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[backhoeboogie]

It was my wife's grandfathers farm and its split between several aunts and my mother in law. I own the old house and a small amount of land right in the middle. I get along with all of the family very well. It's been my wife's dream to farm and live there. I just have to make the numbers work

Run Far away!!! Your brand new fence is not going to be what half of them had in mind. You cut that old dead tree out of the fence row and you killed it. People show up hunting and leave their shotgun shells all over the ground and drink bottles too. They pop a dove and push fences down to retrieve the bird. Stretch your wire etc. I can go on. You aint got a say in anything. If you do you're the azzhole. Lock on your gate and you don't have a key. "Go see Mary if you need in"

Run Dude. Run from this! I aint against borrowing the money if you have a business case analysis. I am against getting screwed and you becoming a bigger outsider than what you already are. It might look good now, just wait. Blood is thicker and if your wife sides with you, it only makes it worse between you and the family.

By they way, if you don't listen to me, I don't blame you. I was hard headed too. They've begged me to come back. They can pound sand.

 

[Dave]

I have made good money on cattle I borrowed to buy. I have also lost good money on cattle I had borrowed money to buy. It is simply risk versus reward. However I never borrow more than I can afford to lose. To me that means if I had 30 pairs I would only borrow enough to buy another 30 pairs. If you pay real value (not inflated value) for those you buy your present cattle could cover a 50% drop in the cattle market. I seriously doubt that cattle will lose 50% of their value at this point. I wouldn't get carried away buying fancy cow. Raise them later. Just buy good commercial cows but breed them to real good bulls.

 

[farmerjan]

This is a decent time to buy cattle. But, there is no guarantee they will stay where they are, and the talk is that they will stagnate for several more years. That's the "talk". Talk had it that prices would stay up until 2016 or 2017 because the cow herd numbers would take at least that long to rebuild.... well guess what, the prices crashed to HALF or less of what they were in 2014 and early 2015. I don't think they will lose another 50% of their value....but if the economy of this country can't get going all bets are off. And if the liberal *%#$@* idiots don't quit trying to stop the new administration from at least trying to fix some of this mess, then we are going to go no where.

All that said, we have bought some and continue to buy and sell some. We had borrowed to be able to expand, BEFORE it got crazy and I wish that we had sold a third of the cows when it hit the highs in 2014. We could have sold 40 and bought back 70 or more for the same or less money. HINDSIGHT..

I would not touch your 401K. I would only put in what your company matches, take any extra and put it towards cows. I would also be inclined to buy another 30 or so bred cows or cow/calf pairs. Bank or farm credit loan...lowest interest you can find. NOT FANCY stuff as Dave has said. Just decent stuff that can be had in alot of places for less than 1000 a piece. We are buying stuff in the 900 range avg. Our last 19 lt weight heifers paid for the 10 bred cows we bought that are due to calve this spring. We still have nearly all the mommas of those 19 heifers also due to calve in the spring. In 2 years you ought to be able to pay off most of the borrowed money on the calf sales at TODAYS prices. That's not figuring what it will cost you to keep the cows, but if the land is available to rent/lease; and it doesn't require alot of work like fences, then the third year SHOULD find you coming out somewhat near even. If something happens, and you lose the lease, you will hopefully be able to sell the cows as pairs or with calves by their side for at least what you have in them and pay off the loan with no loss. In the process you should be able to keep 5-10 of the best heifers to add to the herd, and to cover any sales of old or open cows.

It's a gamble at this point. DO NOT QUIT your job, keep it for as long as you can to see if this will work. Plus a couple more things to consider. HEALTH CARE; do you have it through work? Who knows what will happen in the next couple of years. And at the outside, even if it gets cheaper or more available....what happens if you get hurt and you don't have it because you don't have that job.....Take it from someone who is older, and about to lose mine through no fault of my own, with several years left before I am eligible for medicare....

How long will your 401K last if you do retire at 42?...you won't be eligible for SS for a minimum of 20 years for reduced benefits, if it is even still there by then. With everything paid for, those cows will hopefully give you a small paycheck...but what if you have a disaster and you lose even 10 calves....There goes your paycheck.

Not trying to be negative. Just don't get yourself in too deep, going from 30 to 100 in one fell swoop. Maybe try doubling your numbers with some fair to decent cows...not tripling. Keep your heifers to heavier weights, keep the steers to heavier weights on the extra land. Utilize the land with what you already have available so you don't have so much invested.

If you can get the "family land" do it as a BUSINESS venture; legal lease, so that you have control for the lease period, so everyone knows that they are getting and not getting, so that there are NO hard feelings if it doesn't work and you get out at the end. If it works, then great. Try to buy them out, do a lease/purchase...BUT DO IT as a business deal. Protect yourself and your wife.

