For years breeders have been saying how they would do things differently than the big A.I. companies. In March of 2013 they are going to get their chance. While many top breeders are already licking their lips at the opportunity, there are some key factors I don’t think they have considered that may not change things as much as they think. The following is a closer look at these issues.
Distribution
When Calbrett-I H H Champion hit for GenerVations, the biggest challenge was not marketing but rather distribution. Here is a company who had been a distributor for many international A.I. companies that now had to turn the table and sell back to these companies. Fortunately, for GenerVations they were able to do so and leverage the network they had already developed in order to get Champion semen out to the world. However, what is the typical breeder going to do? Sure, you may be able to move some semen through the internet or advertising your bulls in the major publications, but that will not pay the bills. A global distribution network that can move your semen is a must. Only one person can have the #1 bull, for all others you had better have a cost effective distribution network, or your dreams of becoming the next great Albert Cormier or Doug Blair will fizzle before they even start.
Frequent Genomic Releases
With new genomic bulls coming out monthly, you could be on the top of the list one month and not even in the top 10 the next. This provides for a very short run for peak sales and means you will not always be able to sell your genomic young sire semen for $50+ a dose. More likely, you are looking at a $20-30 average price, and that is assuming you are still in the top 50. Fall out of the top 50 genomic sires in the world and you can kiss sales good-bye.
Cost of Production
Breeders wishing to prove their own sires will have to use one of the approved semen collection facilities. Certainly, many of these facilities will offer competitive rates, but they need to operate at a profit too. While working with the largest A.I. company in the world, we knew that the cost per semen collected averaged between $4 and $5. To get your semen dose collected you are typically looking at $7 – $10 a dose. Big deal you say, a couple of dollars less. Well actually it is. When large semen orders come in, they operate on blend price for the order. Depending on the situation they are from $10 – $12 a dose. That $3-$5 a dose difference could mean the difference between profit and loss. Don’t think you need those large bulk orders? Think again, you will find they are your lifeblood for cash flow.
Aggressive Lease Options from Current A.I. Companies
We have already started to see it. Gone are the fixed sales price of $5,000 -$10,000 or the capped leases at $100,000. The major A.I. companies have already started to get very aggressive on the lease options they offer. Smaller A.I. companies have already been forced to get extremely aggressive in order to procure top genomic young sires. It’s also for these reasons that we are starting to see more bulls being sold in top sales, as it provides the ability to set the bar higher for many breeders. It’s also for these reasons that you have noticed many players starting to buy top females, as the cost to buy them is actually cheaper than the cost to contract their sons.
The Bullvine Bottom Line
While the ability to test their own sires will certainly affect the lease agreements, they get from the A.I. companies it will not be the total game changer that everyone is expecting it to be. What it will do is make the current A.I. become even more competitive and have to trim their own fat. Breeders sampling and selling their own bulls and not selling their bulls to A.I. seems a promising opportunity. However, the thought that it is going to totally change the way bulls are sampled and sold is farfetched. From the cost of production to distribution there are many factors that eager breeders have not yet given enough consideration.
I have had my own bull collected at a stud for $3 a straw. With good advertising and knowledge of a independent semen reps, and a bull that offers something different than what is being offered, I think a guy could make a few dollars selling semen. Is it going to change the industry? No. However I’m sure a couple of guys out there have a good successful game plan that will work.
Bob,
True, but in order to support this model you have to be very small and lean. I have totally seen people achieve this. From Doug Brown of Browndale sires to many others. This model works well. But on mass this will never work. This works well because they can partner up with a bunch of small independents to be part of a larger offering. But as other industries have demonstrated this only works to a certain extent. Eventually the large corporations can squash this (i.e. Wal-Mart example).
Andrew
Standard Oil is another example of a huge monopoly crushing small competitors . One woman Ida Tarbell (her father was cheated by John D Rockefeller). brought them down, focusing on their monopolistic price fixing and trade restraint practices. The same is happening in the AI business right now.,,with this take over attempt of the US Sire Summaries.
Ron,
Explain to me again; how A.I. companies running the US sire summaries will change things? In Canada when we moved from government run proofs to industry supported (Note: was my father who was responsible for doing this. Hired the staff and lead to the formation of CDN) there were no issues with access or credibility.
Andrew
How many breeders in Canada prove their own bulls now? Very few I would guess. It used to cost $2,500 or so to get a proof on a bull in Canada. What is the current fee? Here it is free,.
