Is now a good time to invest in cow calf operation

[Chapel Creek Bud]

Hi All,

I've been watching these boaards for a few weeks. We have been in Boer/meat goat business the past ten years and been trading saddle/riding horses the past couple of years. We have about 65 acres of pasture. I've been in the cow/calf business in the past raising reg. Charolais cattle.So the basic knowledge and experience is in place. We are just curious is now a good time to invest in cattle are should we wait a while?

Looking forward to your impute!

 

[Caustic Burno]

I don't think we seen bottom yet.

 

[MoGal]

No, this year isn't a good time..... I think cow prices will continue to decline this year. They won't get much better in 2009 and I look for them to hit rock bottom in 2010. The packers have gone global while Americans aren't writing their congressional leaders to stop all these beef imports. The EU has closed their border to Brazilian beef so guess where that is going to come to??? Yep, more import to the US of A. When US beef prices get down to South American beef prices we'll be competitive to the packers but until that time......... our prices will continue to drop. The only problem is we can't afford to raise them for those kind of prices.

 

[auctionboy]

With these low cow prices depending on how you sell your calves it could be a good time. Also If the cow price is going to be low for a few years it is a good time to grow a herd.

 

[Darhawk]

Guess first is to really determine what it is you're trying to achieve. You said you were in the business once and then apparently you got out. Are you looking solely to try and make a fast buck, or are you looking to make a much longer term investment/return this time around. While market prices decline, costs, i.e., fuel, fertilizer, feed, medicines, vet services, etc., are climbing at a moderate to fast pace. The old adage of "buy light-sell heavy" is taking toll on a lot of folks around here who thought they'd try for a fast buck. Folks bought in at "high price light" and are finding out that in the end it may be "low price heavy" with more in the animals than what they'll get out of them. If you've got the cash to go into the long haul, then you've got a couple good years to get in position for the market change. Not knowing your financial situation and what your ultimate goals are, all else is left to speculation.

A side example...........a year ago 1000 pound round hay bales were selling here abouts for $135 per bale or more. Guy down the road with a couple hundred acres of field fiqured he'd make a quick buck and did everything to put up as much hay as he could this past summer, during which we had good rains. What's his return right now........same size bales are selling for $30 a bale. Last year's rain was both a blessing and curse. He's pulling his hair out trying to get his expenses paid. Oh, hay will go up again..........it's the nature of the business.............just as with cow calf prices. There are cycles............just need to know your goals and at what point you want to enter the cycle.

 

[onecowfarms]

A side example...........a year ago 1000 pound round hay bales were selling here abouts for $135 per bale or more. Guy down the road with a couple hundred acres of field fiqured he'd make a quick buck and did everything to put up as much hay as he could this past summer, during which we had good rains. What's his return right now........same size bales are selling for $30 a bale.

we had $7.00 small sq bale at salebarn this week and talked to a guy that is paying 22.50 a bale in fl and has been coming to il to get it for 12.00 a bale ! we can still get round bales for 50-65.00 here and the avg on small sq is about 4.00 i guess it just where you live !! i do agree buy low and hang tight and sell when market comes back around and if times get tight take a few to butcher and sale to locals to get by

 

[Susie David]

I've been tracking the sale barn for a few years now, mainly to try and target the sweet date to buy and sell. I haven't noticed a price decline of any porportion up here but we are just starting our feeder sales time so it will be good to see what the trend will be this year.
We have had some herd liquidations because of the poor hay season and the price explosion. Wet weather so far and if it continues this summer and if the dry land hay growers get a second and third cut the prices may stabilize. Hate to see good alfalfa on the truck to the super compactor for a trip overseas.
Just my two bits worth...DMc

 

[Ryder]

A lot of variables to consider. But I would not get in if there is a strong possibility of the market going still lower.
Better to catch it coming off a bottom, a little above, than going toward a bottom.
Market going down, never know how far down is.

Just do your best to watch and get a good idea when bottom is hit. Don't get in too big a hurry.

 

[Brute 23]

Better to catch it coming off a bottom, a little above, than going toward a bottom.
Market going down, never know how far down is.

Just do your best to watch and get a good idea when bottom is hit. Don't get in too big a hurry.

That is it right there... :nod:

 

[Chapel Creek Bud]

Thank you all for your comments! These comments will definately help with my decision making.

DAR, wouldn't the fast buck be in stocker cattle? We gae that operation some consideration; however, the lure of fast and big profits were over shadowed by the risk of loss and large amount of capitol required for such a venture.

Again Thank you all for your thoughts and comments.

Bud

 

[Texas PaPaw]

Bud

Just some food for thought. Cow-calf operation is basicly a manufacturing operation-a calf factory so to speak, profits being squeezed by rising feed, fertilizer,etc and declining calf prices. Lots of cost that we have little control over.

A stocker operation is a margin business. Calf purchase is biggest cost and you have control on what you buy at what price. With last in-first out accounting (LIFO), margin between your sell price and your replacement price, less your expenses determines your profit. This replacement cost accounting allows you to sell animals and simultaniously replace them on the same market. Essentially if you sell low, you can replace low or sell high/replace high. Stocker operators who use replacement cost accounting usually make their best profits when cattle prices are low or declining.

The book "Knowledge Rich Ranching" does a better job that I in explaining this concept. I have attached a link for this book.

http://www.stockmangrassfarmer.net/cgi- ... d=362.html

 

[Darhawk]

Thank you all for your comments! These comments will definately help with my decision making.

DAR, wouldn't the fast buck be in stocker cattle? We gae that operation some consideration; however, the lure of fast and big profits were over shadowed by the risk of loss and large amount of capitol required for such a venture.

Again Thank you all for your thoughts and comments.

Bud

Your point on stockers is "yes" provided you can get quality, healthy calves at low price and control costs to sale at a high price. What I was focussing on is your question "is now a good time to invest in cow calf opertion", which is to say you are looking for the right time to enter to generate maximum yield in profitability. You're obviously looking at the entry point to where there is the shortest time to return. You were in the business, got out, went into goats and branched into horses, and now want back into cows. So reading between the lines is maximum profit from low up front cost investment. Cow-calf pairs are still selling decently, but singly the market seems iffy, at least to me. My over riding point is that one needs to sit down, write out the goals, develop a business plan, and commit the the plan into action once finalized. I don't know your age, your income, your financing possiblities, etc., and so can't honestly tell you at what point to enter. As you see from the others answering here, they're giving you the solid good advice with honest thoughts as to whether now is good or not. But they can no better guess your goal than I can.

So the question remains, what are you wanting to achieve?