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Am I missing something?

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marksmu

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Im about to getting started in the cattle business as a second job - that hopefully one day will become my only job, b/c I hate being behind a desk. Ive read and read and read till I cant read on the subject anymore, and Ive got a plan, but I was curious as to if I'm missing something. So Ill spill it all out, and listen to see if Im crazy or missing anything obvious here. I cant see how I can lose at this given my situation.

First off we've got a family ranch located in SE Texas. I don't own it, but its not going anywhere, its paid for and the USDA payments cover 100% of the taxes so it carries itself no problem. I have been given sole rights to do with it how I please. For the last 2 years I have just been leasing it to a neighbor for grazing, and improving a couple sections for waterfowl hunting, which is my passion.

Its 800 acres, broken up into approximately 70 acre tracts - all connected. Fully fenced, with 3 tractors (100hp, 88hp, and 24hp) The only implements weve got are a watering/dewatering pump for hunting, PH digger, backhoe, mowers, a disc, 3 way blade, and a small 3pt spreader.

My plan is to take my cash that I have been saving for 3 years and buy 10 3fer brangus cattle and a single bull. I chose brangus b/c its hot, humid, and wet here year round, and supposedly according to all my readin they are supposed to tolerate all three of those well.

I plan to set these 10 cows in the first pasture, and rotate them to the other 11 pastures every 2 weeks....each pasture has water and ample grass. I will give the shots, but I am hoping not to supplement with grain or anything else. It almost never freezes, and the ground never freezes, so I should have plenty of grass left year round.

Now being as new at this as possible (still havent bought) what hidden costs am I missing? I pay for fuel, the cattle, and the vet bills....Ill have a single bull and breed it back to the moms, year 1 & 2, sell him year 3, and get another to goto all my new open heifers....keep the heifers, castrate and grass finish the steers, and use the cash to buy more heifers...

What have I missed? It seems to make sense to me, but my uncle is in the same situation, and loses his rear end, and he cant account for where his money is going...just knows he is losing about $10,000/yr on 60 head.

Ive read the posts on here for hours on end...what have I missed?

as an aside - I am an outdoors person who loves working with my hands...I work in an office now to have the money to get to move to the outdoors job later....I am not scared of hard work and have worked many a hard day already. Feel free to be hard on me, all the experience I have in cattle come from watchin my neighbors cattle graze my property. Which I will say graze year round, and eat no hay. So I figure if he can do I can....right?

Goto town on me now. Please!
 

HerefordSire

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Ask your uncle if you can look at his books. That should make it very clear in your mind.
 
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marksmu

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Thats my problem....my uncle keeps no books - he isnt trying to make money. All he wants is the open space exemption he gets from the cattle on his property taxes, and he just likes looking at cows in his pasture. If a heifer doesnt calve he doesnt get rid of her, though he will slaughter her before one that does. He doesnt separate the bull ever and he mixes all his expenses on his place with everything else he does. He has no calving season, and no rhyme or reason. Also he is only there 1 day out of the month, and I go to my place now, several times a week, and at least the whole weekend, though my place is not more than 45 minutes from my front door...

He also is more in central TX, and does not have near the same grass that I do. My 11 pastures are broken up with different grasses too...I have 2 pastures improved bahia, 2 in coastal bermuda, and then 2 in millet, with the remaining in just a mix of what was native...a bit of bermuda, a bit of bluestem, some san augustine, and some weeds.

I know this wont be "easy" but is there something huge an obvious I am missing?
 

dun

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Do you have your facilitys set up to work them. Catch/sorting pens, a method of restraint, etc.?
 

HerefordSire

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My first impression is you do not have economies of scale. Only 10 cows. The other side of the coin is you will not have debt.

For example, say you have to mow 100 acres and it cost you $50 for fuel, or $5 per cow. If you have 100 cows, the same fuel would cost you $.50 per cow. Another example...you repair a tractor for $1,000. With 10 cows, it cost you $100 per cow. With 100 cows, it cost you $10 per cow.

The lack of economies of scale will show up eventually, somewhere, depending on your gross revenue actions down the road.
 
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marksmu

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The property came with a single chute and an old set of gates - but they will work. In terms of the tractors 2 out of 3 are brand new, less than 100 hours. I do see where the economy of scale comes in big time though. I am hoping - big hope here - that I can make my 10 which is really 30 since they are 3fers if the calves all survive, and the mommas have no problems during birth - grow up to about 50 in around 5 years and 100 in 7- my thought being at about 100 head I can clear all repairs as they come up and maybe , just maybe even maybe be able to buy new equipment.

