make money

[TexasBred]

..dblg my herd wont dbl my profit...dam i got it all wrong then..i knew it...

if i didnt have a property mtg and a land lease i could make a profit..but since i dont consider that a liability since i would be buying it anyways it makes it look better on paper..but not in my wallet

My place cost a fair amount to keep up if I have 5 cows or 50. I plan on topping out at 75 cows an I don't think that a 30-50% more cows will increase my cost by 30-50%.
So if you got it wrong looks like I got wrong too.

No you misunderstood....the number you're using may be your "perfect number". Double that and you may have gone well past the point of diminishing return.

 

[Caustic Burno]

There is no perfect recipet. Every body has a different situation so for every one "how to make money" is different. Also people have different goals for what they want out their cattle... maintain the land, cash flow, grow as an asset, ect...

Here are some of my thoughts off the top of my head.

If you cant pay cash you cant afford it.
You have to be able to keep good books.
You have to have paid for land, seperate the land as an investment from the cattle, or be able to lease some good produtive land.
You have to forget the idea that because you own cattle you must have a tractor, diesel truck, goosekneck trailer, or brand new working pens.
Make friends and try to get bulk discounts or car pool when you can.
Although hay rings, hay barns, trailers and other such items may pay for themselves over time. They do you no good if you go belly up before that time.
Keep a very healthy savings account.
In years with less than average rainfall you should have extra grass. That is normal. It only takes one drought year to whipe out 10, 20+ years of so called "money left on the table".
You calculate what you spend on cattle based off what they earn. Not try to make the cattle earn what you spend.

Brute you made a lot of very valid and good points, sound's like you have your rose colored classes tuned in.
Carrying capacity for one example in normal years I could carry 45. The problem becomes what is normal as we have had only one normal year since 2001. Not wanting to push capacity I was at 37, dropped to 28 head cow's were fat sassy on grass and hay not having to worry about weather varibles. Year or better of hay sitting in reserve, that all went out the window going into the second year of the most extreme drought we have ever had. I have dropped from my maximum to what was comfortable to 11 head on stressed pasture. This could still be to many as when the hay and water is gone so are the cow's. There is no majic number over the last two years I have reduced by 70%.

 

[agmantoo]

Here is how it is done!
You must be convinced you are in cattle for profit not hobby!
You become the low cost producer of cattle that buyers want, not necessarily what ones you like.
You learn what type of animal thrive off what your place will produce.
You learn what type of forage that you can produce in quantity and over various seasons.
You match the animals to the forage grown.
You learn to produce that forage without commercial fertilizer and minimum herbicides.
You learn how not to depend on processed (baled) hay and grain.
You learn how to reduce your dependence on petroleum.
You minimize the amount of machinery needed.
You learn that nearly everything you are/were told regarding cattle production isn't true.
Here is what I have learned. I market mostly black hided animals because that is where the premium is in my market. I like red cattle better but it doesn't matter. My place will not produce a 700 plus lb weaned calf off my forage and brood stock. I profitably market feeder calves in the 550 lb plus range. I have 15 month old heifers (700 to 750 lbs) bred and they calf as two year olds. I calve year round and the cow is bred back on the first cycle. Over time I will gain a calf compared to once per year calving. In zone 7, I can feed pasture forage over the entire year. I do not plan on using hay. I sold the hay making equipment therefore I no longer have that crutch. To accomplish the year round grazing I need an easy to keep cow in frame size ~4. I do not want a heavy milking animal as I need her to stay in body condition in order to breed back. I raise the calf mostly off forage so I need it grazing not sucking. I have learned to use chicken litter as a substitute for commercial fertilizer. I do keep the PH where it should be. What I know can be done is that I can feed a brood cow and her calf until the calf is sold 365 days/year on 1.4 acres of what was a worn out cotton/grain farm. I can do this with a very significant net profit margin.

 

[Sir Loin]

agmantoo


I am with you 100%. That's the way I do it also.
The only difference is I make some hay just so I can over graze, but I don't have the equipment or land expense.
I have about 15 acres neighbors let me make into hay so they don't have to mow it.
I swap my labor with a neighbor working his cow with him and he makes my hay free.
This year I turned down another 20 acres of hay simply because I don't need it.
I call it "no frills ranching". Works for me !
SL
PS If your coming over to Athens stockyard, give a hollar and I will buy coffee.