With Genomics now so highly touted, US breeders would like to prove and market their bulls and don’t want these extra fees to stop them. Small AI studs don’t need extra fees either..You pointed out how difficult it is for them..of course we must keep costs to minimum to stay in business.
USDA will not save any money..thus there is no advantage to anyone… exccept the large bull studs that want to control their competion thru prce-fixing… for these services and thus maintain controll of Genomics.
Lastly you have Genomics in Canada I believe…why did Semex jump ship and join the US studs on this program? They paid $49,000 to join us and got full benefits and US Holstein paid $100,000 and NO male Genomic benefits.That is not correct.. especially because US… not Canadian taxpayers pay those US federal employees,that developed Genomics!..
I agree with your main statement.
The large bull studs that have benefited from Genomics immensely… have little to fear….thus it is pure greed…. that is pushing their desire to take over the US Sire Summaries. They are doing this primarily to continue to control their money tree… Genomics. If they do, there will be extra fees ,thousands of dollars per bull, to prevent breeders from selling semen on their bulls.
The farce is …they think they own Genomics…they do not. They didn’t create and refine it in their backrooms with their employees..It was created by US govt employees in this secret deal designed to eliminates their competitors.There are 30 US AI organizations listed the the Holstein Red book The rest were not given a chance to participate. only those on the NAAB board got in on this sweetheart deal.
One correction on your assumption about only interest in the top 50 bulls.Anyone that looks back at the Top 50 TPI bulls in years past in the Red Book will notice all kinds of mediocre bulls that helped very few..they are long gone from impotance.However some of the great cow families including Dellia and others are still very important to the breeds success..
Ron,
How come every time I read one of your comments about the A.I. companies I remember a show I use to watch Pinky and the Brain. First of all I would say that everyone has benefited from genomics not just the A.I. studs. It has taken the guess work out of what is legit and what is not. I have noticed that the strong cow families that maybe in the past did not top the index list now rank much higher, and conversely the hot house herds have gone by the wayside.
Also as an FYI to you Genomics was not just a US discovery “It was created by US govt employees in this secret deal designed to eliminates their competitors” . Much like test day model, it was not invented in the US. Test day was actually a CDN discover that Cornel went and quickly patent in the US and hence no test day in the US.
I will concede that there have been great cow families such as the Dellia’s, but even they topped the PTAT lists. What I am saying is if you don’t have a list topper such as TPI, LPI, PTAT, CONF., Net Merit etc.
Regards,
Andrew
P.S. I am not sure which one of us is Pinky and which one is the brain.
Never heard of Pinky and the Brain. There ia no proof that anyone has benefitted from Genomics at all ..yet…even though many have made lots of money on it.
It appears Genomics itself is far from reliable… lots of bulls have dropped drastically for both production and type. Breeders do not use a bunch of average Genomic bulls.They breed one cow at a time to what they think is best. They flush to them and are contracted to them….when they dive it is a problem….mainly for the breeder…because the bull stud rejects the calf.
Hot house herds were less of a problem than unethical bull proving syndicates.which produced several mllion$ bulls, that faded fast..One of my best bulls was produced in a so called hot house herd according to some experts. He still is the highest proven sire ever… in the previous Holstein Intl contests.
Want chart toppers…Rud Zip is the only cow to have 3 top 100 TPI sires in 2010
Agreed… US did not invent Genomics..but the gang of 7 act like they did. If a couple of companies had invented it they would have rights to a long term patent. B Ingenity has something similar..but far less popular and not offiicially published.
Before the1st USDA sire summaries..ABS had their official American Index…OK so what.
In 1967 USDA could have said we will publish only co-op bulls… since they helped the most with the research..did they …of course not!
Ron,
I am not saying that the top 50 where the only ones of relevance. But if you look at semen sales there is very much a heavy weighting to the top bulls of the LPI, TPI, PLI, Conformation or PTAT lists.
I do see more of your pinky and the brain theory. I am not so sure that “BIG AI” has all these secret deals. Remember they are often the ones who had to pony up the money in the first place. Well that’s the case here in Canada at least.
Ron, I get it your not a genomics or more accurately index fan and that’s cool. I have watched your breeding program for year and have always respected the focus on cow families. But much like other similar programs if it was the B all and end all that you say, how come there have not been more great cows or bulls from these programs?
Andrew