Cow cost per head....2020

Help Support CattleToday:

gcreekrch

Well-known member
Joined
Apr 26, 2010
Messages
1,633
Reaction score
369
Which is exactly my point.
However, this operation is a business that stands on it's own two feet without outside income. If it wasn't profitable more years than not we would be out of business. Every business has operating costs and capital expenditures. And while these are two different things they are fully financed by the operation. We could argue all day long as to weather a capital expense such as a new salt shed should have it's costs amortized over the life of the shed or be expensed directly against this years calf crop.
Figures lie and liars figure, so no two of us on this board are going to look at the same set of numbers and derive the same set of answers.
I like using actual dollars out of pocket as a yearly cost per cow. Building materials, wages and everything down to a filter for a chain saw go into the current year’s cost per cow. There is no opportunity cost against land when you consider where you and I live because no one else would haul cattle this far in the bush or rent the hay land and then haul them 250 miles away again.
I have always considered the items that get paid for and the principle on my mortgage payment to be my income for the year. Be a nice retirement fund when the last payment is made.
Depreciation costs are what accountants use to keep us rich cattle operators from paying income tax.
 

Silver

Well-known member
Joined
May 19, 2009
Messages
2,968
Reaction score
867
Location
BC Peace River country
I like using actual dollars out of pocket as a yearly cost per cow. Building materials, wages and everything down to a filter for a chain saw go into the current year’s cost per cow.
This is how I do it. Right or wrong, it allows me to fairly accurately monitor changes in year over year operating expenses.
 

Lucky

Well-known member
Joined
Feb 11, 2018
Messages
1,132
Reaction score
92
Location
TX
It’s really hard to figure what I would call capital expenditures in on the cattle operation. Last year I spent $10,000 on a new feed bin and about $1,500 upgrading a feed bunk system I already had about $2,000 in. I’m going to guess the bin will last 20 yrs and still be worth $5,000, the bunk system will probably last the rest of my life with minimal maintenance. Both the bin and the bunk feeders make my life easier and save time and money. How would y’all say to expense this? 10 yrs ago I bought a new tractor for $38,500 5yrs later I sold it for $38,000, how do you expense that out? I guess what I’m getting at is when you spend money on something it should have a pay back, most I know just see spending money as a dead expense and can’t see the payback.
 

Lucky

Well-known member
Joined
Feb 11, 2018
Messages
1,132
Reaction score
92
Location
TX
A lot of stuff you dont know its cost until you see how long it lasts.

I dont count paid for land. Do you count paid for equipment? The point of paying things off is to get rid of the costs.
I don’t count things that are paid for as an expense. I don’t count the land at all. I think the land is a long term investment. I know most on here don’t agree with this but a couple weeks ago I got a call about selling my place again. I told the person no but they did say the value had gone up $220,000 in the last 2 years. How would you figure that into the operation? I do count land maintenance and up keep.
 

Brute 23

Brute 23
CT Supporter
Joined
Apr 19, 2007
Messages
9,159
Reaction score
537
Location
Gulf Coast of South Texas
I don’t count things that are paid for as an expense. I don’t count the land at all. I think the land is a long term investment. I know most on here don’t agree with this but a couple weeks ago I got a call about selling my place again. I told the person no but they did say the value had gone up $220,000 in the last 2 years. How would you figure that into the operation? I do count land maintenance and up keep.
Value of your assets goes up on your balance sheet if the land is part of the operation.

That's probably the biggest difference in expenses. If you own the land is it part of the operation? If it's not is there a rent charge or is it upkeep or how are you doing it.
 

Stocker Steve

Well-known member
Joined
May 2, 2005
Messages
10,639
Reaction score
254
Location
Central Minnesota
Harlan runs back grounding numbers at least once per year for Beef mag. He uses market value for feed, so guess what the numbers show?

Many of us are in the land and cattle businesses. Try to keep them separate. Some years you will be better off in the land and deer businesses.

If you live near the city limit - - then you are in only the land business. Cattle do much better in remote areas.
 

HDRider

Well-known member
Joined
Jul 25, 2011
Messages
5,676
Reaction score
237
Location
NE Arkansas
Do you then disagree with my previous statements?

What are Generally Accepted Accounting Principles?​

Generally accepted accounting principles (GAAP) refer to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB). Public companies in the United States must follow GAAP when their accountants compile their financial statements. GAAP is a combination of authoritative standards (set by policy boards) and the commonly accepted ways of recording and reporting accounting information. GAAP aims to improve the clarity, consistency, and comparability of the communication of financial information.
 

