| IN THIS ISSUE:
- What is a Bull Worth?
- New Decision Tool - Net Present Value of Replacement Females
- I'll have the Burger
- News from ICA, Iowa Beef Producer Surveys
- Announcements and Updates
What is a Bull Worth?
By Patrick Gunn, ISU Extension cow-calf specialist
I often get the question “How much should I pay for a bull?” My first answer is “Whatever the market will bear.” Admittedly, that answer really gives no insight into return on investment for the producer relative to traits of emphasis for their particular marketing goals. With the record prices currently being observed in all markets of the beef industry, it is no secret that this translates to increased prices of replacement breeding stock.
While to my knowledge, no calculator exists to determine the exact price a producer should spend on a bull, there are multiple factors that can be considered to establish a base price. Typical thumb rules that I have heard over the years for the value of an average purebred or composite bull include 2 times the value of a fed steer, 5 times the value of a feeder calf at weaning, or 25 times the cwt price of feeder calves. In the current market, using these thumb rules, we get an approximate range of $3975 to $4650, which is very representative of early sale reports from 2014.
While spending less does not insinuate you have purchased an inferior bull, it should be expected that an above average bull for traits such as calving ease, weaning weight, docility, staybility, marbling, etc., will likely garner a premium.
Assuming an average bull in today’s market will be utilized for 4 years and mated to 100 cows, the mating fee over the life of the bull will be $43 per cow. Regardless of base price, for every $500 more spent on a herd sire, it raises the service fee only $5 per cow over the life of the bull.
Given today’s feeder prices, for every $500 more spent on a herd sire, only 3 more pounds of weaning weight per calf would need to be obtained to offset the added investment on a sire improved growth EPDs. Similarly, only 0.5 more calves would need to be born to a sire with an improved calving ease (CE/CED/CEM) EPD profile. Given the fluctuations in grid premiums and discounts, return on investment needed for bulls with improved carcass traits is harder to pinpoint, and will be specific to your operation.
The initial investment of a bull in today’s market may seem staggering, but it is an investment that adds immediate value to the herd working forward.
Good luck, and happy bidding.
Net Present Value of Beef Replacement Females – New Decision Tool Now Available on Ag Decision Maker
By Patrick Gunn, ISU Extension cow-calf specialist and Lee Schulz, ISU Extension livestock economist
Before decisions regarding purchasing or retaining replacement females are made, producers may want to consider the economic value of a replacement entering the herd. One way to analyze this investment is to calculate the net present value, which reﬂects the value of potential future returns in today’s dollars based on an assumed rate of return.
When it comes to projecting the net present value offered by purchasing or retaining a replacement female, a number of assumptions about the future must be made. These assumptions include:
- purchase price of replacement female (if any)
- number of calving opportunities
- number of marketable calves, weaning weights, and sale price of calves
- annual cow costs
- annual heifer development costs (if any)
- weight and sale price of cow when culled, and
- discount rate.
We have developed a new decision tool and accompanying fact sheet to aid producers in making decisions regarding purchasing or retaining available replacement females. The spreadsheet tool estimates the present value of future returns, and net of costs incurred. Projecting the net present value offered by purchasing or retaining a replacement female allows producers to properly reﬂect upon the economic opportunity presented by any candidate investment in beef replacements. This "Net Present Value of Beef Replacement Females" fact sheet and spreadsheet are available on the Ag Decision Maker website.
I'll have the Burger
By Dan Loy, IBC director
A recent report by Rabobank has caught the attention of the beef industry. The report “Ground Beef Nation: The Effect of Changing Consumer Tastes and Preferences on the U.S. Beef Industry,” documents the growing demand of hamburgers in the American diet.
I think we all have witnessed this. In my generation “comfort food” has shifted from roast beef and mashed potatoes to a burger and fries. In Iowa this is celebrated each year by the Iowa Beef Industry Council through their “Iowa’s Best Burger Contest.”
The Rabobank report notes that while conventional wisdom indicates ground beef comprises 50% of our beef consumption, their data suggests that it may now be as high as 62%. Ground beef comes from trimmings from fed beef processing, non-fed beef (cull cows and bulls) and imported beef. With a herd expansion underway, fewer cull cows are coming to market so ground beef is in short supply.
To meet the need for ground beef, more end meat primals (chucks and rounds) from grain fed cattle may need to become hamburger rather than roasts.
The problem they note is that because our production system is designed for a quality eating experience of the middle meats (steak), the system is not the most efficient for the production of ground beef. The report advocates a system where cattle less likely to produce Prime or Choice steaks are identified early and managed through extended backgrounding and stocker programs specifically for a lower cost, more competitive hamburger market.
While times have changed, a shortage of ground beef is not new. During the last cow herd rebuilding period (around and just prior to 1990), ground beef was in short supply. One of the major fast food companies was concerned enough about this that they funded a two-year study at ISU to evaluate the feeding of young bulls for the fast-food, ground beef market.