 

[Ryder]

There is no perfect recipet. Every body has a different situation so for every one "how to make money" is different. Also people have different goals for what they want out their cattle... maintain the land, cash flow, grow as an asset, ect...

Here are some of my thoughts off the top of my head.

If you cant pay cash you cant afford it.Basically rght. But sometimes there are exceptions.
You have to be able to keep good books.Check
You have to have paid for land, seperate the land as an investment from the cattle, or be able to lease some good produtive land.Hmmmm
You have to forget the idea that because you own cattle you must have a tractor, diesel truck, goosekneck trailer, or brand new working pens.Agreed This is one of the most important things and can cause more to go bankrupt than you can count.
Make friends and try to get bulk discounts or car pool when you can.And if you can.
Although hay rings, hay barns, trailers and other such items may pay for themselves over time. They do you no good if you go belly up before that time. You are exactly correct. Got to be realistic.
Keep a very healthy savings account.Hopefully
In years with less than average rainfall you should have extra grass. That is normal. It only takes one drought year to whipe out 10, 20+ years of so called "money left on the table".Yes.
You calculate what you spend on cattle based off what they earn. Not try to make the cattle earn what you spend. Again, be realistic. Leave the swimming pool and the trip to Europe out of it. Some may not believe it, but you do not absolutely have to have a new truck every year.

Very good post, Brute.[/color]

 

[ddg1263]

Yea brute, you have some really good points as do so many people in this thread. One thought I want to see addressed is the idea that land cost have to be segmented out as a separate investment. I just disagree with this approach. You could buy all the tractors and hay barns you want for what land is costing even with the recession. It is just unrealistic to exclude this expense because every other business has to include it in their proforma's. I am sure you could subsidize some of it especially if you have your house on it, but land cost is a hard cost that the bak expects to be payed. Betting on the come like so many did during the speculation land bubble has our banking system in a mess. They are not loaning money on a maybe. I could go on and on about how every business has to allocate money for land costs. It is just a part of doing business.

Now we can debate about how long to amortize you payments over, and I would think that 15 years would be more than generous time frame to pay debts off. If I were going to a bank to get a loan, I don't think I would tell them it would take 15 years to pay them off. Anyway, let's say it takes 3 acres to raise a cow calf to market. And let's assume you have to pay 2000 per acre. This is a 6000 dollar investment right there. Can you make the payments on 6000 dollars over a 15 year peorid with interest? Remember you will have tractors, and truck payments, and a number of other costs that will happen. If you don't have a truck you will have to pay to haul your cattle to market, and that is not cheap. Anyway, I don't think it can be done, and help pay for you to live on like any other job or business. We need to eat too. It is kind of like I tell my customers, I am in the cattle business but I can only afford to eat chicken. Beef is to expensive! :tiphat:

 

[Caustic Burno]

Yea brute, you have some really good points as do so many people in this thread. One thought I want to see addressed is the idea that land cost have to be segmented out as a separate investment. I just disagree with this approach. You could buy all the tractors and hay barns you want for what land is costing even with the recession. It is just unrealistic to exclude this expense because every other business has to include it in their proforma's. I am sure you could subsidize some of it especially if you have your house on it, but land cost is a hard cost that the bak expects to be payed. Betting on the come like so many did during the speculation land bubble has our banking system in a mess. They are not loaning money on a maybe. I could go on and on about how every business has to allocate money for land costs. It is just a part of doing business.

Now we can debate about how long to amortize you payments over, and I would think that 15 years would be more than generous time frame to pay debts off. If I were going to a bank to get a loan, I don't think I would tell them it would take 15 years to pay them off. Anyway, let's say it takes 3 acres to raise a cow calf to market. And let's assume you have to pay 2000 per acre. This is a 6000 dollar investment right there. Can you make the payments on 6000 dollars over a 15 year peorid with interest? Remember you will have tractors, and truck payments, and a number of other costs that will happen. If you don't have a truck you will have to pay to haul your cattle to market, and that is not cheap. Anyway, I don't think it can be done, and help pay for you to live on like any other job or business. We need to eat too. It is kind of like I tell my customers, I am in the cattle business but I can only afford to eat chicken. Beef is to expensive! :tiphat:

Back when I bought my place I cut enough timber to pay for it and the clearing. You can't do that anymore price of land has gone out of sight and there is not that kind of timber left. I had pine's to 36" in diameter those had to be shipped to La wasn't a mill here could handle timber that big.

