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Economic Impact of Artificial Insemination vs. Natural Mating for Beef Cattle Herds

13 June 2008

By Dr. John D. Anderson, Extension Professor, Agricultural Economics; and Dr. Justin D. Rhinehart, Assistant Extension Professor, and Dr. Jane A. Parish, Associate Extension/Research Professor, Animal and Dairy Sciences. Published by the Mississippi State University Extension Service, MSU Cares. Artificial insemination (AI) has been commercially available as a viable technology since the 1940’s.

It has been used extensively in the dairy cattle industry over the last several decades and has totally changed the genetic structure of the national dairy herd.

This technology can also dramatically affect the beef cattle industry. Currently, only about six percent of all beef cattle producers use AI and/or estrus synchronization in their beef herds. The vast majority of this use is in the purebred segment. One of the primary deterrents to beef cattle producer adoption of AI is the perceived cost. This publication details the costs of AI versus natural mating and should allow each producer to evaluate whether adoption of AI will benefit the operation.

In the following example, a producer manages a herd of 85 mature cows and plans to keep 15 heifers as replacements. Cows are synchronized using the CoSynch estrus synchronization protocol. This timed AI protocol involves giving the cows a gonodotropin releasing hormone (GnRH) injection on day 0, a prostaglandin F (PGF) injection on day 7, then a second GnRH injection on day 9. All cows are time inseminated after the second GnRH injection. Heifers are synchronized using the MGA-PGF protocol. In this protocol, heifers are fed a diet containing MGA for 14 days. On day 15, MGA is removed from the diet. A PGF injection is given on day 33, and heifers are bred based on visual observation of heat. The table below explains the per head costs for estrus synchronization drugs, semen, and AI technician. It also illustrates the expected pregnancy rate to AI (one service) and the number of cattle workings required for synchronization and AI.

Artificial Insemination Program Example Description
Protocol
Drug
Cost/head
Pregnancy Rate
Required Workings
Semen
Cost/Straw
Technician
Cost/Head
Cows
CoSynch
$8
50%
3
$20
$7.50
Heifers
MGA-Lutalyse
$10
50%
3
$20
$7.50

The table below contains the budget assumptions for this example herd. The overall expected pregnancy rate (AI + cleanup bulls) is 80 percent for cows and 75 percent for heifers. These expected pregnancy rates may seem low, but data on actual Mississippi beef cattle herds validate this assumption. The average weaning weight is assumed to be 550 pounds, with the calves selling for an average of $105 per cwt. Four bulls are required for adequate breeding in a natural service situation. Each bull is assumed to cost the producer $2,500 and will be used for three breeding seasons. Annual bull maintenance costs will average $600, with a salvage value at the end of the three-year useful period of $850 per bull.

Budget Assumptions for Natural Service
Number of cows
85
Pregnancy rate (cows)
80%
Number of heifers
15
Pregnancy rate (heifers)
70%
Average weaning weight of calves
550 lbs
Average calf value
$105/cwt
Bulls required for natural service
4
Average purchase price of bulls
$2,500/head
Salvage value of bulls
$850/head
Useful life of bull
3 years
Annual bull maintenance expense
$600/head

Annual ownership costs attributed to each bull are illustrated next. Purchase costs minus salvage value show that the producer spends $550 per year on ownership costs alone. When coupled with the $600 per year maintenance costs, plus a “risk of bull loss” factor ($335 per year), the producer spends an average of $1485 per year to own a bull.

Bull Ownership/Maintenance Costs
 
$/bull
Total
Annual Ownership Cost1: ($2,500 - $850)/3
$550
$2,200
Annual Maintenance Cost
$600
$2,400
Risk of Bull Loss2: 0.2[($2,500 + $850)/2]
$335
$1,340
1 Annual ownership cost represents the average annual decline in the bull’s value. It is calculated as the difference between the bull’s original value and his salvage value divided by his useful life.
2 Risk of bull loss represents potential financial loss due to a bull becoming incapacitated through death, injury, infertility, etc. It is calculated as the difference between the bull’s average value and his salvage value, multiplied by the probability of such a loss occurring.

