2012 was certainly an amazing year for RF Goldwyn Hailey and her owners Gen-Com Holsteins. There was a time that when winning Supreme Champion at both the World Dairy Expo (Read more – World Dairy Expo 2012 Holstein Show – A Battle for the Ages ) and The Royal (Read more – The 2012 Royal Winter fair Holstein Show – One of the greatest stories ever told!) would have been a license to print money. Your name would be legendary and you could milk that cash cow for years and years to come (Read more – The Story Behind How Two Full Sisters Dominated Expo Quebec). However, with recent changes in the marketplace (Read more – Who Killed the Market for Good Cattle? and the Insiders Guide to What Sells at the Big Dairy Auctions) the question becomes,”Is Hailey a cash cow or a cash hog?”
In years past a cow such as Hailey would have been a cash cow for her owners Gen-Com Holsteins. Today she appears to be more of a cash hog, not only is she not providing the rivers of cash that most would expect but actually she requires that capital/cash that being a show cow at the level of Hailey demands.
The Financial Numbers Behind Hailey
Before you think I am certifiably crazy, let’s take a closer look at the numbers. First of all consider the recent World Classic Sale at Madison. Hailey’s Sid daughter sold for $30,000 (Read more – World Classic 2012 Highlights). It is also well known that embryos are in high demand, so let’s put a value of $5,000 per embryo from Hailey. Now a couple of factors that make Hailey a little different from your average cow is that you cannot flush her as often and that she costs a lot to take care of. Often Hailey is housed a custom facility costing a lot more than your average housing. Using the Return on Investment Calculator, we plugged the follow numbers in using a conventional embryo transfer program:
- Boarding expense per day $20
- Years of productive embryo production – 3
- Flushes per year – 4
- Flush strike out ratio 25%
- Base cost per flush $ 650.00
- Cost per embryo $ 150.00
- Recipient price $ 1,500.00
- Conception rate of recipients 45%
- Sale price per embryo $ 5,000.00
- Sale price per live heifer $ 30,000.00
- Advertising expense/year $ 5,000.00
- Other promotion expense $ 10,000.00
- Number of embryos per flush 8
What we find, when using Microsoft Excel’s Goal Seek function, is that the current break even value for RF Goldwyn Hailey is $212,808.40. This is what she is worth based on the sale price of her genetics currently. If you think using IVF makes things better think again, remember that you have about an extra $5,000 to $7,500 in expense in order to produce an IVF female (Read more – IVF: Boom or Bust for the Dairy Industry).
Why Pay So Much?
Now I know you’re saying, “Hey Hailey is the greatest show cow in the world, and we see cows like Cookview Goldwyn Monique EX-92 sell for $490,000 at the International Intrigue Sale (Read More – International Intrigue – The Secret Is Exposed).” Looking for answers, I figured I would go directly to the source. In our interview just before the Royal with Monique’s co-owner Jeff Butler of Butlerview Farms, Jeff made a very interesting comment that caught my attention. He pointed out that “Type brings the foot traffic to the farm. But genomics and pedigree get them buying.” (Read more Exciting Times at Butlerview).
Think about it. Here is a guy who very clearly understands the marketplace and has invested in what is probably the best show string in the world today. With some of the prices they have paid, you wonder how they could ever make a profit on these animals. But then his comments start to make more sense to me. They don’t need to make their profit from each of these animals. Some of these animals are purchased to get people through the door.
It’s with that single change in thinking that everything becomes much clearer. It’s like having a great playmaker in Hockey. They may not score all the goals (i.e. make all the profits) but what they do is make every player around them play much better. You see you can have a team of super stars but if they can’t work together, you can’t win (Look at the NBA’s L.A. Lakers our Baseballs L.A. Dodgers). The same is true in the elite genomics world. Having a team of show super stars on their own will not make you rich. What you need, in addition to them, are cattle that you paid far less for, but since the super stars are attracting the attention, buyers are willing to pay more for the progeny of these other great animals.
In Butlerview’s case, this model still means buyers are accessing some of the best genomic animals in the world. Furthermore, instead of Butlerview having to spend that much more in marketing or advertising, the money spent on these top show cows helps decrease marketing expense of these Genomic animals, They drive up traffic and demand so that Butlerview can make their margins with the Genomic animals. When you start to look at it as a genetic operation as a whole and not so much on a cow by cow basis only, purchases like Monique make a lot of sense. Dollars and cents.
The Bullvine Bottom Line
There is no question that everyone loves to win, and that RF Goldwyn Hailey did a lot of that in 2012. It’s also important to make money. That is where the Butlerview model makes a lot of sense. Use the type super stars to get buyers through the door and have plenty of other high genomic and high pedigree animals right there to help convert that traffic into cash. It’s not that you make your money off the super star herself. You make your money from how much easier the super star makes it to sell the genetics from your other cattle. It’s at this point that I realize that some of these show super stars are not cash hogs, but actually agents for other cash cows.
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