If you are like many breeders who see the opportunity to invest in high-end genetics cattle but you’re not quite sure what way to do it, this article is for you. The days of finding that $40,000 2yr old and only having to pay $20,000 are far behind us.  Genomics has changed everything and those who have the top cattle know they have the top ones.  The following are six ways you can invest in top cattle.  We take a look at the risk in relation to the return as well as the outcomes you should expect.

1. The Complete Package – Invest in a $40,000 to $50,000 2yr old

This means you go out and buy the single best 2 year old you can afford in the $40,000 to $50,000 price range.  This means she is the complete package.  She has already calved, will score, or has already scored VG and is from a high in demand genomic family that has proven to be decent flush cattle.  Also remember not to sacrifice sire. It is very important that is animal not only has the top female side, but also the top sire stack.

Based on the above here are the expected inputs: Using the Dairy Cow Investment Calculator here is the expected performance:
Purchase price $50,000.00 Total Revenue per flush $9,187.50
Boarding expense per day $10 Total cost per flush $4,062.50
Years of productive embryo production 3 Total profit per flush $5,125.00
Flushes per year 4 Total heifer sales per year $7,654.50
Flush strike out ratio 25% Total boarding expense $11,460.30
Base cost per flush $650.00 Total promotional expenses $4,000.00
Cost per embryo $150.00 Total Revenue $84,463.50
Recipient price $1,500.00 Total Profit $19,003.20
Conception rate of recipients 45% Return on investment 38%
Sale price per embryo $2,500.00
Sale price per live heifer $12,500.00
Advertising expense/year $1,500.00
Other promotion expense $500.00
Number of embryos per flush 7
Ratio grade A/B embryos 70%
Ugly duckling rate 40%

Analysis:

By purchasing the complete package you limit your risk while still delivering about a 12% return per year.

 

2. Hedge Your Bets – Invest in two $20,000 to $25,000 2yr olds

This means you go out and buy two potential VG two year olds that are decent flush potential, and while their progeny will not be sale toppers they will fit the mid-market.  Warning, buying the 4th best daughter of a cow, or maybe not a popular sire, thinking it will not matter, is a big mistake.

Based on the above here are the expected inputs: Using the Dairy Cow Investment Calculator here is the expected performance:
Purchase price $50,000.00 Total Revenue per flush $4,4100.00
Boarding expense per day $10 Total cost per flush $4,062.50
Years of productive embryo production 3 Total profit per flush $347.50
Flushes per year 4 Total heifer sales per year $11,022.48
Flush strike out ratio 25% Total boarding expense $20,920.60
Base cost per flush $650.00 Total promotional expenses $4,000.00
Cost per embryo $150.00 Total Revenue $41,407.44
Recipient price $1,500.00 Total Profit $(34,513.16)
Conception rate of recipients 45% Return on investment -77%
Sale price per embryo $1,200.00
Sale price per live heifer $9,000.00
Advertising expense/year $1,500.00
Other promotion expense $500.00
Number of embryos per flush 7
Ratio grade A/B embryos 70%
Ugly duckling rate 40%

Analysis:

Contrary to popular belief this mid-market strategy just does not work.  With the increased expenses from double the number of animals as well as the much lower sale price of animals, this strategy actually causes you to lose money.

 

3. They Could Be Big Time – Invest in two $20,000 to $25,000 heifers

This means you go out and buy the two best heifers you can find. That when calved you stand a strong chance of one going VG and is from a high in demand genomic family that has proven to be decent flush cattle.  This equation equates to one of the two turning out and the other one being just an average cow.  Remember: Don’t sacrifice sire stack.

Based on the above here are the expected inputs: Using the Dairy Cow Investment Calculator here is the expected performance:
Purchase price $50,000.00 Total Revenue per flush $9,187.50
Boarding expense per day $10 Total cost per flush $4,062.50
Years of productive embryo production 3 Total profit per flush $5,125.00
Flushes per year 4 Total heifer sales per year $9,185.40
Flush strike out ratio 25% Total boarding expense $11,460.30
Base cost per flush $650.00 Total promotional expenses $4,000.00
Cost per embryo $150.00 Total Revenue $89,056.20
Recipient price $1,500.00 Total Profit $23,595.90
Conception rate of recipients 45% Return on investment 47%
Sale price per embryo $2,500.00
Sale price per live heifer $15,000.00
Advertising expense/year $1,500.00
Other promotion expense $500.00
Number of embryos per flush 7
Ratio grade A/B embryos 70%
Ugly duckling rate 40%

Analysis:

By investing in two heifers you do increase your risk compared to buy a complete package 2 year old but you also increase your potential reward.

 

4. Heifer Hedge Your Bets – Invest in four $10,000 heifers

This means you go out and buy 4 heifers that have potential to be VG two year olds that have decent flush potential, and while their progeny will not be sale toppers they will fit the mid-market.  While the temptation may be to buy heifers of lesser demand sires, the risk in this play is very big.