RDFF

Well-known member
Joined
Oct 3, 2019
Messages
229
Reaction score
251
Location
SE Minnesota
I agree that long term capital investments could never be counted against an operation on an "as invested in" expense. $200,000 facility for feeding all paid up front, won't float in the year you built it... and you're going to be using that facility for 30 years or more. That's what the depreciation schedule is for. But DO include that depreciation then in the "bottom line". Some operations are "long term", and may not have a "turnover" in a given year... a reforesting operation, where you had "clear cut" an area, which gave you a "harvest" in one year, might require 30-50 years to get to the next "harvest" on that same acre. Those years in between are "annual loss years", if all the income is applied annually. But there is still a "cost" for that land each and every year, even if the land is paid for. Land, as an asset, is another one... yup, it goes up, it goes down, and THAT VALUATION IS what is essential when looking at total value of the operations ASSETS. Asset valuation is different than annual operational profitability. That's why I feel it important to include a "land rental valuation" as a part of an "annual cost of operation", when trying to figure out if I can be profitable or not.

I cash crop too, on both owned and rented land, but if the land I own and have paid for and use for cropping doesn't have included in its "profit or loss statement" what I could reasonably receive for renting it out without having to do anything to it, then I'm not really comparing the two types of ground fairly... and if I'm not including that value when I'm trying to decide if I'll be raising corn or beans or cattle on that land, or renting it out, on ALL the various options, then I'm not really knowing my true cost of overhead.

Here's my point... and it doesn't matter what kind of operation it is. Let's say I operate on "rented ground" and on owned, paid for ground. If I DON'T include a realistic "land cost" each year against my "owned ground" in the bottom line OPERATIONAL costs, and if "renting" more ground can only "cash flow" and make sense BECAUSE I have some "owned acres" that I DON'T plug in a land cost for, and therefore, I can "mentally" offset the cost of paying rent there, and still be making money on the "overall operation".......... then I'm really subsidizing the profitability of the rented ground with my owned land.... I'm fooling myself into thinking that the rented ground "pays". I might be LOSING money on that rented ground. And if that's the case (the land can't make it without some "free land" to offset the true operating cost), then I'm also fooling myself about the profitability of my owned land too.

If we don't include these costs, then we MAY be raising our commodity and SUPPLYING and selling it for LESS than our true actual cost of production. And if we're willing to do that, then why should the consumer consider paying us what our true cost of production is, as long as the supply continues to roll in? We have to think like businessmen, and if it can't pay it's true cost, we have to stop supplying the marketplace with that commodity, and find some other use for our land.
 

gcreekrch

Well-known member
Joined
Apr 26, 2010
Messages
1,633
Reaction score
369

What are Generally Accepted Accounting Principles?​

Generally accepted accounting principles (GAAP) refer to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB). Public companies in the United States must follow GAAP when their accountants compile their financial statements. GAAP is a combination of authoritative standards (set by policy boards) and the commonly accepted ways of recording and reporting accounting information. GAAP aims to improve the clarity, consistency, and comparability of the communication of financial information.
Canada’s tax structure is different than the US. We don’t get as many subsidies in general but aren’t taxed as heavily on income tax it seems. They get us in many other ways.
 

HDRider

Well-known member
Joined
Jul 25, 2011
Messages
5,676
Reaction score
237
Location
NE Arkansas
Canada’s tax structure is different than the US. We don’t get as many subsidies in general but aren’t taxed as heavily on income tax it seems. They get us in many other ways.

In Canada, accounting standards for all entities outside the public sector are issued by the Accounting Standards Board (AcSB). The AcSB adopted IFRS® Standards as the accounting standards used by publicly accountable enterprises. Private enterprises and not-for-profit organizations can choose to use separately developed standards for those entities or IFRS Standards. Separate accounting standards exist for pension plans.
 

RDFF

Well-known member
Joined
Oct 3, 2019
Messages
229
Reaction score
251
Location
SE Minnesota
If there's more money in OWNING land, than there is in FARMING land, care to guess who will be owning the land? Investors. Why is it nigh onto impossible to buy land today and make it pay farming? Because farmers are willing to raise commodities for less than their true cost of production. And when they/we do, they/we are willing to turn to the government to subsidize that willingness to do it.
 

Brute 23

Brute 23
CT Supporter
Joined
Apr 19, 2007
Messages
9,159
Reaction score
537
Location
Gulf Coast of South Texas
I agree that long term capital investments could never be counted against an operation on an "as invested in" expense. $200,000 facility for feeding all paid up front, won't float in the year you built it... and you're going to be using that facility for 30 years or more. That's what the depreciation schedule is for. But DO include that depreciation then in the "bottom line". Some operations are "long term", and may not have a "turnover" in a given year... a reforesting operation, where you had "clear cut" an area, which gave you a "harvest" in one year, might require 30-50 years to get to the next "harvest" on that same acre. Those years in between are "annual loss years", if all the income is applied annually. But there is still a "cost" for that land each and every year, even if the land is paid for. Land, as an asset, is another one... yup, it goes up, it goes down, and THAT VALUATION IS what is essential when looking at total value of the operations ASSETS. Asset valuation is different than annual operational profitability. That's why I feel it important to include a "land rental valuation" as a part of an "annual cost of operation", when trying to figure out if I can be profitable or not.