A comparison of the costs in using AI versus natural mating follows. On the next page, a partial budget compares increased costs of AI to the increased revenue generated from AI-produced calves. Total costs for the AI (including drugs, semen, technician, and labor) are $4,012. This includes the 85 cows and 15 heifers.

On the revenue side, the example assumes that the use of genetically superior AI sires would increase average calf weaning weight by 25 pounds per head. If calves are sold at weaning at a value of $105 per cwt for 550-pound calves, the value of the additional weaning weight would increase gross receipts by $2,061.

Because estrus synchronization and AI require enhanced management and increase the number of cows bred early in the breeding season, the expected increase in calving percentage is 5.0 percent. The value of the additional calves at weaning is $2,756. This results in a total increase in revenue of $4,817 over the use of natural service alone.

Use of AI also allows for a reduction in costs in the number of bulls required for cleanup breeding and lowered bull ownership/maintenance expenditures. Four bulls are required for adequate breeding with natural service alone. With AI, bulls are needed for cleanup breeding purposes only. Based on the expected AI conception rates, only three bulls are required for cleanup breeding (one bull could serve a dual purpose by breeding both the 6 remaining heifers and then be available for use in the cow herd).

This reduction in costs through the use of AI is estimated to be $1,485 for the example herd. Comparing the increased costs of AI with the increased revenue/reduced costs, using AI results in an additional net change in profit of $1,440.

AI vs. Natural Service: Partial Budget 1
Increased Costs
Increased Revenue
Drug costs $830 Additional weaning weight. 25 lbs/head
Semen costs $2,000 Value of additional weight $2,061
Technician fees $750 Change in calving percentage +5%
Additional labor1 $432 Additional calves $2,756
Total Increased Costs $4,012 Total Increased Revenue $4,817
Reduced Revenue
Reduced Costs
Reduced cull bull sales $850 Cleanup bulls required 3 bulls
Total Decrease in Profits $4,862 Total Increase in Profits $6,302
Net Change in Profits = $1,440
1For budgeting labor costs, it is assumed 100 head of cattle can be worked in 4.5 hours using four hired workers at an $8/hour wage rate. This is separate from the technician fee.

The next table is similar to this one except for assumptions in the increased revenue section. In this scenario, more calves are expected to be born early in the calving season because of concentrated breeding through use of estrus synchronization and AI (all cows would be mass inseminated the first day of the breeding season). These calves would be older and heavier at weaning time and would add 25 pounds more per head to the average weaning weight. This, coupled with the additional weaning weight increase (25 pounds) because of improved sire genetics, would result in a total additional weaning weight of 50 pounds per head. The value of this increased weaning weight would be $4,121. The increased management required for an effective AI program would result in an increased calving percentage of 8 percent. This would return additional revenue of $4,620. In this scenario, the net change in profit resulting from the use of AI would be $4,862.

AI vs. Natural Service: Partial Budget 2
Increased Costs
Increased Revenue
Drug costs $3,580 Additional weaning weight. 50 lbs/head
Semen costs $2,000 Value of additional weight $4,121
Technician fees $750 Change in calving percentage +8%
Additional labor1 $432 Additional calves $4,620
Total Increased Costs $4,012 Total Increased Revenue $8,741
Reduced Revenue
Reduced Costs
Reduced cull bull sales $850 Lower bull ownership/maintenance $1,485
Total Decrease in Profits $4,862 Total Increase in Profits $10,226
Net Change in Profits = $5,364
1For budgeting labor costs, it is assumed 100 head of cattle can be worked in 4.5 hours using four hired workers at an $8/hour wage rate. This is separate from the technician fee.

Note that the increased costs of drugs, semen, technician services, and additional labor exceed the savings from reducing bull requirements. For most beef cattle producers, these items are the most obvious considerations in evaluating the decision of whether or not to implement an AI program. This may help to explain some producers’ reluctance to try AI in their herds. As these budgets show, however, consideration of costs alone provides an incomplete picture of the financial impact of AI adoption. Even when very conservative figures are used, the additional revenue from using AI systems more than makes up for the additional costs of the system.

May 2008

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