Based on the above here are the expected inputs: Using the Dairy Cow Investment Calculator here is the expected performance:
Purchase price $50,000.00 Total Revenue per flush $4,410.00
Boarding expense per day $10 Total cost per flush $4,062.50
Years of productive embryo production 3 Total profit per flush $347.50
Flushes per year 4 Total heifer sales per year $11,022.48
Flush strike out ratio 25% Total boarding expense $20,920.60
Base cost per flush $650.00 Total promotional expenses $4,000.00
Cost per embryo $150.00 Total Revenue $41,407.44
Recipient price $1,500.00 Total Profit $(36,513.16)
Conception rate of recipients 45% Return on investment -81%
Sale price per embryo $1,200.00
Sale price per live heifer $9,000.00
Advertising expense/year $1,500.00
Other promotion expense $500.00
Number of embryos per flush 7
Ratio grade A/B embryos 70%
Ugly duckling rate 40%

Analysis:

Again similar to the mid-market cow strategy this approach just doesn’t work.  With the increased expenses from double the number of animals as well as the much lower sale price of animals, this strategy actually causes you to lose money.

 

5.  Go for the Gusto – Invest in best 15 embryos you can find

This means you go out and contract a high-genomic mating from a high in demand genomic family that has proven to be decent flush cattle.  Also, consider that you need to purchase recipients and raise the heifers, leaving you with 7 calves.  For the sake of this equation we will leave the bulls out of it and expect that one of the 3 females turns out as a two year old.

Based on the above here are the expected inputs: Using the Dairy Cow Investment Calculator here is the expected performance:
Purchase price $50,000.00 Total Revenue per flush $9,187.50
Boarding expense per day $10 Total cost per flush $4,062.50
Years of productive embryo production 3 Total profit per flush $5,125.00
Flushes per year 4 Total heifer sales per year $9,185.40
Flush strike out ratio 25% Total boarding expense $11,460.30
Base cost per flush $650.00 Total promotional expenses $4,000.00
Cost per embryo $150.00 Total Revenue $89,056.20
Recipient price $1,500.00 Total Profit $13,595.90
Conception rate of recipients 45% Return on investment -27%
Sale price per embryo $2,500.00
Sale price per live heifer $15,000.00
Advertising expense/year $1,500.00
Other promotion expense $500.00
Number of embryos per flush 7
Ratio grade A/B embryos 70%
Ugly duckling rate 40%

Analysis:

While there is a little less return than going out and buying a 2yr old complete package, when you factor in the X factors of the bulls as well as the fact that 1 of the other 2 heifers could turn out this opportunity provides the maximum return but comes at the maximum potential risk.

6. Embryo Hedge Your Bets – Invest in 30 mid-market embryos

This means you go out and buy 30 embryos from VG two year olds that are decent flush potential, and while their progeny will not be sale toppers they will fit the mid-market.

Based on the above here are the expected inputs: Using the Dairy Cow Investment Calculator here is the expected performance:
Purchase price $50,000.00 Total Revenue per flush $4,410.00
Boarding expense per day $10 Total cost per flush $4,062.50
Years of productive embryo production 3 Total profit per flush $347.50
Flushes per year 4 Total heifer sales per year $11,022.48
Flush strike out ratio 25% Total boarding expense $20,920.60
Base cost per flush $650.00 Total promotional expenses $4,000.00
Cost per embryo $150.00 Total Revenue $40,407.44
Recipient price $1,500.00 Total Profit $(56,513.16)
Conception rate of recipients 45% Return on investment -113%
Sale price per embryo $1,200.00
Sale price per live heifer $9,000.00
Advertising expense/year $1,500.00
Other promotion expense $500.00
Number of embryos per flush 7
Ratio grade A/B embryos 70%
Ugly duckling rate 40%

Analysis:

This is probably the worst investment you could ever make.  With the mass numbers of animals you have to care for as well as the limited return, this strategy is a no go from the start.

 

The Bullvine Bottom Line

While everyone looks at these sales toppers and wonder how they ever make money when they pay so much for these animals, as our return on investment analysis above shows, it’s actually the other way around.  Buying the best genetics you can possibly afford limits your risk and delivers your maximum return. In reality the price difference between the top cattle and the mid-market cattle is actually not large enough.  Remember this analysis is for total return on investment, not overall herd genetic gain.

1. The Complete Package 2. Hedge Your Bets 3. They Could Be Big Time 4. Heifer Hedge Your Bets 5. Go for the Gusto

6. Embryo Hedge Your Bets

Strategy Best 2yr old Two 2 yr olds Two best heifers Four heifers Fifteen best embryos Thirty embryos
Revenue $84,463.50 $41,407.44 $89,056.20 $41,407.44 $89,056.20 $41,407.44
Profit $19,003.20 $(34,513.16) $23,595.90 $(36,513.16) $13,595.90 $(56,513.16)
Risk Low Low Medium Medium High High
Yearly Return On Investment 12% (25)% 12% (20%) 5-25% (18)%
Notes Least risk with a positive reward Biggest loss potential with only limited up side But does have the potential of 24% if both heifers turn out The dream of buying that one that might surprise every one is just that  – a dream.  Genomics has caused that bubble to burst When you factor in that you could have higher conception rates and sale of bulls, this scenario actually has the largest up side, but at the highest risk There is just nothing to say about this. Unless your goal is to improve the overall level of your herd in the shortest amount of time possible.

The bigger question should be whether to buy the best 2 yr. old you can afford, the best heifer, or the best embryos.  The answer  depends more on how fast a return you would like and how much risk you are willing to take.  If you want instant return with the least amount of risk, buy the can’t miss 2 year old.  If you want the maximum return over the long term, buy the best embryos you can get.  And of course if your goals are  somewhere in between, buy the best two heifers you can afford.

The big thing this analysis shows “GO BIG OR GO HOME.”

 

What has your experience been?  Please share in comments box below.

 

 

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