I cash crop too, on both owned and rented land, but if the land I own and have paid for and use for cropping doesn't have included in its "profit or loss statement" what I could reasonably receive for renting it out without having to do anything to it, then I'm not really comparing the two types of ground fairly... and if I'm not including that value when I'm trying to decide if I'll be raising corn or beans or cattle on that land, or renting it out, on ALL the various options, then I'm not really knowing my true cost of overhead.

Here's my point... and it doesn't matter what kind of operation it is. Let's say I operate on "rented ground" and on owned, paid for ground. If I DON'T include a realistic "land cost" each year against my "owned ground" in the bottom line OPERATIONAL costs, and if "renting" more ground can only "cash flow" and make sense BECAUSE I have some "owned acres" that I DON'T plug in a land cost for, and therefore, I can "mentally" offset the cost of paying rent there, and still be making money on the "overall operation".......... then I'm really subsidizing the profitability of the rented ground with my owned land.... I'm fooling myself into thinking that the rented ground "pays". I might be LOSING money on that rented ground. And if that's the case (the land can't make it without some "free land" to offset the true operating cost), then I'm also fooling myself about the profitability of my owned land too.

If we don't include these costs, then we MAY be raising our commodity and SUPPLYING and selling it for LESS than our true actual cost of production. And if we're willing to do that, then why should the consumer consider paying us what our true cost of production is, as long as the supply continues to roll in? We have to think like businessmen, and if it can't pay it's true cost, we have to stop supplying the marketplace with that commodity, and find some other use for our land.
That's why you run numbers on the operation as a whole and individual properties. Some properties are more profitable than others. Inherited land vs purchased pand vs rented land may all be different.
 

Brute 23

Brute 23
CT Supporter
Joined
Apr 19, 2007
Messages
9,159
Reaction score
537
Location
Gulf Coast of South Texas
If there's more money in OWNING land, than there is in FARMING land, care to guess who will be owning the land? Investors. Why is it nigh onto impossible to buy land today and make it pay farming? Because farmers are willing to raise commodities for less than their true cost of production. And when they/we do, they/we are willing to turn to the government to subsidize that willingness to do it.

 

Dave

Well-known member
Joined
Jul 12, 2004
Messages
9,494
Reaction score
827
Location
Baker County, Oregon
There is a difference between value and cost. What is the value of land if you covered it with houses? Cows will never pay for that.
 

Lucky

Well-known member
Joined
Feb 11, 2018
Messages
1,132
Reaction score
92
Location
TX
We could spend 2021 arguing both sides of business accounting. Bottom line for me is “Does this feel worth Doing”. For me the cattle generally work out. They always pay for themselves, feed, pasture spraying, cross fencing, and a few upgrades. Plus I like fooling with them and seeing progress being made on the herd and the land.

Everyone in business knows what your tax man turns into the IRS and what you actually make are 2 different things. It’s the same with a balance sheet. It’s easy to be a multimillionaire on paper and at the same time wonder how you gonna make ends meet.
 

Rydero

Well-known member
Joined
Jan 22, 2019
Messages
371
Reaction score
315
Location
Manitoba, Canada
Land investment is its own enterprise. There's already a lot of investment in land by non farmers going on and it will only increase. My response to this is to question why? Mainly because there's money to be made in it. Eventually owning large tracts of land will equate to power as well as the population increases. For these reasons I choose to participate in investing in land. It also gives stability to my cattle operation. Farmers tend to hate non farmers owning land while ignoring the fact that riding land appreciation is usually their retirement plan. Also operationally renting ground is usually cheaper than owning IF you have to buy it.

I look at each thing I do as an enterprise. Pasture is worth what I can rent it for. It's not free on my land because I own it - I have to compete with what I could rent it out for in order for the enterprise to make sense. There's no free hay - it's worth what hay sells for. It's my job to make the big picture make sense I have a number I have to feed a cow for to make money and I have to find a way. Build a small profit into each enterprise and you'll be just fine.
 

Silver

Well-known member
Joined
May 19, 2009
Messages
2,968
Reaction score
867
Location
BC Peace River country

What are Generally Accepted Accounting Principles?​

Generally accepted accounting principles (GAAP) refer to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB). Public companies in the United States must follow GAAP when their accountants compile their financial statements. GAAP is a combination of authoritative standards (set by policy boards) and the commonly accepted ways of recording and reporting accounting information. GAAP aims to improve the clarity, consistency, and comparability of the communication of financial information.
And yet no two accountants will manage the numbers in exactly the same way. Thus the reason everyone has had "good accountant" and a "bad accountant" at some point.
 
Top