Investing Today for a 2020 Return? Read the Numbers!
It's Spring and the press is full of advice and advertisements for Financial Investments. The Agriculture Press is also full of advertisements for investments-Genetic Investments in the form of a bull! The same as with stocks or bonds, we need to carefully consider the right purchase of Genetic Investments for our business.
Before we pick the right investments, however, we do need to know the goals we are aiming for. In your herd are those goals the top selling set of steer calves, perhaps the most easy keeping cow herd going, or the top rail price for your finished steers?
In the banking world we pay close attention to the interest rate and length of time we tie up the investment for. In the cattle world that is length of use or influence from the bull, and the interest rate is indicated by his performance numbers, not his looks! Are we considering this a short, medium or long term investment? As length of term and interest rate increases so does the list of requirements and time invested in picking the "right" one. You need to read the numbers.
A short term bull might be one you buy to get the heifers/cows bred. This would be like just buying as RRSP to get the tax deduction. Any bull with the right equipment will do. However, if you intend to calve out those females or keep a market for bred heifers then the overriding criteria for this might be calving ease -the main goal being to get a live calf on the ground. A nod may go toward marketability of the calves, but this would be a secondary selection trait. You need to read the performance numbers.
A medium term might be the bull that you plan to keep for 2-3 years and market the calves at weaning. While getting a live calf is still very important, the criteria of market appeal and weaning weight probably move to the head of the list. If you are going to background or finish the calves, traits like feed efficiency, marbling and muscling/yield enter into your selection equation. You need to read the performance numbers.
The long term investor is one who plans on keeping replacements out of the bull and putting them back into the herd. This investment is the one that will be paying out or costing you money in 2020. After all, the bull bought this spring will have his first daughters on the ground in 2011. They will get bred in 2012 and drop their first calves in 2013. Add two more years of replacement heifers to this and in 2020 all the 7, 8, and 9 year old ladies in the herd are a result of this 2010 bull buy. These are the cows that we expect to do the heavy lifting as far as returns from the cow herd. So that creates quite a stiff criteria list for this bull to live up to. Not only does he need calving ease and marketability for his steer calves, he also needs to pass on ease of keeping and maternal traits to his daughters. Think of him as a Laddered GIC and Balanced Investment all in one. This will necessitate considering even more performance data, so you really need to read the numbers.
As the criteria list increases your time invested in research and the $ investment probably needs to increase as well. We need to read the numbers and do the math.
The bull purchase price is not a place to "go cheap" but rather weigh out the potential returns. If we look at a pretty normal Ontario herd with 40 cows bred over three years we have 120 calves. Rate those at 500 lbs (pretty conservative) then we will market 60,000lbs. If the bull even makes 2 cents a lb difference on the sale price of the calves that is $1200. Add in some extra weight on the calves (10-15 lbs/calf) and you will have the equivalent of another calf in weight. So even in a small herd an extra $500 to $1,000 well invested in the bull can pay dividends.
Figure 1. The bull has an ongoing impact on herd productivity
So how to make that bull buying decision? Start with research into what sells best in your market. Actually list the traits you want and then rank them. Its just like grocery shopping - impulse buying because something looks really good is easier to avoid if you have a list to work from. Then look at the numbers. EPD's from breed associations, and or bull test stations are your best guide. If you feel there are too many numbers on the page then highlight the numbers you really need or use one of the selection indexes that roll a number of traits together. Don't toss the numbers and just go on looks. We don't buy investments because the salesperson is attractive!
An additional piece of information to ask for is DNA testing. The DNA trait profile now includes: Residual feed intake (feed efficiency), Average daily gain, Tenderness, Marbling, Quality grade, Yield grade, Fat thickness, Ribeye area, Heifer pregnancy rate, Stayability (longevity), Calving ease, and Docility. This allows us "numbers "or ratings for many traits that are very difficult and time consuming to measure.
This simply adds to the information you have to make that investment decision. So get your selection criteria together, gather the performance numbers, read them, narrow the candidate list then look at the bulls and talk to the breeders. Then make your investment decisions. Remember it's not just a bull purchase but an investment in your 2020 marketing plan!
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|Author:||Nancy Noecker - Cow Calf Specialist/OMAFRA|
|Creation Date:||06 May 2010|
|Last Reviewed:||06 May 2010|