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To buy or not to buy; leasing bulls could be an option

Cassidy Woolsey Published on 24 August 2015
Bull grazing

If you’re like most commercial beef producers, you probably left this year’s bull sale feeling a little sick to your stomach. Not only were bull prices outrageously high, but now you have to turn the animal out and pray he doesn’t break a leg or turn up positive for trichomoniasis later on.

It’s an unequivocal fact that bulls – in some way, shape or form – are a necessity on a cow-calf operation. But without deep pockets, some professionals are saying it could be well worth your time and efforts to consider all your options before making such a risky investment.

Robert Weaber, an extension cow-calf specialist at Kansas State University, points out the national average spent on a bull this year was roughly $5,000. And if that doesn’t make your guts churn a little bit more, producers easily spent $6,000 or more on top-quality genetics.

So what other option do you have?

Similar to leasing land or cows, leasing bulls provides a viable alternative to help mitigate some of those costs associated with purchasing and managing bulls. Although this arrangement comes with its own set of risks, Weaber believes this method is looking more and more appealing in today’s market.

“If you think about it, yearling bulls have an expected longevity of about three years, and if you start figuring out the cost of that and the risk of failure, it is a pretty substantial investment to be making,” Weaber explains.

“By the time you put in a whole year’s worth of feed and other costs, it is not atypical to have service costs somewhere around $50 per cow. It wasn’t too long ago when that was $25 or $30, but the dramatic run up in the value of seedstock bulls and their associated costs really changed that cost per exposure substantially.”

Weaber points out that costs of bull ownership for one year can easily exceed more than $1,500, depending on purchase cost, salvage value, and feed and pasture costs.

However, during the breeding season, you could expect feed, pasture and animal health costs to be close to $350, so leasing a bull for less than $1,500 could be cheaper than maintaining the animal year-round, he says. Having the bull off-property for those six to nine months frees up those forage resources.

Weaber also adds, “There is a convenience component to it. When you lease a bull, you bear the cost of feed, mineral, water and whatever else, but as soon as that period is over he goes back to the owner for their care. All the headache of taking care of the animal after and before the breeding season is essentially gone.”

It has often been said that bulls are used only 3 percent of the time and make up almost 97 percent of your problems. But with leasing you can eliminate wintering bulls, potentially lease more mature bulls to help increase coverage, and in some cases, if a bull dies or is injured, the lessor will replace the animal based on availability.

The downsides to leasing

It may seem like a win-win situation, but there are some challenges to leasing that should be considered beforehand, he says. It is possible venereal diseases such as vibriosis and trichomoniasis could be introduced to your cow herd if you are not careful.

These diseases can reduce pregnancy rates by 20 to 30 percent or more and result in many late or open cows. It is important the bulls are tested for trichomoniasis and vaccinated for venereal diseases prior to the breeding season.

Another thing that needs to be considered is that not every state has readily available bull lease programs. Although leasing is a widely known concept, leasing bulls is fairly new to the industry, he says.

Just like any other business deal, it is important you run the numbers and weigh the pros and cons before making an agreement.

Sealing the deal

If you decide to pursue a leasing agreement, Weaber strongly encourages you to not only talk about the terms and conditions, but get them in writing. He goes on to explain, “The way of the West is by a handshake, and that’s great, but a handshake and a contract are even better.”

He believes this is even more important when it is someone you know personally. Don’t let a business transaction ruin a relationship just because both parties didn’t talk about it up-front or put it into a formal agreement, he says.

“Great fences make great neighbors; great contracts make great lease arrangements,” Weaber quips. “This is not something you want to scratch on the back of a newspaper or napkin.”

To help you avoid any trouble in the future, Rusty Rumley, an attorney at the National Agricultural Law Center, suggests putting components like these into a written contract:

  • Who will handle the transportation of the bull? What happens if the bull dies during or after delivery? And if the bull dies, who bears the cost of the bull?

  • What if the bull injures someone? Whether the injuries were caused by an attack or because of an auto accident involving the bull, who will be responsible?

  • If calving rates are low after the bull is returned to the owner, should the lessor compensate the leasee for the loss?

  • Can the bull be moved from pasture to pasture during the agreement?

  • How many cows is he allowed to breed? What if he turns up positive for trichomoniasis after leaving the premises? What does his body condition score need to be when returned?

A lot of the time contracts have already been drafted by attorneys for these leasing programs, so there might not be a whole lot of negotiation, Rumley says. But in situations where that isn’t the case, it is important you draft a contract both parties can agree to.

“People still do oral contracts,” he says. “But any time there ends up being a dispute, it really causes some problems. It turns into a he-said, she-said thing, and the only way you can settle it is in court.

A written agreement is so much easier to address those issues before they become a problem.”

A.I. vs. leasing

At this point, you are probably thinking: Wouldn’t A.I. be a better option? Why would I want go through the hassle of leasing a bull if I can A.I.? But for producers like Noland Stone, leasing provides the most cost-effective way to access top-dollar genetics.

Convenience and flexibility was a huge determinant when Stone decided to lease bulls for his cow herd. Because he leases land in various locations across the northern region of Colorado, managing and finding additional land for bulls was a hassle he didn’t have time for.

“In my case, with the leased ranches, most of the facilities aren’t the best and I didn’t want to spend money to upgrade the facilities so I could synchronize and inseminate the cow herd,” he says. “Leasing provided me with another option to access quality genetics without having to manage bulls or upgrade my facilities.”

So for nearly 10 years, Stone has benefited from his lease arrangements. He understands that leasing bulls isn’t for every operation, but it has essentially allowed him to get by with the land and facilities he has available.

“It has been nice not having to worry about taking care of bulls in the off-season,” Stone says. “I also like the flexibility associated with leasing. You can have the newest and greatest genetics because you are not tied to a bull for the next four or five years.”

There are many advantages to leasing bulls; however, it is important you consider the challenges as well. Leasing can be a way to reduce feed and care cost involved with owning a bull, but it also takes a great partnership and written agreement to make it work.

Without taking the necessary precautions or considering the possible outcomes, you could find yourself potentially queasier in the courtroom than you were in the sale barn.  end mark

PHOTO: Weaber says it is important you body condition score the bull before and after the breeding season. Lessors will not be happy if the bull comes back in poor condition. Photo courtesy of Cassidy Woolsey.

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