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

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I agree with you ladies and gents about being frugal and making every red cent count. However, a human being deserves to make a living and breath air. There is not enough spread for everyone. Some are going to get gobbled up. After all, one can only cut cost so much. There is no need to deprive ourselves from items like toothpaste and toilet paper and land payments. Those are the cost of doing business. If the spread ain't there, in ain't there and there is no use trying to make it appear. A squeeze is going on and it is backed by people with mega-bucks trying to make a return on their money. The only solution I see for the masses (to stay in business), if to market to the end user. If one can do this, you can probably brush your teeth and make land payments.
 
Amen Herefordshire, you have nailed it. All expenses do count. It is great to be frugal and I do not think anyone squeaks as loud as a farmer, but there comes a point in time where cutting is not an option. People have to be able to make payments on everything involved in raising beef. We should be able to look at those who just do a super job in their business and make the most margins on their herd and try to achieve that level of production. But the average farmer just looks at the information from those guys as a tool to just survive not prosper. So we have got to be the best of the best to just survive, and even then we have to have the land or other capital expense paid for by some other form of work. Or either have bought it when it was 1/10 the price. I have got to go feed up! I do enjoy seeing my cows, and they like to see me.. But I am afraid that they are just eyeing the sack of feed I am toting! Great posts everyone.
 
You have to remember the secret to running cattle, a lot of money is changing hands getting some of it to stay in yours is the trick. Until you take the proceeds from sales and put into another account and draw on it for the operation cost you will never know what the cows are costing or making.
 
ddg1263":1sbnlcfc said:
Amen Herefordshire, you have nailed it. All expenses do count. It is great to be frugal and I do not think anyone squeaks as loud as a farmer, but there comes a point in time where cutting is not an option. People have to be able to make payments on everything involved in raising beef. We should be able to look at those who just do a super job in their business and make the most margins on their herd and try to achieve that level of production. But the average farmer just looks at the information from those guys as a tool to just survive not prosper. So we have got to be the best of the best to just survive, and even then we have to have the land or other capital expense paid for by some other form of work. Or either have bought it when it was 1/10 the price. I have got to go feed up! I do enjoy seeing my cows, and they like to see me.. But I am afraid that they are just eyeing the sack of feed I am toting! Great posts everyone.

If you are the norm, there is zero margin for error. Most of the local ranchers I know, sell at the local sale barn bid. Some even haul to OKC stockyards to get a stronger bid. Even with the stronger bid, we just went through a wave of commodity prices never seen before by Americans. Fuel, corn, fertilizer, food, etc. flew through the roof unprecedented in modern history. At the same time, the weather patterns are fluctuating wildly. Nowadays, you can have a drought one year and a flood the next. Each type of weather pattern causes hay prices to skyrocket. The scary thing about all this is......there is another stronger commodity wave coming where prices are expected to exceed prior highs.
 
The fact is there is not much money in cattle right now. If you take all your expenses, the fact is the payday is pretty slim?
If you own everything and have no interest costs you can figure on a profit...but I would suggest even this is false economics?
For example if you didn't own that $1000 cow what could you get for a return on your money? I have a few bank bonds that are paying 9.5% right now...so that cow is costing me $95 a year in lost opportunity. If I keep that bond at the end of ten years I get my $1000 back. If I keep that $1000 heifer 10 years I might get $700 back? So she depreciates in value $30/year.
What other opportunity costs do I have. If I am spending 20 hrs. a year taking care of a cow and could be earning $25/hr. instead, then she has cost me $500 in lost opportunity expense! Now if I'm just laying on the couch, that would not apply!
If you own your own pastures/hayfields etc. what could you rent them out for? This should be included as an expense as it is easier to rent it out and laze about!
People raise cattle for many reasons. Making a lot of money on them isn't really one of them?
How much money does a family need to live a fairly good life? Especially a young family. Do you really want to live below the poverty line for twenty/thirty years?
Now I like cattle but was never too keen in always having the wolf at the door. I realized at a very young age that cattle, or farming in general, just wasn't going to cut it. I found a business I was interested in, worked for several years for someone else in that type of business, and started out on my own. First doing contract work for previous employer as I aquired machinery and capital. Eventually it became a very good little business. I did not grow it beyond what I wanted to do and it lets me indulge in my "agricultural hobby". I do not have any "employees" but do sub contract three other people at $25/hour each. Get away from all the government BS this way.
Borrowing money is like any other expense. It has to make you money...or don't do it!
How much real profit do you make on a cow after all expenses(including opportunity expenses) are taken off? I would suggest at $500 a calf you are probably losing money depending on how you figure your expenses? But say you think you are making $100 profit per cow. You would need 520 cows to come up to the national family standard for income of $52,000! Some have wrote on here that they can feed a cow on 3 acres of land per year at a price of $3000/acre. That would be 1560 acres for 520 cows. 1560 acres of land at 3K is going to cost you $4,680,000! To make $52,000? If you had the $5 million plus(cows and land) wouldn't it be easier to just be lazy and invest the money? Even at 1% return you would still make the same amount of money...and not do anything! You might even find some easy job for $10/hr. and make another $20K or so.
When you are young and full of oats it is exciting to go for a dream and that is a good thing. No one knows the future but it is always good to use your head and think things through and realize what the costs/rewards are likely to be? Work hard, be thrifty, and try to have common sense and you will probably make it. Just my opinion.
 
