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Cattle loan question?

coalburner

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Hello all!
I have a few questions for you, with today's prices what are your thoughts on borrowing money to buy cattle? I currently run 120 head cow/calf operation (no debt) but I might have an upcoming opportunity to pick up another pasture. So what would be an acceptable price to pay for a 3-5 year old cow that's heavy bred? What kind of interest rate on a yearly note? What bank in east Texas or north Louisiana would be good to try and borrow from? I would like to pay this off in 3 years, is that the norm? Just wanted some input, thanks in advance!
 

js1234

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I don't know much about banks in that part of the world. I've done some stuff with a couple banks up in the Panhandle that I'd give a good review but I understand that's a world away from you.
How many more you figuring on buying?
I'm not sure what a closeup calver is bringing in your country but a guy would get them bought out here between $1,500-$1,750 if calvy and 3-5 years old.
While there is plenty of money out there for good operators in the 3's on a line of credit, I guess on a cow note, it would be in the 4's.
Smaller deals, more leveraged operators and other factors might push it into the 5's.
Some may disagree but I think its asking a lot of a cow to settle up the debt in 3 years, IF you decide to finance her, better figure on her taking 4 years, maybe 5.
I'm not adverse to borrowing money from banks, we have really big lines of credit for stockers and cattle on feed and have a few of our more recently purchased ranches that have a ranch payment on them still. That said, to me, financing breeding stock is the least attractive way of borrowing within the cattle segment. To be fair, I could be biased by our own philosophy, we carry lines for stockers or feeders and will borrow money to buy a ranch but we only pay cash for mother cows. Just the way we roll.
That said, I don't think it's undoable and if the situation is right, I don't think you're foolish for doing it. I also recognize that it may be the only way you can get the volume of cows needed bought in the time frame that fits your grass deal. The rub is, in my view, you can only ask a cow to pay for one thing and if she's busy paying herself off, she can't do much else.
 

Nesikep

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js1234, while I do hear you, he's already got 120 head, so lets say he wants to add 60 more for this extra pasture, He's got 180 head to pay down the debt of 60, and 3 years might be doable that way.. If he didn't have the home herd to begin with, I think it would be darned hard to make it pencil out.
The one good thing about cows is you can sell them in within a week.. There have definitely been worse times to borrow money for cows in the last couple years!
 

angus9259

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I wouldn't pay more than $1000-1200 for a bred cow right now of any age. While this is probably the best opportunity for taking a loan to buy cows since money is cheap and cows are cheap, I still struggle to see the payout in the short term.

Do you keep your heifers or need to sell for cash flow? Depending on calf prices in your area, if I were going to take a loan I wonder about taking a loan to buy your heifers from yourself? That would give you a bump of 60 head pretty quick and you make the money.
 

RanchMan90

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You should be able to get what you want bought for $1200-$1500 a head. FSA is loaning money to anyone who qualifies at 1% interest on a 7 year note. You could pay it off in 3 years while giving yourself a margin for error.
 

js1234

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Nesikep":2vwdydne said:
There have definitely been worse times to borrow money for cows in the last couple years!
I would agree with that 100%. If one is so inclined to go the loan for breeding stock route, this is a pretty borrower friendly time to do it.
 

Cross-7

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For good quality young to middle aged cows 3rd trimester
1500-1800 here ( sw ok/ nw Tx)
1st -early 2nd trimester 1200 plus
Lots of junk sale barn cows can be bought for less
 

hurleyjd

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None of my business but I would concentrate on the 120 head to become more efficient and profitable. Lease the land in question and keep your calves and carry them to 900 or so pounds on the new place.
 

