Clueless Outsider needs help for Paper

[ALK3BC4]

Hello:

I am currently a student in the University Florida Graduate Tax Program, and I am writing a paper on Cattle Breeding Partnerships. Unfortunately, I am clueless about the economics relating to operating a cattle breeding business, and have been unable to find specific details. I read a few posts from a different thread on here that gave some facts and figures, so I'm hoping to get some responses on just the general basics regarding costs and potential income. I appreciate any help you may have with my questions.

1) On average, what can a quality calf, heifer, and heifer with calf sell for at auction? Also, is there a difference in prices paid in private contracts, and if so, what is the average price you typically see? (*If I'm not using the correct terminology for the various growth stages, feel free to correct me)

2) Is it recommended to purchase an initial herd with the different growth stages, so that some can begin producing income in the short-term while purchasing cheaper calves to develop into breeding heifers?

3) At what point to purchased cows begin producing income?

4) On average, what does it cost per year per calf and per heifer (or other growth stages) for all aspects of operations (labor, feed, land leases, etc.)?

Thank you all so much, and I look forward to any information or help you may have.

 

[Hippie Rancher]

you're in a graduate program yet you want us to do your research?

I will give you the benefit of the doubt and assume your questions only cover a small part of your paper, but really...a few minutes perusing the site would pull up a fair amount of what you asked - one post a few posts below yours has the answers to several of your questions

viewtopic.php?f=8&t=60694

And of course some of what you ask varies by region, breed, and of course good old OPINION. Good luck.


edit strange URL

 

[ALK3BC4]

Thanks for the response HF, and the thread you posted is the one I saw and found some helpful data. The info I'm looking forward is essentially a paragraph in a 50 page paper, so rest assured I'm not trying to have others do my research for me. Plus, technically you the experts are my research-it's basically an interview since you deal with this on a daily basis and likely know the economics of breeding operations. I've search Shorthorn Country, many websites, government census, etc., but I haven't been able to locate specifics on costs or purchase/sales prices. So I have been trying, and the trail has led me here. But I will take your advice and look through some of the other threads to see what I can find.

Thanks again.

 

[upfrombottom]

I am currently a student in the University Florida Graduate Tax Program

The answers to your questions depend on whether you are planning to work for the IRS or a CPA.

 

[Jogeephus]

Exactly what is a cattle breeding partnership?

 

[1982vett]

Exactly what is a cattle breeding partnership?

You know Jogee, the partnership between you and your banker and your Uncle......... :lol:

 

[HOSS]

Thanks for the response HF, and the thread you posted is the one I saw and found some helpful data. The info I'm looking forward is essentially a paragraph in a 50 page paper, so rest assured I'm not trying to have others do my research for me. Plus, technically you the experts are my research-it's basically an interview since you deal with this on a daily basis and likely know the economics of breeding operations. I've search Shorthorn Country, many websites, government census, etc., but I haven't been able to locate specifics on costs or purchase/sales prices. So I have been trying, and the trail has led me here. But I will take your advice and look through some of the other threads to see what I can find.

Thanks again.

I think the USDA website has links to most of the cattle sale results throughout the country. That will give you a good indicator of the average sale price for different weights (growth stages) and a break down by sex and quality grade. Good luck.

 

[ALK3BC4]

Thank you for your help Hoss.

For those that are curious, I'm writing about Walter J. Hoyt III's structure and analyzing it (absent the fraud) under the current tax code.

 

[ALK3BC4]

Hoss:

The USDA market reports look like they will be extremely helpful for the purchase/income side of things. Thank you again for providing me with the source.

Unfortunately I couldn't find anything informing me how to read to charts, so if you (or anyone else) could help with that I would greatly appreciate it.

For example, one of the figures provides:

Feeder Heifers Medium and Large 1
Head Wt Range Avg Wt Price Range Avg Price
5 433 433 117.00 117.00
5 456 456 118.00 118.00
23 510-535 533 109.00-111.50 111.29
21 563-586 577 99.00-105.75 101.68
42 600-645 612 97.50-102.80 101.92
73 666-699 686 91.00-99.00 96.23
85 703-705 703 95.00-97.10 96.87
8 758 758 94.25 94.25
32 805-823 815 92.25-93.75 93.10

I'm assuming that Price Range cannot mean what a single heifer was sold for (or does it), so I'm wondering this is some formula (e.g., $117 per 100 pounds of weight) or some other measure? I guess what I need to know is what these figures mean in terms of actual average sale pers single heifer.

 

[Jogeephus]

Exactly what is a cattle breeding partnership?

You know the imbalancer program you are wanting to start up and other people want to join in? That right there is a cattle breeding partnership.

I was thinking this would be more on the line of a multinational conglomerate.

Alk, never herd of the Hoyt's but I found this timeline pretty interesting. It sure looks like a lot of agencies dropped the ball on this crook.

http://www.mindconnection.com/hoyt/timeline.htm

Its people like this that give honest cattle producers a bad name and draws the IRS's suspicions on us. I think anyone who pays someone to intentionally create deductions for them is dirty as well. I think the old saying if you lay down with dogs you'll get fleas fits this situation well.

