Percent of
Let’s say you find a superior Operating Cost Item Year Service Cost Weaned Total Cost
Grazing and Supplemental Feed $600 $24.00 $4.91
bull and spend $4,500 and get a Veterinary Medicine $45 $1.80 $0.37
575 lb. calf. If all the other factors Other Cost $0 $0.00 $0.00
Annual Interest on 1/2 of Operating Cost $16 $0.65 $0.13
stay the same, you spent $500 extra Annual Operating Cost $661 $26.45 $5.41 41%
dollars to get $45 more per weaned Ownership Cost
calf and your bull cost per cwt. of Depreciation $720 $28.80 $5.89
Average Annual Interest Cost* $153 $6.12 $1.25
weaned calf is just $13.29 — less Death Loss (% of Purchase Cost) 2.0 $90 $3.60 $0.74
than a dollar more. This makes the Annual Ownership Cost $963 $38.52 $7.88
Exposed/Yr.
59%

bull cost 6.3% of the calf’s value Breeding Seasons Per Year 1 Cows Exposed/Bull 25 25 % of Calf Val.
Total & Cost per Cow Exposed - Cwt. Weaned $1,624 $64.97 $13.29 6.28%
(see Figure 2). Total Cost per Calf Weaned $76.43 85 Calves During Life of Bull
McGrann says, “The investment
Purchase Cost of Bull $4,500
in a higher priced bull that can Useful Life - Years 4
Wt. Lb./Hd. $/Head
contribute to improved production Bull Salvage Value 1,800 $90.00 $1,620
of more market acceptable calves Interest rate Used 5.0 %
Average investment is cost plus salvage value divided by 2 or $3,060
and better weaning weight for ---------------------------------------
Weaned Calf Crop - Based of Exposed Females 85.0 % Weaned Calf Price
the cow-calf producer is not that Average Weaning Weight 575 Lb. $180.00 $/Cwt. Head of
costly when numbers are put into Weaned Calf/Exposed Female 489 Lb. $1,035.00 $/Head Calves/Bull
Calves per Bull Investment 4.3
perspective for calves sired and as a -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
percent of the breeding cows total Annual Bull Cost for Different Bull Purchase Cost
Annual
annual cost. Service Breeding
“This decision aid helps put Annual
Bull Service
Cost per
Cwt
Change in
Cow
Pounds of
Weaned Calf
Cow Total
Production
the bull investment into proper Cost per Cow Weaned* Service Cost per Cow* Cost
$/Cow $/Cwt. $/Cow Lb. $/Cow
cost perspectives. Annual cost is Table Price Increment $200 Bull Per Hd. $600
calculated in terms of the number Price of Weaned Calf $180.00 Per Cwt Bull as %
of Total Cost
of cows serviced and what change Bull Purchase Cost $3,900 $57.89 $11.84 -$7.08 -3.9 9.6%
would be required in weaning $4,100 $60.25 $12.33 -$4.72 -2.6 10.0%
$4,300 $62.61 $12.81 -$2.36 -1.3 10.4%
weight to pay for the higher priced Base Purchase cost $4,500 $64.97 $13.29 10.8%
bull. Calculated cost per calf and $4,700
$4,900
$67.33
$69.69
$13.77
$14.26
$2.36
$4.72
1.3
2.6
11.2%
11.6%
per cwt. of calf weaned per cow $5,100 $72.05 $14.74 $7.08 3.9 12.0%
*Change in pounds weaned per exposed female or percent weaned times average weaning weight.
exposed are good indicators to
compare bull investments. This Comments: Bulls used for spring calving herd
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------
provides information on what the Sensitivity Analysis to Number of Cows Serviced
market would have to pay to justify Table - Number of Cows Serviced Increment 5 Head Annually
Number of Cows Serviced Annually and Cost per Exposed Cow
paying more for a herd bull that Head Serviced Annually 15 20 25 30 35
$/Head $/Cow
could produce a more market $3,900 $96.48 $72.36 $57.89 $48.24 $41.35
acceptable higher valued calf.” $4,100 $100.41 $75.31 $60.25 $50.20 $43.03
$4,300 $104.34 $78.26 $62.61 $52.17 $44.72
Another example would be if an Base Purchase cost $4,500 $108.28 $81.21 $64.97 $54.14 $46.40
$4,700 $112.21 $84.16 $67.33 $56.10 $48.09
extra $1,000 spent on an older or $4,900 $116.14 $87.11 $69.69 $58.07 $49.78
continued on page 80... $5,100 $120.08 $90.06 $72.05 $60.04 $51.46
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Author: Jim McGrann - Professor Emeritus, Texas A&M University, 11-1-2012.

Bull Investment C
Hereford.org March 2013 / 79 Prin
4,500 Bull Investment Cost Per Cow & Perspective 2-5-2013.xlsx 2/7
...The Economics of Bull Investments continued from page 79

more fertile or simply more structurally a $4,000 bull and a $5,000 bull, your
sound bull could increase the number first reaction is going to be: ‘What do I
of cows serviced to 30 head instead get for that extra $1,000’. By using the
of 25. Still using the same variables, spreadsheet, you can put it in proper
this better bull would perspective and see
increase the number of that if $1,000 more
calves produced over “This decision achieves what you want
four breeding seasons to achieve it’s not that
by 22 head. At $990 aid helps put the much more. You are
a calf, the increased bull investment going to spread that
cost is an investment $1,000 difference over
that would more than into proper cost four years and get some
pay for itself. You perspectives.” back in salvage value.”
could even take into He adds, “It might
consideration that the — Jim McGrann be a tough decision
bull’s salvage value may but you can certainly
be less because it is part put numbers into this
of the calculations. spreadsheet and evaluate it properly.”
“I think sometimes when people buy Yes, bull prices have gone up but so
bulls they go through the sale catalog have calf prices and land prices and
and pick out the bulls they want but feed prices and fuel prices. McGrann
don’t do this investment analysis,” stresses that you should keep it all in
McGrann says. “So they end up buying perspective and use this spreadsheet
bulls that are inferior to what they to help determine what you can spend
wanted because of a few hundred to get the bull that will really make a
dollars in price. By running this difference in your herd.
analysis before they go into the sale McGrann says, “I developed this to
they can see what would happen if you help producers not get bogged down in
end up paying more for the bull you thinking about the cost of the bull and
really want. In the end an extra $200 instead think of it as an investment.
dollars or so doesn’t mean that much And with the higher calf price now
in the long-term. Don’t go in there and and salvage value of bulls way up, it is
buy cheap bulls thinking that you’re a relatively small investment with the
going to be better off and that it’s a potential for great gain.” HW
good economic decision.”
McGrann stresses that he is an Editors Note: Use the spreadsheet at
economist and his spreadsheet is agrisk.tamu.edu/herd-bull-investment
meant to use as a decision-making and find out for yourself how bull cost
tool. “If somebody said to you, I’ve got affects your profitability.

80 / March 2013 Hereford.org