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How in the world can you make money in this market?

ddg1263

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I have been in the business for just about a year, and it is slowly sinking in about how hard it is to turn a profit in the cattle business. It is just a shame to see all those calves go by in the sale barn selling for that cheap. People have got to be loosing a ton of money each year, and it looks like it is getting worse by the month. Input costs are up. Granted we have seen some softness over the past 2 months, but in general they have not retreated in comparison to what calf prices have dropped. Land costs are still high, but if you go to the store to buy that steak, it is still as high as ever.

You know people keep saying that you have to love the cow business to be in it, and I actually do. I have never enjoyed something so much in my entire life. However during my life, I have seen many business, and each one of them had to turn a profit to stay in business or eventually close up. People today will quickly say that well if you had the land for free or if you had an edge here you could make it. But my contention is that no matter which business you are in you have to account for everything in order to keep it going. I know the Cargill’s of the world will make what they have to in order to stay in business, but the guy who has a few head and sales to the sale barn has got to subsidize the wealthy by not accounting for his tractor, truck, and maybe even his land. It just all seems backwards to me if you know what I mean. People still eat, and they pay good money for it. Demand is there, but everyone is probably going to take a loss this year if you are in the cattle business. I know the ones who are selling their 550 lbs heifers for 330.00 are. You can not produce a calf that cheap in this market. Something has to give and I just do not understand it. And on top of prices being down the Government wants to put a tax of 87.50 on each head of beef cows we own now that is a tax of 26.5% of your gross sales on top of already having a loss in your business. Something has got to give! Am I seeing this wrong?
 

LoveMoo11

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Sucks, don't it?
My family has been telling me my whole life not to be a farmer, but I just love it and can't give it up. Most farmers I know have an off-farm job, or at least one person in the family does. Last semester we learned about "the squeeze" how farmers are getting less and less of the food dollar as time goes on. I'm definitely scared about getting done with college and trying to buy a place with all my college loans already breathing down my neck :(
 

Sasserosa

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I've been in it less then a year and all I know is I'm spending lots of money everytime I turn around. :help:
 

HerefordSire

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In my experience, once a winner, generally always a winner. You sound like a winner. I am going to ask you a question or two based upon what you just wrote....

Where do you think the extra money is going in the difference in extra strong retail beef prices and the extra weak sale barn bids? In other words, one would think prices would move in tandem. If retail beef prices move up, one would think sale barn prices would also move up. Same with corn and fertilizer. Now answer the question.
 

ddg1263

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Well Ray Charles can see that it is going to every middle man in between the farm and the end buyer. When I was in college 20 years ago my econ teacher would teach us that because of economies of scale this country would continue to migrate to larger and larger companies to take advantage of volume discounts and efficiencies. I understood what he was saying, but never dreamed that this country would just have a handful of retailers that would set the stage for market movements. And our government has facilitated and encouraged this consolidation in every market from the banking to retail, all in the name to fight inflation. Has it really succeeded in fighting inflation, or has it just slowly migrated our jobs overseas? Now that question will be answered over the next few years as we try and pull ourselves out of this recession with out base manufacturing jobs to support future tax increases from our bailout nation agenda.

But where it is leading our nation’s food supply is concerning. If you force every small farmer out of business, it will have lasting effect on our food production for our country. Maybe I am just to close to the problem to understand the big picture, but it does not take a rocket scientist to understand that businesses will not last operating at a loss over an extended period of time. And if we have a problem with food production after the consolidation as they did with the Banking industry, you can not just print food to feed the population like they are doing with the dollar. People will be upset if they can not get something to eat. Someone in Washington or somewhere needs to wake up and smell the methane that is building from all these external forces we are seeing before someone lights a match! (HEHE) please excuse me I just could not resist! Have a great night. :banana: :banana: :banana:
 

HerefordSire

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ddg1263":ytvj141y said:
Well Ray Charles can see that it is going to every middle man in between the farm and the end buyer.

True. But....why are their spreads widening and ours becoming more narrow?
 

Jogeephus

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A lot of people were losing a ton of money when prices were high as well. To be successful you might have to rethink your marketing. Just because everyone else is doing it this way or that way doesn't neccessarily mean it is right for you. This board is a wonderful place to get ideas that "might" work on your place.
 

HerefordSire

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Jogeephus":1conn9z3 said:
A lot of people were losing a ton of money when prices were high as well. To be successful you might have to rethink your marketing. Just because everyone else is doing it this way or that way doesn't neccessarily mean it is right for you. This board is a wonderful place to get ideas that "might" work on your place.


What I am getting at....I have seen first hand how big money operates....I have personally been in a position to move markets....I am not sure, but the price action is big money at work squeezing the small guy out of business, grabbing the assets, and then will move the market right back up and higher, allot higher.
 

grannysoo

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I've always heard that you can make a little money in the cattle business if you start with a lot.......

My market is direct to the consumer by selling "freezer beef" in 1/4, 1/2 or whole cow. I can make some money that way. It takes time to develop the customer base, but it's a good business if you can produce a quality product.
 

ddg1263

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Typically the markets will move because of supply and demand. And people are selling because of problems turning a profit in the business. Hence we have more supply than the market can absorb. I have not looked at the supply numbers, but I am sure the last two years, one being the drought and the second being an expensive input year, have over burden the feedlots with cheap beef. Then we have foreign beef producers that supplement our market with beef produced on low labor and land cost beef.
 

RD-Sam

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HerefordSire":3bs033xn said:
Jogeephus":3bs033xn said:
A lot of people were losing a ton of money when prices were high as well. To be successful you might have to rethink your marketing. Just because everyone else is doing it this way or that way doesn't neccessarily mean it is right for you. This board is a wonderful place to get ideas that "might" work on your place.


