Harlan’s “Thinking Expansion?” Series

[HDRider]

Maybe most of ya'll have read this. For those that have not, I thought it was good advice...

For those nearing retirement, the current prices offer the opportunity for a very profitable and slow exit from the ranching business. But a retiring rancher will want to spread the sale over three or more years for income tax purposes. Cattle prices should remain high for the next few years.

I suggest selling all calves born each year, slowly decreasing herd numbers. With no replacements retained and intensive cow culling while cattle prices are up, a herd will decrease 15%-25% annually. After three years, the rancher can then decide whether to liquidate the remainder of the herd or continue to shrink the herd for a few more years. This strategy will allow retiring ranchers to convert their cowherd into a nice retirement nest egg.

http://beefmagazine.com/blog/part-3-har ... ion-series

 

[HDRider]

Another snippet from the same article...

Meanwhile, other ranchers have five options:

1.Continue with a static herd, holding back just enough replacement heifers to maintain herd numbers. This should provide above-average returns for the next several years.

2.Grow your steer calves to heavy feeders for the next few years, and maintain steady cowherd numbers. Feedlots will remain short of feeder cattle during the early years of the expansion, and I currently project $129 in additional profit for 2014 steers grown out to and marketed at 800 lbs. Growing to heavier weights should add even more profit. Budget through the growing out of your steer calves each year before executing your plan, as the economics will change as the national herd expands.

3.Expand the herd slowly during the good price years. High calf prices will lead to good cash flow from the herd, even if you're selling a few less heifer calves. This was a popular strategy in past cattle cycles.

4.Expand your herd substantially by holding back additional replacement heifers — perhaps even doubling the number retained. Be sure yours is a high-profit herd going into this option, as cash flow can drop in the early years of a major expansion.

5.Sell every calf born when calf prices and demand are high, and bank the extra money earned. Later, when calf prices and demand for calves are low, retain as many heifers as possible and rebuild the herd. In other words, when everyone else is buying, you sell; when everyone else is selling, you hold and expand. While the economics of this strategy can be very favorable, it also can stress production resources — especially of grass — during your expansion years