mncowboy
Well-known member
If you not retaining any of your heifers, there's no use in buying anything other than the most average bull out there being the genetics are heading out the driveway every year.
Cow turnover rate
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Dave
Well-known member
I would disagree with this. I still sell steers and heifers that leave by the pound. That is the main source of income here and a well bred steer is going to weigh more than one sired by the most average bull out there. There are some big ranches here who have been using good genetic for years. The second cut of their heifers are packing the same genetics as the ones they kept.mncowboy said:
Nesikep
Well-known member
Your tax codes must be different than ours
It makes no difference to your taxes whether you buy or raise them... Livestock is 100% depreciable the year it's bought. So you sell a heifer to buy one (for the sake of argument lets say they're both $1000), your income goes up $1000 and it's completely offset by the $1000 purchase price of the next one.. totally moot point.. There's no additional writeoff if either of them keel over at any point.. One never was an expense other than her feed, the other you've already called her an expense when you bought her... while she's alive she's an asset, but so is the one you raised.
If you sell a heifer calf and buy a bred heifer you're saving a year of feed, but now you're probably paying considerably more for her and she better perform to pay that off.
I'll keep exceptional cows until they fall over, the rest I keep until it looks like I have something better to replace them with, age doesn't really factor into it, it's just priorities... If they're trouble free even if they just have average calves they can hang around a decade or so.. I have a 14 year old I've been looking for excuses to get rid of.. always had others to go on the truck though
It makes no difference to your taxes whether you buy or raise them... Livestock is 100% depreciable the year it's bought. So you sell a heifer to buy one (for the sake of argument lets say they're both $1000), your income goes up $1000 and it's completely offset by the $1000 purchase price of the next one.. totally moot point.. There's no additional writeoff if either of them keel over at any point.. One never was an expense other than her feed, the other you've already called her an expense when you bought her... while she's alive she's an asset, but so is the one you raised.
If you sell a heifer calf and buy a bred heifer you're saving a year of feed, but now you're probably paying considerably more for her and she better perform to pay that off.
I'll keep exceptional cows until they fall over, the rest I keep until it looks like I have something better to replace them with, age doesn't really factor into it, it's just priorities... If they're trouble free even if they just have average calves they can hang around a decade or so.. I have a 14 year old I've been looking for excuses to get rid of.. always had others to go on the truck though
Caustic Burno
Well-known member
Nesikep said:
A retained heifer here has no value to the IRS unless sold. If she falls over dead there is no write off for value only the inputs to maintain her.
There is no benefit to the terminal commercial operation to retain.
The purchased heifer has depreciation value along with inputs. The retained has no depreciation value.
Nesikep
Well-known member
Over how long do you typically write them off? It still sounds like you're chasing your tail, If you're selling one of your heifers she's income, using that income to buy one that will be expensed still is a zero sum game
Caustic Burno
Well-known member
Nesikep said:
There is no chasing your selling your 5 or 6 wt heifers as feeders. You replace the cull cow with a heifer ready to breed.
It's not a zero sum game a retained heifer will easily have 1500 in inputs.
You can take the cull cow price put on a bovine ready for production everyday cheaper than you can raise one.
Secondly if she craps out she can at least be written off.
Got get past the pasture blindness.
Nesikep
Well-known member
I'm not arguing that you can buy one cheaper than you can raise one, I'm not talking about quality differences.. I'm only talking about the tax part.
So you sell your cull cow, that's income, and you're going to put that either toward the costs of raising a heifer or buying one...
If you're buying one, it means you're also selling one of your heifers instead of keeping her.. so you have 2 animals counting as income to buy one that'll be expensed, and I figure Cull cow + Heifer calf is probably going to be pretty close to the price of decent bred heifer, give or take.
If you're retaining the heifer, you sell the cull cow, that goes toward the cost of raising a heifer calf which doesn't count as income. If she costs more to raise than you can buy her for, shouldn't you be happy for all those write-offs?
One thing I'm darned sure of is the IRS wouldn't let you write something off twice, so either you're expensing a purchased heifer immediately, or if you do it over the years, if she'd fall over dead the best you could do is write off her remaining book value... If you'd sell her, you'd be counting anything over book value as income.
It sounds like an incredibly complicated way of doing it, if they're expensed on the year they're purchased, and income as they're sold it's a lot easier.
So you sell your cull cow, that's income, and you're going to put that either toward the costs of raising a heifer or buying one...
If you're buying one, it means you're also selling one of your heifers instead of keeping her.. so you have 2 animals counting as income to buy one that'll be expensed, and I figure Cull cow + Heifer calf is probably going to be pretty close to the price of decent bred heifer, give or take.
If you're retaining the heifer, you sell the cull cow, that goes toward the cost of raising a heifer calf which doesn't count as income. If she costs more to raise than you can buy her for, shouldn't you be happy for all those write-offs?
One thing I'm darned sure of is the IRS wouldn't let you write something off twice, so either you're expensing a purchased heifer immediately, or if you do it over the years, if she'd fall over dead the best you could do is write off her remaining book value... If you'd sell her, you'd be counting anything over book value as income.
It sounds like an incredibly complicated way of doing it, if they're expensed on the year they're purchased, and income as they're sold it's a lot easier.
Stocker Steve
Well-known member
Future results will vary, but mostly lately usually we can sell a heifer calf for U$S 700 to 800, and buy back a bred for $1200 to 1300. Call it $500 to boot. So 500 divided by 365 is $1.37/day to breakeven on development. Can you do this? Possible for a lean grazing operation. Not possible for a confinement operation.