One thing about raising cattle is it really helps to have a good off farm income. Lots of the nice herds and cattle operations were paid for with other income. I know a guy with a nice herd of paid for cattle,equipment,trailers and barns. The thing is he has a great off farm income and is able to invest into his cattle operation. I'm sure his cattle help him reduce his tax bill each year. He doesn't have to take money from cattle sales to help pay personal expenses. He works hard with his cattle, but his other job has made it possible for him to build his operation.
 
HerefordSire":1lcu4cs5 said:
The only solution I see for the masses (to stay in business), if to market to the end user. If one can do this, you can probably brush your teeth and make land payments.

This is happening in many different areas of the economy - there is not enough margin for many folks in the middle. The end user is smarter and frugal - he is not willing to pay for all of the middle men UNLESS they add some value to the purchase.

However selling to the end user requires a different set of skills, marketing skills, than are required to be a good producer.

The key to being able to make a living profit from a cattle operation, even if you are an excellent low cost producer of a quality animal product, is to improve your marketing skills.

Now we are getting somewhere.
 
SRBeef":3jjqf33m said:
HerefordSire":3jjqf33m said:
The only solution I see for the masses (to stay in business), if to market to the end user. If one can do this, you can probably brush your teeth and make land payments.

This is happening in many different areas of the economy - there is not enough margin for many folks in the middle. The end user is smarter and frugal - he is not willing to pay for all of the middle men UNLESS they add some value to the purchase.

However selling to the end user requires a different set of skills, marketing skills, than are required to be a good producer.

The key to being able to make a living profit from a cattle operation, even if you are an excellent low cost producer of a quality animal product, is to improve your marketing skills.
Now we are getting somewhere.

Agree. So if you were going to start selling freezer beef, and you were going to prepare ads or handouts to market your product, what would you list as the advantages to buying a 1/2 beef from you as opposed to buying one or two steaks at a time from the supermarket?

Starting to think through the marketing process for a small freezer beef operation. I'm thinking about ultimately placing ads in craigslist.com and thrifty nickel to start with. How far in advance would you start running ads?
 
skyline":1zl6df5b said:
...Starting to think through the marketing process for a small freezer beef operation. I'm thinking about ultimately placing ads in craigslist.com and thrifty nickel to start with. How far in advance would you start running ads?

These are complex questions with no one answer. The answers will vary based on who and where and how your beef is processed. Are you selling a finished wrapped cuts delivered at a doorstep or farmers market or a whole animal picked up at the processor? There are local laws and regulations such as USDA, state or non inspected, permits,....etc.

The number one thing to start with in marketing is to identify, accurately, who is your target customer?

What is a target customer? It is someone that has the desire and ability to purchase your product if only he knew about the product and how to go about buying it in a convenient enough way that he/she is likely to actually complete the sale. And ability is a key word - lots of folks say they want to buy beef but don't have the ability to pay a reasonable price for it. You want to make sure you are paid.

The first step is to figure a selling price for various marketing options that allows you a profit worth all the effort.