I could make quite a bit from hunting leases, but as I said - its my passion - I dont want to share that, except with family and friends.

In terms of extra mowing - If I have the grass out of hand, I will let my neighbor bale it in exchange for keeping a few bales each time. He has already let me know when I boot his cattle off that he would be interested in doing that if I still excess.
 

mobgrazer

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I know you’re asking something different but I do not want to answer it but I’ll give a decent response.

Pastures 11
Acres 70
Modified rotational grazing
Stocking rate? 100 cows for the light end.
Re growth of 60 to 90 days
Weather- light winters, grass grows 280 days a year? I’m thinking you would be low on the drought scale.

For a full time job I would start with 100 + cows. Move as needed depending on pasture condition. Round bail pastures your cows don’t mow for you. Once bailed 352 day supply of pasture grasses at your top stocking rate then sell when market is in your hands. Rotate what pasture you bail. Stock pile pastures for winter if needed cut high for winter pastures and walk away, don’t bail and let them regrow; this saves the labor and fuel cost of bailing but might push you to strip grazing for this pasture. Feed hay when needed and bail grazing would work well to cut fuel cost.

As far as buying cattle get the best heifers you can buy. I would rent a cheap bull if needed to cut cost. Yes you wound need to cull the off spring but if grown out and marketed right you can get a very good bull. If you buy a good bull use him and lease him out one time when he’s not working for you after the second year sell him for a new bull that’s better for you’re heard and came with a some what different genetic back round.

If you can only find 5 good cattle then buy 8 ok cattle to go with them. No matter what you need to cull hard, track the genetics to help with culling the questionable cows. Starting with 10 sets you should be fine part time if you leased part of the pasture out for a year or two. I would think 300 and would be able to keep it grass fed. If you keep a cow as a keeper this year it cost you money; when you sell its calf’s you make money (depending on market).

If you still want to go with it I hope you secede and would suggest finding someone near you that will let you look through there books even know it’s personal info…
 

HerefordSire

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marksmu":3ury2fhl said:
Yup, Ive got access to excel - background in Mechanical Engineering - so they pretty much cram that down your throat.

Why do you ask?

Do you have all the realistic projected numbers punched in the spreadsheet so you can change one number and all the totals change? For example, there should be three main sheets in the book, namely, Income Statement, Cash Flow Statement, and Balance Sheet. You can also have several spreadsheets tying to the main three spreadsheets. If you were to change any number in your spreadsheets, the totals should update automatically. Have you got this far yet?
 
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marksmu

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I have made a spreadsheet, but the only numbers Ive got to plug in, is the price of the cattle, vaccinations, and hay if I need it. Fuel is pretty much fixed, Ive got 2000 gallons but I really dont run the tractors that much except to water/dewater - which has nothing to do with the cattle. Though I dont have alot of plans for running the tractors that much if I dont have to. May plant a resting field of rice to attract ducks, but again that would not be for the cattle.

My spreadsheet figures in necessary shots, the price of the cattle and 6-8% losses, fuel, and hay - but I am planning to build my herd, so profit the first 5 or so years is not really important....I plan to reinvest any sale into new bred heifers. I figure if I spend a bit now to get started, then I can go at my own pace until I get up to 100 or so cattle. No hurries and no pressure hopefully...just want to enjoy the work and the time I get to be out on the ranch.

I guess I could fertilize the fields more frequently which would add costs, and most likely will convert a field to winter rye again adding costs, but I think i can offset most of my costs by utilizing my neighbors. They want what I have and I have too much for the moment.

I have looked for ranch plans to find basic numbers on costs, and there was a good discussion on here too but so many of the costs do not apply to me b.c the tractors and the land are not mine and wont cost me anything, I just have full access to them - its free to use, but if I break it I have to fix it on my own dime.

Also thanks for all the great inputs! The advice is well taken. A book I read on this also said the same thing...if your not in a hurry and its not your primary source of income, start with quality over quantity and cull heavily - in the long run they say its much better...Im taking that philosophy. Get less by buying better, and hopefully let the benefits of better genetics pay for themselves over time.