Meanwhile back at the ranch, we used the feed that could have raised half a calf to develop the heifer for one year. Assuming you make money on your calves - - we are giving up half of perhaps U$S 150/calf or $75/heifer/yr or $0.21/day. So now breakeven is costing $1.37 minus 0.21 or $1.16/day. Tough target. Hope you leased some grass for almost nothing. :cowboy:
But the guy in the green eye shade is mumbling about time value of money. We will ignore this in the age of 1.5% interest. He was also concerned about tax rates, but Trump fixed that. Then there are the skinny cull heifers, but we sold them for a premium as grass fed. :lol: So the big net worth question is how much is that bred heifer appreciating? If there is ever a cattle price cycle again, then I think there will be a couple years where bred heifers pay well. Perhaps 3 years out of 12...
Its all about inventory management.
Meanwhile back at the ranch, we used the feed that could have raised half a calf to develop the heifer for one year. Assuming you make money on your calves - - we are giving up half of perhaps U$S 150/calf or $75/heifer/yr or $0.21/day. So now breakeven is costing $1.37 minus 0.21 or $1.16/day. Tough target. Hope you leased some grass for almost nothing. :cowboy:
But the guy in the green eye shade is mumbling about time value of money. We will ignore this in the age of 1.5% interest. He was also concerned about tax rates, but Trump fixed that. Then there are the skinny cull heifers, but we sold them for a premium as grass fed. :lol: So the big net worth question is how much is that bred heifer appreciating? If there is ever a cattle price cycle again, then I think there will be a couple years where bred heifers pay well. Perhaps 3 years out of 12...
Its all about inventory management.
I sold some 15 yr old cows this winter that still brought $750. I dont like to keep much past that if at all possible. Hopefully the genetics and herd has improved over that time thru heifer retention.
Nesikep
Well-known member
That equation puts absolutely no value on the risk of buying something you know nothing about, vs when you raise your own you have a better idea of the genetics behind it. One thing that's certain to me, unless you're paying a premium and buying the pick of a group from a good herd, you'll never make a whole lot of advancements on your herd... and those heifers won't be cheaper than the ones you raise yourself.Stocker Steve said:
There are no tax benefits to buying vs retaining. The "IRS value" of that retained heifer is what ever costs you have associated with raising her. All that cost will be written off. That will be offset by the taxes you pay when you sell her. Sound familiar...
If you run the math it's a wash if you depreciate vs writing off expenses.
I assure you if one way more beneficial to you than the other the IRS would change it. They are going to get their money either way.
The guys trying to generate cash flow will look at it differently than guys trying to manage an asset.
Retaining heifers from an asset stand point can be awesome. It's like a stock splitting multiple times inside your 401K. You get exponential growth over time.
If you run the math it's a wash if you depreciate vs writing off expenses.
I assure you if one way more beneficial to you than the other the IRS would change it. They are going to get their money either way.
The guys trying to generate cash flow will look at it differently than guys trying to manage an asset.
Retaining heifers from an asset stand point can be awesome. It's like a stock splitting multiple times inside your 401K. You get exponential growth over time.
Another problem I see is now since keeping track of the lbs per day of gain on our calves is a cow that you scoop up at the auction can cost you a lot of money long term. If she is a #2/day cow rather than #3-4 you are leaving significant dollars on the table. Even as a commercial producer if if you are moving any kind of volume it adds up. I dont know if your auction barn price savings can cover that.
I'm not against buying from outside sources. In fact I think its a good idea to better your herd. With that said, the ab is not going to be your saviour.
I'm not against buying from outside sources. In fact I think its a good idea to better your herd. With that said, the ab is not going to be your saviour.
Nesikep
Well-known member
Agreed!Brute 23 said:
Stocker Steve
Well-known member
Brute 23" There are no tax benefits to buying vs retaining. [/quote said:
True Grit Farms
Well-known member
There's excellent cows sold at the sale barn everyday. You just need to weed through them.
True Grit Farms said:
Lots of problems being passed along as well.
Bright Raven
Well-known member
How do you source good replacements? If you go to a seedstock producer you are going to pay a premium for bred heifers. If you go to the Stockyards and buy whatever comes through the ring, you may be bringing home someone else's problem 5 out of 10 times.
Just judging from this region, many producers buy their replacements. My neighbor buys all his at the Stockyards. Some don't do well, they die, he has to treat them, etc. It is a rough road to hoe. Some buy from "quasi seedstock" producers. These are producers who are not high end seedstock producers. They usually don't register their calves. Their practice is to pick out some better heifers and sell them to locals as replacements. Some are nice and some are not.
With all the posts on CT about breeding practices to fit your cattle to the environment and breeding for good feet, good udders, good maternal instincts, etc. In practice, that is not happening.
Just judging from this region, many producers buy their replacements. My neighbor buys all his at the Stockyards. Some don't do well, they die, he has to treat them, etc. It is a rough road to hoe. Some buy from "quasi seedstock" producers. These are producers who are not high end seedstock producers. They usually don't register their calves. Their practice is to pick out some better heifers and sell them to locals as replacements. Some are nice and some are not.
With all the posts on CT about breeding practices to fit your cattle to the environment and breeding for good feet, good udders, good maternal instincts, etc. In practice, that is not happening.
Stocker Steve
Well-known member
Bright Raven" How do you source good replacements? [/quote said:
True Grit Farms
Well-known member
TennesseeTuxedo said:
Putting in seat time and doing your homework is mandatory to making quality purchases. But that can be said for about anything you buy.
Bright Raven
Well-known member
I have known my share of rough cobs who spend their life at the Stockyards. The ones around here don't give a hoot what the genetics behind a cow are! They don't care about anything but getting a calf on the ground. If you ask them about breeding "to fit the environment" , they will think you are trying to salvage their soul, then they will get up and go to the lobby for a cup of free coffee.
