First Timer Buying Feedlot Cattle

[madmax83]

Hello all,

I am in the process of getting approved for a line of credit so that I can begin feeding cattle as a long term investment strategy for my family and myself. Not looking for a get rich quick scheme, I am in this for the long haul to set up a good long term business. Currently I am looking at a pen or half a pen of "2nd rate" Holstein steers that came out of California sale barns that will feed until Feb here in the Panhandle of Texas. I have a good banker in mind and have a meeting with him next week, he specializes in Ag loans and also finances the feedlot I will be using. I will also seek out a book keeper to guide me through the finances and taxes.

What I want to know based off all the knowledge available here is what questions should I be asking the feedlot manager and the banker to set myself up for success? I am doing as much research on my own as I can and am very excited to begin this process. I am not a complete novice as I work in the industry doing technology for feedlots. I have a close working relationship with around 45 different feedlot operations, however I have always worked on the back side of the feeding industry and would now like to take advantage of my position and participate in the front end. Any advice, opinions, or suggestions would be welcomed.

v/r

Jason

 

[bmoore87]

No first hand experience with using a custom feedlot but i would want to see some performance of comparable groups of cattle. Their death rate, feed conversions and any tracking and would probably compare it to a couple yards in the area.

 

[milkmaid]

Light weight Holstein steers out of a sale barn and shipped from CA to TX are high risk calves. I'd ask about performance of similar quality cattle (Holsteins!) at the yard (morbidity, mortality, case fatality). I'd ask about BRD, mycoplasma, digestive, and "other" causes of fatality on the yard - Holsteins are notorious for finding ways to die. I'd ask about intake and processing protocols for those type of calves (starting them on feed, metaphylaxis and with what). I'd ask about implants (what and when) and buller rate and buller pen management. I'd ask about stocking density, bunk space, pen cleaning (if they're getting dumped in there for 200 days those pen conditions are going to cause problems in the winter). I'd want to know who their consulting veterinarian is.

Definitely ask about feed conversion, cost of gain.

Disclaimer.... I have no idea if customers typically ask these questions. I'm a vet (or will be in 27 days!) and after working on quite a few yards and traveling with dozen good feedlot consultants, those are things *I* would want to know before I fed cattle anywhere...

 

[1982vett]

Hello all,

I am in the process of getting approved for a line of credit so that I can begin feeding cattle as a long term investment strategy for my family and myself. Not looking for a get rich quick scheme, I am in this for the long haul to set up a good long term business. Currently I am looking at a pen or half a pen of "2nd rate" Holstein steers that came out of California sale barns that will feed until Feb here in the Panhandle of Texas. I have a good banker in mind and have a meeting with him next week, he specializes in Ag loans and also finances the feedlot I will be using. I will also seek out a book keeper to guide me through the finances and taxes.

What I want to know based off all the knowledge available here is what questions should I be asking the feedlot manager and the banker to set myself up for success? I am doing as much research on my own as I can and am very excited to begin this process. I am not a complete novice as I work in the industry doing technology for feedlots. I have a close working relationship with around 45 different feedlot operations, however I have always worked on the back side of the feeding industry and would now like to take advantage of my position and participate in the front end. Any advice, opinions, or suggestions would be welcomed.

v/r

Jason

sounds like a disaster looking for a place to happen....but it's your money...or is it?

 

[sim.-ang.king]

Only advise I can give you is you need to be able to ID sick animals, able to read the feed pan, and have a good feed plan. If you can't get those down, then your attempt at making a profit will be futile.

 

[Texas PaPaw]

Many custom feed yards will partner with you where you have a certain % interest in a pen of cattle and they will own the balance. Would suggest you look into something like that as the feedyard will have some of its own skin in the game in a partnership feeding deal and should buy cattle that are the best feeding value at the time. Many yards have prearranged financing agreements for their customers making them a one stop shop.

Remember-Good judgement comes from experience and experience comes from bad judgement. Would use feedyard managers experience to reduce the expense of your own experience.

Bottom line is you will get experience feeding cattle. It's just a matter of what the tuition cost will be.