 

[No Rest Farm]

That's some really good advice, I like the idea of borrowing the money to buy 30 more cows and then using the rest of the land to grow out the calves after weaning.
A bit more details on my situation. My wife is self employed and makes close to enough to pay the bills. I serve in local government and the wife and I have insurance through the position I hold. My term is for 3 more years so I'm covered on healthcare during that period. EPA regulations has pretty much killed off the business I started 8 years ago so that's coming to an end anyway I I will have to find something else to do.
So I guess my real goal is to get to a place that I'm making a bit of money off the farm in 3 years. I've always been a bit of an enterprising guy. I will find some other ways to make a dollar along the way.
Again thanks for all the advice. It's helped me have a better perspective

 

[True Grit Farms]

I'd rather have cows than paper. At least I can see my money, I'm not convinced that a 401k isn't a ponzI scam.

 

[Ol' 243]

I'd rather have cows than paper. At least I can see my money, I'm not convinced that a 401k isn't a ponzI scam.

Make that two of us.

 

[Brute 23]

401K is a great tool. Just like any tool if you don't understand how to use it you can get hurt. Certain tools do certain jobs better and than others. Putting money in your 401K has a purpose just like putting money in cattle.

Banking on living off of cattle or retiring off of cattle is a far stretch. You have to handle a lot of cattle to make a little money. I see cattle as more of an asset to park money in, not so much some thing that cash flows a lot.

 

[TexasBred]

I'd rather have cows than paper. At least I can see my money, I'm not convinced that a 401k isn't a ponzI scam.

Make that two of us.

It's your money....real money and part will be matched by your employer. Only restrictions are period until fully vested in order to get employers matching funds and of if you withdraw early you simply pay the tax on it like ordinary income plus an early withdrawal penalty. Not even close to being a Ponzi scheme. Much better than IRA's because of higher amounts you can deposit each year along with employer matching funds.

 

[skyhightree1]

I'd rather have cows than paper. At least I can see my money, I'm not convinced that a 401k isn't a ponzI scam.

I like cows too but land is where you can really see your money... Cows as we know go up and lately WAY down... Land only goes up in value since none is being made anymore.. They can't import land from South America. Cows can die on you and you lose your money. Dirt not so much its still there.

 

[M-5]

I'd rather have cows than paper. At least I can see my money, I'm not convinced that a 401k isn't a ponzI scam.

I like cows too but land is where you can really see your money... Cows as we know go up and lately WAY down... Land only goes up in value since none is being made anymore.. They can't import land from South America. Cows can die on you and you lose your money. Dirt not so much its still there.

that's true for the most part but a lot of folks bought land back in 2005 to 2009 and paid 3 times what its worth today,

 

[skyhightree1]

I'd rather have cows than paper. At least I can see my money, I'm not convinced that a 401k isn't a ponzI scam.

I like cows too but land is where you can really see your money... Cows as we know go up and lately WAY down... Land only goes up in value since none is being made anymore.. They can't import land from South America. Cows can die on you and you lose your money. Dirt not so much its still there.

that's true for the most part but a lot of folks bought land back in 2005 to 2009 and paid 3 times what its worth today,

I don't know enough about raw land purchases that lost money then, but I know lots of folks lost money on real estate " Housing "

 

[RanchMan90]

There's more than one way to hedge a bet. Contract lease it to protect yourself and the landowner for 5 years or the duration of the cattle debt. Contract or insure the cattle to lower your risk.Try to optimize not maximize at first.

 

[No Rest Farm]

The retirement plan is from a former employer. I haven't put any money into this plan for about 8 years. I actually got really lucky, I left my former job in 2007 and played the market almost perfectly in the 2008 crash. Money out of one plan, market crash and then I put the money back in another plan. Complete luck but I have about 7 times in the account compared to what I put in.

 

[farmerjan]

Sounds like you are smart and lucky especially with the 401K. Since it is in a plan making money, can you borrow against it? Use it for collateral? That way it is still invested and making you the money you say you were lucky to hit....borrow at a lower rate usually. Buy another 30 or so cows, hold your calves a little longer to utilize the farm, on a lease, watch the markets and when it looks a little better, be able to sell some quickly to take advantage of the situation.
That's what we have done/are doing. Have sold some heifers that were mediocre, at prices that were up about $.15-25 a lb more than in dec. Have some more and I hope they will be going by early march regardless of their size, as I think that once alot of these guys get set with grass cattle, the prices will fall. And with the amount of leftover hay around here, they are buying early and feeding for a month or 6 weeks at a not very high price. We will have another 75 or more to wean early summer when we preg check the fall calving groups and get them separated so the cows will get a rest and put a little more condition on.
It has taken us nearly 20 years to get to this place; once we bought 40 breds and doubled our size, kept our better heifers and added. Then maybe 4 years ago we bought about 50 from our friend that had cancer. They were old, and we got them for about lb price but at that time it was about 1.00 lb. Still half were bred with big calves he just sold off and the other half had small calves on them. We have kept some heifers out of them, but the calf sales have paid for the cows and the last of the cows will be leaving this next month. It was a cash flow deal more than a make money, and it really helped out his widow and it helped pay the rent on his farm that we lease. It served it's purpose.
All that said, both my son and I work off the farm jobs too.

