By Bruce Derksen, Livestock Weekly
Assumed paradigms are difficult to break, and the beef cattle industry isn’t immune from this fact. For example, purchasing bulls to cover the cow herd has long been the norm and while it will likely remain the view and practice of the majority, leasing has maintained a steady momentum as ranchers begin to dig deeper into their business plans.
100th Meridian Ranching, located in the Texas panhandle, has roots in the area spanning over 125 years. Owners, Justin Rader and wife Bryn, focus their ranch guidelines and principles on providing stewardship of resources.
The Raders operate several enterprises including cow/calf production, bred heifers, custom grazing and bull leasing.
Rader believes cattlemen are missing out on numerous benefits by following a paradigm of routinely purchasing bulls year after year, rather than considering the alternative of leasing. In general terms, he sees them as an under-utilized resource, usually working only three months a year. In his opinion, this leaves too much time for problems.
“If an employee only showed up for work 25 percent of the time, would you fire him?” he asks. “A bull isn’t really any different. I feel our leasing option solves that problem for producers. The only way my economic analysis shows justification in owning is if you use him twice in the same year, both in fall and spring calving herds.”
Their lease program is supported with Black and Red Angus and Charolais breeds, all tied into a bloodline or breeder with ‘name brand’ recognition. Rader says they have sires from Pharo Cattle Company, Jorgensen Angus, Bradley 3 Ranch, Sandhills Charolais and several from their own elite pairings.
He explains many factors support leasing rather than purchasing bulls yearly.
First, he’s already taken care of necessary culling. Their animals are not only strong genetically, but also in toughness and ranch level conditioning.
“If you’ve ever bought a bull at a sale, took him home and realized he was dangerous, hard to handle, or melted away and got crippled up, you know what I mean,” Rader said. “Our cattle are on native grass and cake. We only feed hay during weather extremes, so you won’t find a fat, soft, or unsafe bull here. He’s either got to make it on his own merit or he’s a cull.”
The worry of inbreeding is also gone as breeding stock are constantly rotated. Commercial cattlemen might be tempted to retain favorite sires they’ve been keeping replacements from, but by leasing they eliminate the downstream risk of inbreeding. Instead of selling a cull and buying back an expensive replacement to avoid this problem, they can lease worry free.
Risk is also mitigated through simple, clearly written agreements. Contracts clarify details and any potential ‘what ifs’ arising, spelling out exactly how Rader will handle all types of situations without negative impacts to their customers.
“If a cow-calf producer owns a bull that becomes crippled or unusable, that’s a problem for them. With leasing, they shift 100 percent of the risk to us. A $5000 animal who quickly loses body condition or gets crippled is a waste of a $5000 investment. Bottom line is, if he is unable to breed females for any reason, we will provide a replacement at no cost. The goal is to get them bred and keep them bred.”
And while risk is reduced, flexibility is increased as herds grow in size or breed targets change. If the economics of breeding heifers climbs during a certain year and an owner holds back twice as many as normal, leasing provides an avenue to source bulls without keeping them past their unique need. Rader says economic incentives don’t present themselves often and instead of buying extra sires that might not be needed down the road, leasing becomes a resourceful option.
For grazing limitations, often paddocks are at a premium and tying one up strictly to host ranch bulls for nine months never makes sense grazing wise adds Rader.
But the biggest benefit of leasing over purchasing for many operations is the economic savings, increased cash flow and expansion of stocking rates, stressed Rader.
In 2020, the average Angus bull purchase price was just over $4800. An 1800-pound cull would fetch slightly more than $1600 and accumulate about $3200 in depreciation over an average of four years of usefulness. “That’s depreciation alone, not including grass at roughly $250, vet costs at $120, feed at $80, death loss, interest or anything else. Owning an average bull can cost a rancher over $1600 yearly.”
A ranch needing four sires immediately ties up almost $20,000 versus leasing four bulls for $4000.
Rader believes maintaining the correct stocking rate is the most critical influence on profit a rancher has control over. He explains leasing allows for an increase of approximately five percent in stocking rate.
On a 100 animal-unit pasture with cows at one unit and bulls at 1.5, four bulls would be needed with a 25-to-1 ratio. Six bull units equal 72 AUM yearly. In contrast, leasing four animals over a three-month breeding season is only 18 AUMs. The 54-unit annual difference would total 4.5 cows at a gross margin of $500/head or $2250.
“The point is customers can save over $500 per bull, per year by leasing. If they start to replace females (which make money) rather than purchasing bulls, real money starts to add up. They can increase their herd by five percent, which adds the equivalent of over $1000 per bull in savings plus extra cow revenue.”