 

[Kingfisher]

Just curious how many Holstein steers your speaking of?
Not sure about your strategy or out come expectations when it seems that the market for high end beef is most certainly something black hided or now even Hereford brand influenced. I'm not sure I've ever seen a menu touting Holstein beef so I suppose your just raising Big Macs.

 

[madmax83]

I appreciate everyone's comments and information thus far. I can see by some of your comments that many of you are feeling I may be a tad bit crazy, and perhaps I am, however this feedlot has a proven track record with this specific situation. Matter of fact feeding spotted cows from another part of the country in North Texas is not an uncommon phenomenon. I may in fact partner with the manager on this pen, I don't have specifics yet. The manager will ensure the cattle are established in the yard before he sales them i.e. health is stable and have been on feed a few weeks. That will determine the headcount available to me for purchase, and then my banker will determine what he will allow me to do as I am planning to finance the calves and the feed. I personally know the Vet and Nutritionist for the yard as well and they have my faith.

As I mentioned before I am not looking for an instance success formula, I am looking to establish a business for the long run. If I can make a few bucks a head on this go round to put back into the next and gain experience I'll be happy. Also I am the software tech for the feedlot, managing their bunk and animal health systems, so I have rare insight to performance from similar pens.

I guess my concerns at this point are, how will the medicine bills play into everything? Do I need to borrow more in expectation of that and other circumstances? What types of lending are available? I understand that these are questions I need to ask to the appropriate folks however those of you that have experience I do certainly appreciate your insight.

 

[Texas PaPaw]

If we're me would only have a max of 25% ownership of any pen being fed at first. This will minimize your investment/risk and will make the yard have most of the risk in any particular pen. When/as you build more equity add additional pens of cattle but keep your % at 25 to spread your risk in any single pen of cattle until you have several years experience. If Feedyard is not willing to own 75% interest and let you have 25% need to find another yard that will. As many empty pens as there are in Tx panhandle shouldn't be difficult to find a good yard that will partner with you as custom feeding customers have gotten scarce over the past 5-6 years.

Would also wait until fall to place the first pen as the seasonal market fluctuations should be more favorable then.

Just another 2 cents worth.

 

[dun]

I don;t know how it works, but when we retained full or partial ownership of claves going to the feedlot we purchased puts on them as some insurance against losing our butts. We left it to the feedlot to do it.

 

[Kingfisher]

I don;t know how it works, but when we retained full or partial ownership of claves going to the feedlot we purchased puts on them as some insurance against losing our butts. We left it to the feedlot to do it.

Yes sir that's the way to do it w feeders & stockers especially if your borrowing money. If your bankers smart enough he can help you make a prudent investment to insure a successful partnership!

 

[madmax83]

I don;t know how it works, but when we retained full or partial ownership of calves going to the feedlot we purchased puts on them as some insurance against losing our butts. We left it to the feedlot to do it.

Yes sir that's the way to do it w feeders & stockers especially if your borrowing money. If your bankers smart enough he can help you make a prudent investment to insure a successful partnership!

I was curious about insurance programs for feeders. Definitely add that to my list of things to talk about.

 

[js1234]

any feedyard will offer in-house risk management. we feed a fair amount of holsteins as calf feds (about 6,000 of them at the moment) as of the last few years and always have several thousand head of native cattle on feed too. i can tell you that if you're going to get into the calf fed holstein game, buy good ones to start. if you'd like anymore detailed questions answered about cattle feeding etc., your welcome to ask me. i don't pretend to know very much but we've been feeding cattle a long time as a secondary business in addition to our cow/calf and yearling operations and have made a lot of mistakes that can be learned from along the way.

 

[talltimber]

any feedyard will offer in-house risk management. we feed a fair amount of holsteins as calf feds (about 6,000 of them at the moment) as of the last few years and always have several thousand head of native cattle on feed too. i can tell you that if you're going to get into the calf fed holstein game, buy good ones to start. if you'd like anymore detailed questions answered about cattle feeding etc., your welcome to ask me. i don't pretend to know very much but we've been feeding cattle a long time as a secondary business in addition to our cow/calf and yearling operations and have made a lot of mistakes that can be learned from along the way.

I have some questions for anyone in the know about feeding/retaining ownership. I'll start another thread.