 

[riquezada]

Our first house paid off when I was 35, the first farm when I was 36. I say leave the 401K alone. I have raised heifers for years but I have started to sell them and buy bred cows. Some will bring what a cow costs. The return seems so much quicker. Some cows turn out really good, some in the middle and some duds...same true for heifers but at least with a mature cow you most likely will find out quicker...after a lengthy time of consideration we did pull a line of credit on the 2nd paid off farm to expand...btw we originally sold the 1st farm to buy the 2nd one...

 

[No Rest Farm]

Sounds like you are smart and lucky especially with the 401K. Since it is in a plan making money, can you borrow against it? Use it for collateral? That way it is still invested and making you the money you say you were lucky to hit....borrow at a lower rate usually. Buy another 30 or so cows, hold your calves a little longer to utilize the farm, on a lease, watch the markets and when it looks a little better, be able to sell some quickly to take advantage of the situation.
That's what we have done/are doing. Have sold some heifers that were mediocre, at prices that were up about $.15-25 a lb more than in dec. Have some more and I hope they will be going by early march regardless of their size, as I think that once alot of these guys get set with grass cattle, the prices will fall. And with the amount of leftover hay around here, they are buying early and feeding for a month or 6 weeks at a not very high price. We will have another 75 or more to wean early summer when we preg check the fall calving groups and get them separated so the cows will get a rest and put a little more condition on.
It has taken us nearly 20 years to get to this place; once we bought 40 breds and doubled our size, kept our better heifers and added. Then maybe 4 years ago we bought about 50 from our friend that had cancer. They were old, and we got them for about lb price but at that time it was about 1.00 lb. Still half were bred with big calves he just sold off and the other half had small calves on them. We have kept some heifers out of them, but the calf sales have paid for the cows and the last of the cows will be leaving this next month. It was a cash flow deal more than a make money, and it really helped out his widow and it helped pay the rent on his farm that we lease. It served it's purpose.
All that said, both my son and I work off the farm jobs too.

I like the idea of using some of the land to background my weaned calves. I agree with you that being flexible on selling calves makes a big difference.

 

[RanchMan90]

Sounds like you are smart and lucky especially with the 401K. Since it is in a plan making money, can you borrow against it? Use it for collateral? That way it is still invested and making you the money you say you were lucky to hit....borrow at a lower rate usually. Buy another 30 or so cows, hold your calves a little longer to utilize the farm, on a lease, watch the markets and when it looks a little better, be able to sell some quickly to take advantage of the situation.
That's what we have done/are doing. Have sold some heifers that were mediocre, at prices that were up about $.15-25 a lb more than in dec. Have some more and I hope they will be going by early march regardless of their size, as I think that once alot of these guys get set with grass cattle, the prices will fall. And with the amount of leftover hay around here, they are buying early and feeding for a month or 6 weeks at a not very high price. We will have another 75 or more to wean early summer when we preg check the fall calving groups and get them separated so the cows will get a rest and put a little more condition on.
It has taken us nearly 20 years to get to this place; once we bought 40 breds and doubled our size, kept our better heifers and added. Then maybe 4 years ago we bought about 50 from our friend that had cancer. They were old, and we got them for about lb price but at that time it was about 1.00 lb. Still half were bred with big calves he just sold off and the other half had small calves on them. We have kept some heifers out of them, but the calf sales have paid for the cows and the last of the cows will be leaving this next month. It was a cash flow deal more than a make money, and it really helped out his widow and it helped pay the rent on his farm that we lease. It served it's purpose.
All that said, both my son and I work off the farm jobs too.

You always seem to have an attention to detail. Have you seen a seasonal trend with calf prices over the years?

 

[Stocker Steve]

In a year where the funds are not controlling price:

- MN calf prices bottom in mid Nov (after pasture water freezes up and before holidays)
- MN calf prices bounce in early Jan (when corn farmer feedlots load up after holidays)
- MN calf prices peak after snow melt and before field work starts (when small farmers buy in to utilize "free" grass)

 

[Stocker Steve]

I've wanted to expand and farm full time but just haven't found the pasture to rent. It's looking like I'm going to get several opportunities this year which could result in running my numbers up to around 100 pairs. So my question revolves around how to pay for the additional cows.

Buying cows may reduce your income due to interest and principal payments. So, you need to set an income goal first, and then have some one help you do stock flow and cash flow plans. I am not sure that 100 pairs is even close to a living. You need your own numbers. A bank would be happy to talk to you if the numbers look good.

I have seen a few folks quit their day job and go full time on cattle. Most get things paid off first -- and then either send the wife to town for benefits or sell higher value (breeding or grass fed or back grounded) stock. I am working on higher value.

Look at the graphs in Harlan' article in the last issue of Beef magazine. The guy used as an example has 250 cows and is breaking even... :help: Next month his operation gets a make over.

 

[shaz]

If you raise cows on land your in-laws own do you think they'll want a cut sooner or later?