Your question on the price is by the cwt. Generally this is used in most situations but many also just say it by the pound. No matter, its all sold on weight either pounds or hundreds of pounds.

edit - Commericially its done this way but in the Hoyt's instance he was a purebred breeder so it may have been by the head. This is probably where the shill sales came into play.

 

[backhoeboogie]

I'm assuming that Price Range cannot mean what a single heifer was sold for (or does it), so I'm wondering this is some formula (e.g., $117 per 100 pounds of weight) or some other measure?

You got it right. $117 per hundred weight.

Reading your posts above, note that once a heifer gives birth, she is a cow.

 

[Howdyjabo]

I would suggest you contact the breeder associations- and interview actual breeders by name. If you are writing a paper on a certain person then you should understand the industry at the level he was playing at.

I will give you one hint from an outsider--- if you base the breeder sales on what they can contribute to the commercial market in actual cash flow -- it doesn't work.. Its a pyramid market- the ones at the bottom will eventually loose out .
And to further skew with cash flow and marketability it is common practice to scratch each others backs and push the market. IE I will buy your bull for this ridiculous amount of money if you buy my heifers for this ridiculous amount of money-- then ignorant buyer three jumps in an buys both bloodlines for even more money.

 

[Jogeephus]

Good point Howdyjabo, that's why I tried to get some specifics as to the partnership. In a commercial operation there is not enough money to create the lure you'd need to get fools to buy into the scam but when you start talking hundred thousand dollar animals, egg and sperm sales some people's imaginations will go wild and they forget we are talking about a four legged creature that doesn't have enough sense to get off the highway.

 

[ALK3BC4]

Thank you all again for your helpful information.

The Hoyt situation was definitely a mess, although unfortunately a lot of the investors were middle class wage earners who thought it was a legit operation that would be a low-cash retirement investment (or so they argued).

I was relying on just the basic economics because the bulk of my analysis is not on any specific breed or breeder (whether purebred or commercial), but just on the investment structure of no upfront cash, debt assumption, and pass-through losses in the initial years that would result in tax savings (relying on eventual gain down the road when the herds were liquidated-essentially a tax deferral structure). Where the figures I'm looking for come into play is just working a hypothetical example through the initial years of operation to see if investors would get to recognize their losses under the tax code-therefore I think I can work with what you have all given me or pointed me to.

But is what you are all saying that while you could get about $600 for a 500 pound heifer on the commercial market, you could fetch a lot more if it were a purebred operation?

 

[Hippie Rancher]

But is what you are all saying that while you could get about $600 for a 500 pound heifer on the commercial market, you could fetch a lot more if it were a purebred operation?

yes cattle are like any other animal out there - and are subject to the same whims and vagaries of market - fads, demands for certain lines, breeds, etc

here is a quick thing I found on the google:

Fink Beef Genetics 2005 Foundation Female Sale Results

Twenty-one states were represented on the buyer's list at the recent Fink Beef Genetics 2005 Angus Foundation Female Sale June 5, 2005, Manhattan, Kansas, along with another 10 states on the bidder list. Seedstock producers bid on females stacked with high accuracy, balanced-trait EPDs. udder quality, soundness and carcass quality from one of the nation's largest producers of Angus and Charolais genetics. Since 1995, Fink Beef Genetics has been recognized as an innovator of several customer services, one of the nation's largest embryo transplant programs, and one of the largest programs using extremely high accuracy, proven genetics in the industry.

High-selling lots included Lot 1, the highest IMF EPD Leachman Right Time daughter in America, selling full interest to Gold Hill Angus, North Carolina, for $15,000. The highest valued female, Lot 7, a New Design 323 daughter, ended with Mark Womack, Missouri, winning the bid for $13,000 for 1/2 interest. Delbert and Sharon Faske, Texas, claimed Lot 4, a Boyd New Day bred heifer for $12,000. A powerful bred heifer by New Design 036, Lot 41, went to Sweetwater Plantation and Sweetwater Farm, Georgia, for $10,000.

The offering consisted of heifer calves, bred heifers, bred cows, and donor females. Niney-six lots averaged $5,017. The American Angus Hall of Fame served as sale managers, and Col. Stanley Stout sold the offering. A capacity crowd was in attendance.

http://www.finkbeefgenetics.com/purebred.html

 

[backhoeboogie]

But is what you are all saying that while you could get about $600 for a 500 pound heifer on the commercial market, you could fetch a lot more if it were a purebred operation?

They are worth whatever anyone is willing to pay.

You might also google "horse trader" Some folks will take advantage of other folks in any business. "These cattle will make you money" is a common sales pitch horse traders use to get to you. There are hundreds more.

During drought periods, the market is flooded with commercial cattle and prices adjust accordingly. People start rebuilding herds in following years and the pickings are pretty slim. Supply and demand factors rule. People selling during down times will claim they are being taken advantage of, even right here on these boards. Others will brag on the deals they get.

There are all kinds of sideline work associated with the cattle and niche markets that interfere with normal commercial operations. There are buyers who legitimately put together groups.

Hay prices can escalate and drop right along with the same supply and demand priciples. If you have to feed and you have to pay through the nose, you may be money ahead at times to cut your losses and sell out.

There is more. Much more. It is all a very diverse market and foreign markets come in to play as well.