The study, headed by Dr. Gene Rouse, looked at feeding young bulls on an accelerated feeding system and marketing them at 13-14 months of age. The idea was that bulls would have a higher percentage of lean round and chuck cuts that could be ground and the steaks would be youthful enough for acceptable tenderness.
Read all of this column on the IBC website.
|News from ICA, Iowa Beef Producer Surveys
ICA launches Iowa's Best Burger contest
For the fifth year, Iowa Cattlemen's Association and Iowa Beef Industry Council are asking for your help in determining Iowa's Best Burger in 2014. Through 5 p.m. on March 17, you can nominate your favorite burger served in an Iowa restaurant.
The nominations can be made through the mail, online or by texting. Details about the contest rules and nomination forms and options are on the Iowa Beef Industry Council’s website, http://www.iabeef.org/. Burger lovers can also find a link to the online nomination form at the Iowa Beef Council Facebook page; or text BEEF to 313131 and receive information about submitting a nomination via text.
The more nominations a burger receives, the better are the chances that it will be on the ‘Top Ten’ list. Finalists will receive a certificate and be eligible for the secret taste-test of contest judges. The winner will be announced the first week of May to kick-off Beef Month.
Last year, 6,320 nominations for 349 restaurants were received in the contest. The final winners in previous years are: 2013 – 61 Chop House Grille, Mediapolis; 2012 – Coon Bowl III, Coon Rapids; 2011 – Rusty Duck, Dexter; 2010 – Sac County Cattle Company, Sac City.
Iowa Beef Producer Surveys reminder
If you're an Iowa beef producer, watch your mail for a survey from the Iowa Beef Center. As part of our ongoing commitment to Iowa's beef industry, we're surveying both the feedlot and the cow-calf segments.
Separate surveys for each segment were sent in February and those who receive them are encouraged to spend a few minutes completing the survey and returning it. Postage-paid envelopes are included for convenience. IBC needs help from these producers to identify growth opportunities and challenges and determine how to provide the right assistance.
Participation is voluntary and all responses are kept in strict confidence. Individuals who will analyze the responses will not have access to identification of survey participants. Anyone with questions about the survey is welcome to call IBC director Dan Loy at 515-294-1058.
ICA Bull Sales
ICA will hold its first two performance-selected bull sales of the season on Monday, March 17, at the Bloomfield Livestock Auction Market in Bloomfield; and Friday, March 28 at the Dunlap Livestock Auction in Dunlap. Both sales begin at 6:30 p.m. The sales feature bulls that have met the standards of ICA’s Bull Evaluation Program, indicating they will provide genetics with high economic value to farmers with either commercial cow-calf or seedstock production. For more information or to receive a sale catalog, contact ICA office at 515-296-2266 or check out the website.
|Announcements and updates
2012 Ag Census data
The preliminary report of the 2012 Ag Census is now available online. One quick fact: Iowa is second in top 10 states for total ag sales, crop sales and livestock sale; and third in number of farms. See more data on the USDA website.
Feed vs. food: facts for choices
A new resource from the Council for Agricultural Science and Technology explains the importance of understanding the animal feed versus human food issue. "Animal Feed vs Human Food: Challenges and Opportunities in Sustaining Animal Agriculture Toward 2050" is available in video and text format from CAST.
The video is just under 13 minutes in length and accessible on the CAST youTube channel. The text version (Issue Paper No. 53) is a 12-page pdf document that can be downloaded at no charge from this page Choose the "Online / Downloadable" delivery method in the right column.
Update your software
If you use the Bovine Estrus Synchronization Planner software you'll want to download the latest version for your operation. This version -- V.14 -- includes the new estrus synchronization protocol recommended in the 2014 sire summaries. Learn more.
Free Online BQA Certification
Thanks to a partnership with Boehringer Ingelheim Vetmedica, Inc., the beef checkoff-funded Beef Quality Assurance (BQA) program is offering free online BQA Certification through April 15.
Start at www.BIVI-BQA.com and click on "Beef Quality Assurance and Beef Cattle Care" or one of the other 18 categories. Register and then enter the code BIVIBQA for your payment method.
For more information, Iowa producers can contact Iowa BQA coordinator Doug Bear by email at firstname.lastname@example.org or by phone at 515-296-2305.
Farming for the Future conference videos
Did you miss the Coalition to Support Iowa's Farmers's "Farming for the Future Conference: Emerging Opportunities in Livestock Production" last month? Never fear. Various segments of the Jan. 16 conference are now on the CSIF website to view at no charge.
Each segment includes experts who can help Iowa’s livestock and poultry farmers manage changes to their farms. Topics range from global economics of the agricultural industry and risk mitigation to financial feasibility and obtaining financing for new livestock projects.
The videos highlight several emerging opportunities in the state’s livestock industry including the panel of Iowa farmers who shared innovative things they are doing to increase the viability of their farm, such as calving under roof. The conference video page has links to videos and presentation slides from 10 sessions, including a Q&A.
Contact us at:
Iowa Beef Center
313 Kildee Hall
Iowa State University
Ames, IA 50011-3150