What I am getting at....I have seen first hand how big money operates....I have personally been in a position to move markets....I am not sure, but the price action is big money at work squeezing the small guy out of business, grabbing the assets, and then will move the market right back up and higher, allot higher.

If you have a big operation that can produce plenty of beef, it wouldn't take much to open your own meat market, sell below what the chains are selling for, then you reap all the profits. When big business gets greedy, it's time to teach them a lesson! I just did something I haven't done in over 30 years, and that was buy a half a cow due to the high cost of beef in the stores. From what I have read, it's a trend too.
 

HerefordSire

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ddg1263":1qodta2u said:
Typically the markets will move because of supply and demand. And people are selling because of problems turning a profit in the business. Hence we have more supply than the market can absorb. I have not looked at the supply numbers, but I am sure the last two years, one being the drought and the second being an expensive input year, have over burden the feedlots with cheap beef. Then we have foreign beef producers that supplement our market with beef produced on low labor and land cost beef.


I told you what I think our issue is and the chances are I am probably correct. Put is this way, look around you......what can you get for a CD if you tie it up for a little while? Not much. What this means is there are tons of cash looking for a home. Trillions and trillions of dollars with no where to go. Well guess what. A billion here and a billion there will move markets. Supply and demand is controlled by big big money. The little cattle guy is getting gobbled up. Next thing to go will be the $100K down payment the little guy has in his land. They will grab that also, just won't be the same exact entity doing the grabbing. For big money players, it is the only way to get a return right now.
 

skyline

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Since I started out about 4 years ago, I have had several people ask about buying beef direct from me. I'm beginning to think that this might be the answer. I'm working the numbers now, thanks to some recent posts on here, but it looks much more sustainable than selling calves at the sale barn.
 

HerefordSire

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RD-Sam":nujb393e said:
HerefordSire":nujb393e said:
Jogeephus":nujb393e said:
A lot of people were losing a ton of money when prices were high as well. To be successful you might have to rethink your marketing. Just because everyone else is doing it this way or that way doesn't neccessarily mean it is right for you. This board is a wonderful place to get ideas that "might" work on your place.


What I am getting at....I have seen first hand how big money operates....I have personally been in a position to move markets....I am not sure, but the price action is big money at work squeezing the small guy out of business, grabbing the assets, and then will move the market right back up and higher, allot higher.

If you have a big operation that can produce plenty of beef, it wouldn't take much to open your own meat market, sell below what the chains are selling for, then you reap all the profits. When big business gets greedy, it's time to teach them a lesson! I just did something I haven't done in over 30 years, and that was buy a half a cow due to the high cost of beef in the stores. From what I have read, it's a trend too.


Good for you! I think I am going to go for the juggler. I need to locate one butcher to hire full time to start and decent facilities. Are you a corn grower? :mrgreen:
 

grannysoo

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skyline":ho4f93q6 said:
Since I started out about 4 years ago, I have had several people ask about buying beef direct from me. I'm beginning to think that this might be the answer. I'm working the numbers now, thanks to some recent posts on here, but it looks much more sustainable than selling calves at the sale barn.

It is more sustainable.

Perhaps it's just a small town USA thing, but my father used the same processing plant for years. Just so happens that I went to school with that guys son, and here we are again, doing the same thing that our fathers did. I'm raising beef and he is processing...

All my cattle go to him for processing. The consumer does not have a choice in that matter. I know what I produce and I know what he makes out of it. It is a winning combination for both of us.

He also got with me a couple of years ago and told me that he could sell anything that I could produce. Seems that there is always someone contacting him to buy a portion of a cow and there are not enough quality producers. I can get my full selling price, he gets his full processing fee, the customer gets a quality beef product. We all win........
 

HerefordSire

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grannysoo":1bimxn2j said:
skyline":1bimxn2j said:
Since I started out about 4 years ago, I have had several people ask about buying beef direct from me. I'm beginning to think that this might be the answer. I'm working the numbers now, thanks to some recent posts on here, but it looks much more sustainable than selling calves at the sale barn.

It is more sustainable.

Perhaps it's just a small town USA thing, but my father used the same processing plant for years. Just so happens that I went to school with that guys son, and here we are again, doing the same thing that our fathers did. I'm raising beef and he is processing...

All my cattle go to him for processing. The consumer does not have a choice in that matter. I know what I produce and I know what he makes out of it. It is a winning combination for both of us.

He also got with me a couple of years ago and told me that he could sell anything that I could produce. Seems that there is always someone contacting him to buy a portion of a cow and there are not enough quality producers. I can get my full selling price, he gets his full processing fee, the customer gets a quality beef product. We all win........

The local sale barn and mid-west packer don't win! :mrgreen:
 

RD-Sam

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HerefordSire":e8ah4562 said:
RD-Sam":e8ah4562 said:
HerefordSire":e8ah4562 said:
What I am getting at....I have seen first hand how big money operates....I have personally been in a position to move markets....I am not sure, but the price action is big money at work squeezing the small guy out of business, grabbing the assets, and then will move the market right back up and higher, allot higher.

If you have a big operation that can produce plenty of beef, it wouldn't take much to open your own meat market, sell below what the chains are selling for, then you reap all the profits. When big business gets greedy, it's time to teach them a lesson! I just did something I haven't done in over 30 years, and that was buy a half a cow due to the high cost of beef in the stores. From what I have read, it's a trend too.


Good for you! I think I am going to go for the juggler. I need to locate one butcher to hire full time to start and decent facilities. Are you a corn grower? :mrgreen:

I was looking at another small piece of property last week, and was thinking it would be an excellent place to grow corn to feed my cows. My goal is to be as self sufficient as I can be, I've pretty much had it with the high cost of living these days. Of course I don't think I could plant 15 acres in 50 minutes like Tophat! :lol2:
 
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