Thanks everyone, I need the input keep it coming if I am missing anything.
 

HerefordSire

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There is something bothering me about this whole deal.....allow me to explain....

There are financial advantages of farm ownership when running a farm for profit. You mentioned you do not own the farm but you are going to incur all the expenses. I think it would be wise, since you have outside income, if you signed a purchase contract for the land at the current market value with the owner of the land. Finance the land @ historic low interest rates, as we are currenty seeing, preferably for about 20 years or less depending on the amount of payment you can afford. Make your payments to the owner. The owner no longer gets the financial advantage of running a farm. However, you do. The owner can place the proceeds of the land payments in a tax deferred investment inside a trust account (hopefully with your name on it) so as not to have to pay taxes immediately on capital gains.

Are you with me so far?
 

T-Bro

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Howdy neighbor,
I graduated from BH. Been in your area a lot.
Have friends that live there.
With 800 acres in Chambers County, I would contact the Ag extension agent.
The carrying capacity of pasture land in your area is high, probably 1 to 2 acres per cow/calf pair.
You could have enough momma cows to fill up two or three full time jobs.
Good luck,
 

Angus Cowman

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why don't you go ahead and lease out the pasture you are not going to be using and just run your 10 hd on one pasture and keep one to hay on shares , then take the lease money and buy a few more cows next yr , that would make the most sense to me then as your herd increases and your pasture needs increase just subtract more land out of the lease until you have the stocking rate you want or need JMO
 

Nesikep

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Angus Cowman":3l6r7opk said:
why don't you go ahead and lease out the pasture you are not going to be using and just run your 10 hd on one pasture and keep one to hay on shares , then take the lease money and buy a few more cows next yr , that would make the most sense to me then as your herd increases and your pasture needs increase just subtract more land out of the lease until you have the stocking rate you want or need JMO

I completely agree, if these new tractors have 100 hours on them, you can't move them from one side of the barn to the other without losing money, you have to figure on depreciation, and on that equipment it REALLY high, there's no way owning 10-20 cows would EVER pay for replacing one of them... I would seriously consider getting rid of the largest tractor, I doubt there's anything you need 88HP for until you have at least 50 head, and it'll be better to run the midsize a little longer to accomplish what the big one would do in less time

So where would you lose money? 10 cows = $5000 a year if things are good, 50 is 25000, it's going to be a while until you can have this as a full time job, so while you build up to it, rent out the pasture you don't need and build a herd, and be ready for things to not go smoothly.. we found to double the size of your herd takes 10 years if you want to keep culling properly... actually, it takes longer.. we started out in 1992 with cattle, we bought 12 bred heifers, 3 or 4 weren't any good, lost 3 calves the first year, the 3 heifer calves we bought at the same time did better, but a couple of the cows had developed atypical pneumonia which took them down, we were down to about 10, we've kept about 3 heifer calves a year and we're hovering around 18 cows, with a couple really getting up there in age but still doing alright..

If you're going to do this, do it for the fun, the stories, tall tales, and getting away from your desk, it'll all be great for that. just count on losing money for a long time

Have fun and good luck :)
 

hillsdown

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I would do that different Nesikep, keep the 88 and 100 (although 100 is even small) sell the little one because they actually retain their value because all these acreage people need them. You need a chore tractor with a bucket and grapple and a field tractor with a 3ph. For a field tractor you need over 100 hp if you want to break land etc.

Good luck with your venture mark, and remember it takes money to lose money in the cattle biz.. :lol2:
 

HerefordSire

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The tractors are more valuable than they seem because of IRS section 179 concerning accelerated depreciation which could increase cash flow if you have income, including outside income. However, this section falls under the owner of the tractor.
 

HerefordSire

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True....but if the poster is a mechanical engineer in south Texas, of course depending on how long he has been employed, he\she is probably paying $15K in federal and state income tax from primary employment.

Edit: Oops...Texas doesn't have income tax.
 

Baldie Maker

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If you plan on being a big operation in the near future and aren't worried about costs with a limited number of cattle in the first few years i would pursue A.I. extensively. The genetic improvement factor is tremedous and you can lease a bull to sweep. Also get someone to set up a facility or go over an overview of one with you so that when you do expand you can handle your cattle and do so safely. I would suggest investing in a good squeeze shute. Makes Castration and preg check a breeze compared to a regular ol' head catch. JMO tho
 

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