Use of expected progeny difference (EPD) information to estimate maximum bid price for purchased beef bulls

Abstract

A pricing model was developed using expected progeny difference information for weaning weight (WW-EPD) to predict the maximum bid price for a bull considered for purchase. The utility of this pricing model should appeal most to veterinarians working closely with their clients on other bull management issues. To complete the pricing model, buyer-specific data were needed for 2 bulls, a reference bull and a bull being considered for purchase (prospect bull). Data input included a base sale price (in $) for the reference bull, the WW-EPD advantage for the prospect bull over the reference bull, expected body weight (in lb), and price (in $/per hundred weight [cwt]) at time of culling for both bulls, and the number of breeding seasons used. Cow-to-bull ratio used, weaning percentage of each calf crop, mean age (months) of calves at weaning, income tax rate (%), discount (interest) rate (%), average price ($/cwt) expected for each calf crop sold, shrink (%), and price slide ($/cwt) were also required to complete the pricing model. Output values generated by the pricing model were initially organized into an income statement summarizing the increased after-tax net income earned from each calf crop produced by the prospect bull over the reference bull for each year of bull use. Income statement information was then transformed into a cash flow statement. Cash flow for each year was transformed into its present value. All present values were summed, and then added to the purchase price used for the reference bull to establish the recommended maximum bid price for the prospect bull. Inaccurate input values will reduce the effectiveness of the pricing model as a tool for informed decision making. Veterinarians who use this pricing model to help their clients value bulls will find that cow-to-bull ratio, number of breeding seasons that a bull is used, and weaned calf crop percentage are the primary factors influencing the premium that can be paid for the prospect bull over the reference bull.