The second step is looking at who is your target customer, what do they want to buy, how are they willing to buy it (how far will they drive, etc), where is your target customer located and then where is the best place to advertise to reach that customer.

All this changes whether you are located just outside San Francisco or in rural west Texas.

I have been selling split halves - a quarter including all cuts from a half. This is in a dollar range folks can afford. Each split half is about 110-120 lb the way I had it processed and all are processed the same. I may tweak this in the future. These are contained in 2 approx 60 lb boxes from the processor. This won't work everywhere but has some advantages.

I would not dive into Craigs list etc until you have thought these things thru. Craigs list rings a bell because I tried that and all I found were folks looking for a cheap deal. You can go to the sale barn and come out ahead compared to what some folks want to pay.

Best of luck.
 
There is lots of money to be made in this market. I made over $200.00 ahead on a set of steers 1/5/09.
You are all looking at the selling price which you have no control of only time you control the market is when you buy.
 
SRB, those are good points. I will not be selling individual cuts, but selling a whole or half animal. Customer pays for the processing. I'm posting some ideas on marketing on a post that I created about creating a freezer beef program. Trying not to hijack this original thread.
 
SRBeef":3r9n7jdb said:
HerefordSire":3r9n7jdb said:
The only solution I see for the masses (to stay in business), if to market to the end user. If one can do this, you can probably brush your teeth and make land payments.

This is happening in many different areas of the economy - there is not enough margin for many folks in the middle. The end user is smarter and frugal - he is not willing to pay for all of the middle men UNLESS they add some value to the purchase.

However selling to the end user requires a different set of skills, marketing skills, than are required to be a good producer.

The key to being able to make a living profit from a cattle operation, even if you are an excellent low cost producer of a quality animal product, is to improve your marketing skills.

Now we are getting somewhere.


You are correct! Perceived value relative to price usually triggers a buyer to cough up frog hides. The actual value doesn't really have to be there, unless you are after repeat business. Since we are after repeat business, the actual value must at least be there, and the perceived value must be equivalent to the actual value, that is unless you want to leave a frog hide or two on the table, which sometimes can be a good technique. Leaving frog hides on the table is good to get advertising by word of mouth. It helps to differentiate the product. If millions of other products are the same as our product, why buy ours? After going through the sale pitch why you are going to take care of them better, the customers starts working the price downward. So what I am thinking may work...is to have a different product that is superior...AND market to the end user.
 
*** You have to have very cheap forage or be a consistently good trader ***

Three years ago you could buy land and N here, stock heavy, and cash flow a seasonal operation. Not today. Maybe the price will drop some the next couple years...
Last year you could buy bred cows and make money selling split pairs. Not sure about this year, but I have a put together herd that is burning through the hay this winter. :cboy:
Direct marketing is always great. The question is are you good enough at it to sell more than a couple head per year??? Buy low / sell high / turn is a more flexible approach.
Ranch Management Consultants (RMC) has a "Filthy Rich and Dirt Poor" webinar at 6 PM PST on 1/13. I assume they will tell us that we should rent land rather than buy it. Crop farming has already gone that way in some areas - - investors and widows own the land and someone with big equipment works it.

*** You have to have very cheap forage or be a consistently good trader ***
 
Having sold slaughtered animals direct from the farm for several years , I have to tell you it's not all it's cracked up to be either.
You will have a list of clients and when your animals are finished and ready to slaughter usually 1/2 back out on you. Alot of them wise up and shop the other producers and get them to undercut you.
Demand Cash!! or get used to rubber checks.
I've dealt with 5 proccessors. One was too far away and hauling took up too much profit. One was a thief , I even witnessed him in action stealing meat. One didn't have a clue what he was doing, he would package siloins as ribeyes. Another charged as much to process as I made on the finished animal.
And my personal proccessor who was'nt intrested in all the work I had for him had a gas leak in his shop last spring that levelled it and almost killed him.
If your proccessor does'nt do a quality job , you will get the blame.
It just got to be too much headache for me and I quit last year.I regularly get calls now and I turn them all away.
Listen to Caustic, He knows what he's talking about.You have to manage every aspect of this business especially your pasture and hay and cull ruthlessly.
 

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