farmerjan

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I have to agree to some extent with hurley and angus... Maybe keep most or all the heifers from your own cows, and buy half the number of cows you were thinking. Payments would be spread over the cost of all the cows, and you would have some of your own heifers to keep or sell as the market dictates. In this area you can buy some at bred cow sales, mostly held at the stockyards but often from herd sell downs or dispersals. We do not buy the high priced cows, more often we will buy cows that are older and we figure we can make a little on them after a calf or two. If this is land you are getting, you will want to turn some money over from them so I think I would buy some of the less expensive type cows and keep some of your own heifers. You can buy decent commercial cattle here in the 1100-1200 range for bred heifers and 1100-1500 for bred cows. Strangely, cow calf pairs are often a little cheaper, and the calf is already safely on the ground. It is a good as any time to borrow and with the 120 cows you already have, you ought to be able to pay it off in 3 years if you don't pay too much for them. Even figuring calf prices at the market low here, that's about a $5-600 average per calf (hfrs and strs) off the cows. So a 1200 cow will take 3-4 years to pay off, depending on what it costs you to keep that cow per year. And you still have the salvage value of the cow....which now is half of a year ago but still .50 lb avg. We try to stay under 1100 for any cows or c/cf pairs we buy and some are just to turn out on pasture for the year and turn them over, but most we like to keep 3-4 years at least.

Alot of it has to do what kind of operation you have and what you feel most comfortable doing; the size and carrying capacity of the place you are getting to put them on and what type animals the fences will hold.
 

Jogeephus

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hurleyjd":37jkqow4 said:
None of my business but I would concentrate on the 120 head to become more efficient and profitable. Lease the land in question and keep your calves and carry them to 900 or so pounds on the new place.

I like this idea too. Sometimes you can clear more with less but like Farmerjan said it depends on your setup.
 

JMJ Farms

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RanchMan90":1h2ipwji said:
You should be able to get what you want bought for $1200-$1500 a head. FSA is loaning money to anyone who qualifies at 1% interest on a 7 year note. You could pay it off in 3 years while giving yourself a margin for error.

Which loan program is this under? What are the qualifications? I've got some things I would be interested in restructuring at 1%. I haven't heard of money this cheap.
 

RanchMan90

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JMJ Farms":24uex2d9 said:
RanchMan90":24uex2d9 said:
You should be able to get what you want bought for $1200-$1500 a head. FSA is loaning money to anyone who qualifies at 1% interest on a 7 year note. You could pay it off in 3 years while giving yourself a margin for error.

Which loan program is this under? What are the qualifications? I've got some things I would be interested in restructuring at 1%. I haven't heard of money this cheap.
Farm service agency, it'll be in your local USDA office. Usually works best for less than perfect credit and beginning farmers up to $300,000. It's a lot of paperwork but may be worth checking into.
 

hurleyjd

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JMJ Farms":3g778166 said:
RanchMan90":3g778166 said:
You should be able to get what you want bought for $1200-$1500 a head. FSA is loaning money to anyone who qualifies at 1% interest on a 7 year note. You could pay it off in 3 years while giving yourself a margin for error.

Which loan program is this under? What are the qualifications? I've got some things I would be interested in restructuring at 1%. I haven't heard of money this cheap.

Don't do it that is a government program and you will not like it it is socialism at its best.
 

True Grit Farms

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hurleyjd":2nq72936 said:
JMJ Farms":2nq72936 said:
RanchMan90":2nq72936 said:
You should be able to get what you want bought for $1200-$1500 a head. FSA is loaning money to anyone who qualifies at 1% interest on a 7 year note. You could pay it off in 3 years while giving yourself a margin for error.

Which loan program is this under? What are the qualifications? I've got some things I would be interested in restructuring at 1%. I haven't heard of money this cheap.

Don't do it that is a government program and you will not like it it is socialism at its best.

But it's easy money, and some folks will do anything for a dollar.
 

ddd75

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hurleyjd":1nm8fbtx said:
JMJ Farms":1nm8fbtx said:
RanchMan90":1nm8fbtx said:
You should be able to get what you want bought for $1200-$1500 a head. FSA is loaning money to anyone who qualifies at 1% interest on a 7 year note. You could pay it off in 3 years while giving yourself a margin for error.

Which loan program is this under? What are the qualifications? I've got some things I would be interested in restructuring at 1%. I haven't heard of money this cheap.

Don't do it that is a government program and you will not like it it is socialism at its best.

i did one before. i had to put all my cows, sheep, 35k tractor, livestock trailer, and something else in for collateral. It was something like 200k in collateral for a 50k loan. then they had to come out every year to count everything and make sure i had the equipment still. cheap money but i just paid it off in 2 years(7 year loan) because I didn't care for them coming out and acting like I owed them and they acted like they owned my farm. "bring us a ATV to ride to count all your animals" thats the first thing they said to me when they got out. I Told them they'd have to bring there own atv. they ended up not counting anything and told me to bring all the animals up to the barn to count them. I told them when I got some time I would.. i never did get any time. :deadhorse:
 

JMJ Farms

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True Grit Farms":2bd6m8yu said:
hurleyjd":2bd6m8yu said:
JMJ Farms":2bd6m8yu said:
Which loan program is this under? What are the qualifications? I've got some things I would be interested in restructuring at 1%. I haven't heard of money this cheap.

Don't do it that is a government program and you will not like it it is socialism at its best.

But it's easy money, and some folks will do anything for a dollar.

I've got near perfect credit so I probably won't qualify. Unfortunately I wasn't born with a silver spoon in my hand so I've had to borrow money. I didn't say I was gonna sign up tomorrow but anyone who wouldn't at least be interested into checking into a way to refinance money borrowed at 5-6% into money borrowed at 1% isn't very smart financially. May not be a good idea but without looking and asking, one would never know. Borrowing money is a necessary evil for people like me if they ever want to acquire anything in life before they are too old to enjoy it. When used as a tool and not abused it's actually a very acceptable way to do business. It's like anything else in life, when done responsibly it's a very valuable tool. Some folks don't want to borrow money. Period. I'm fine with that. But I'm also fine with the ones that do. I've been successful in doing it. However based on the replies, it doesn't sound like FSA loans are very customer friendly. Thanks for all the replies to my question.
 

dun

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ddd75":1mjaylmr said:
i did one before. i had to put all my cows, sheep, 35k tractor, livestock trailer, and something else in for collateral. It was something like 200k in collateral for a 50k loan. then they had to come out every year to count everything and make sure i had the equipment still. cheap money but i just paid it off in 2 years(7 year loan) because I didn't care for them coming out and acting like I owed them and they acted like they owned my farm. "bring us a ATV to ride to count all your animals" thats the first thing they said to me when they got out. I Told them they'd have to bring there own atv. they ended up not counting anything and told me to bring all the animals up to the barn to count them. I told them when I got some time I would.. i never did get any time. :deadhorse:
I think a lot of the checking up and inventorying stuff is a loacl office kind of deal. We are apparently fortunate in that all off the people working in our FSA office are also farmers and seem to understand the realities of farming.
 

True Grit Farms

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dun":gry3hc7k said:
ddd75":gry3hc7k said:
i did one before. i had to put all my cows, sheep, 35k tractor, livestock trailer, and something else in for collateral. It was something like 200k in collateral for a 50k loan. then they had to come out every year to count everything and make sure i had the equipment still. cheap money but i just paid it off in 2 years(7 year loan) because I didn't care for them coming out and acting like I owed them and they acted like they owned my farm. "bring us a ATV to ride to count all your animals" thats the first thing they said to me when they got out. I Told them they'd have to bring there own atv. they ended up not counting anything and told me to bring all the animals up to the barn to count them. I told them when I got some time I would.. i never did get any time. :deadhorse:
I think a lot of the checking up and inventorying stuff is a loacl office kind of deal. We are apparently fortunate in that all off the people working in our FSA office are also farmers and seem to understand the realities of farming.

Well here in middle Georgia the FSA comes out yearly to check on my daughter's cows. She borrowed $5k to buy cows as part of the FFA in high school. I put up with the program and endorse it, because it's taught her responsibility and record keeping.
 

hurleyjd

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coalburner":3ilez8ha said:
Hello all!
I have a few questions for you, with today's prices what are your thoughts on borrowing money to buy cattle? I currently run 120 head cow/calf operation (no debt) but I might have an upcoming opportunity to pick up another pasture. So what would be an acceptable price to pay for a 3-5 year old cow that's heavy bred? What kind of interest rate on a yearly note? What bank in east Texas or north Louisiana would be good to try and borrow from? I would like to pay this off in 3 years, is that the norm? Just wanted some input, thanks in advance!

I do not know what the name they go by now but they was at one time called production credit for cows equipment and such. The real estate loaning bunch were Federal Land bank. The one in my area is called LEGACY AG CREDIT ACA. Loan rates in about the 4% range and they pay back the profits to the borrowers. For operating loans this would be the place to check on.

https://www.texasfcs.com/
 

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