 

[ddg1263]

CB, You did great in setting up your farm and need to be commended. I have heard of people doing just as you did to basically get their land for timber income. However, the market as a whole has to include land costs because not everyone has the same situation as you. I also think it is one reasons so many people are getting out of the cattle business. If you have a couple hundred of acres at 2000 dollar an acre price tag, then this note has to be included in expenses. This is a 400,000 price tag to figure out how to pay on about 75 to 80 head of cattle. You also need to include improvements in that property. Roads, fences, and soil developments are huge considerations when buying a place.

I am just highlighting the future of cattle farming because as each generation comes along someone will have to undertake these expenses to stay in the business. If the margins remain so thin, I just don't see how our cattle supply will not continue to decline. I see the big guys putting the squeeze on the cattle farmers one more time before they truly see an influx in the ability to provide beef for the consumer. It is going to be a real problem at some point in the future.

 

[ddg1263]

I also want to make the point that the world population is going the reach 7 billion people sometime this month, and beef is still a great way to enjoy diner. People in the far east are getting a taste of high quality of beef so I am hoping that in the next 15 years, our business may just improve in some way. Prices are already staying high so there may be hope.

 

[Caustic Burno]

I don't see how you can do it today buying the land for cattle. I bought some of my acreage at 300 an acre up to 700.
It is going for 3000 and up now. Then you could cut 500 to a 1000 dollars of timber per acre. It is going to be a tough row to hoe. The majority of cattlemen in Texas today run under 35 head, it's a land thing. I am not smart enough to figure this one out. It goes for equipment as well, tractor used to have an umbrella on it, now everyone want's one with a cab and A/C. We won't even get off into trucks.

 

[Isomade]

Yea brute, you have some really good points as do so many people in this thread. One thought I want to see addressed is the idea that land cost have to be segmented out as a separate investment. I just disagree with this approach. You could buy all the tractors and hay barns you want for what land is costing even with the recession. It is just unrealistic to exclude this expense because every other business has to include it in their proforma's. I am sure you could subsidize some of it especially if you have your house on it, but land cost is a hard cost that the bak expects to be payed. Betting on the come like so many did during the speculation land bubble has our banking system in a mess. They are not loaning money on a maybe. I could go on and on about how every business has to allocate money for land costs. It is just a part of doing business.

Now we can debate about how long to amortize you payments over, and I would think that 15 years would be more than generous time frame to pay debts off. If I were going to a bank to get a loan, I don't think I would tell them it would take 15 years to pay them off. Anyway, let's say it takes 3
acres to raise a cow calf to market. And let's assume you have to pay 2000 per acre. This is a 6000 dollar investment right there. Can you make the payments on 6000 dollars over a 15 year peorid with interest? Remember you will have tractors, and truck payments, and a number of other costs that will happen. If you don't have a truck you will have to pay to haul your cattle to market, and that is not cheap. Anyway, I don't think it can be done, and help pay for you to live on like any other job or business. We need to eat too. It is kind of like I tell my customers, I am in the cattle business but I can only afford to eat chicken. Beef is to expensive! :tiphat:

Wrong, you do not have to expense land. There is absolutely nothing wrong with running two separate businesses. I have land in places I have bought because they were a good deal and I can make improvements on them and turn a profit in the future. Just because I decide to run a few cows on them in the mean time does not mean I have to charge that land to my cattle. I have some land I don't have cattle on, that could have, but is an investment, what imaginary cows would I charge that land to? There aren't many investments you can put money in that are as good as land at the moment.

 

[JSCATTLE]

I payed 1200 an acre for my land .. I sold 60 k worth of timber off the place... I bought a 10k dollar dozer.. I have half in pasture now . Took me 3 years and I should have the other half cleared by this time next year... I agree that land is an expence however you are building equity so in a since that'd be makin profit. As would paying off a tractor or other equipment.. unless u were born into a family that handed down a large amount of land it would be hard to make a living at first.. but most things take time to get off the ground. I believe you can either cut your own hay or rotational graze to eliminate paying for feed...

 

[Brute 23]

From what I can tell it is impossible to pay for land with the cattle you can produce from it. Land is now valued on its recreational use, not what it can make in revenue.

 

[JSCATTLE]

From what I can tell it is impossible to pay for land with the cattle you can produce from it. Land is now valued on its recreational use, not what it can make in revenue.

My calf check pays my land note .. as I sell calves I put the money in a future payment account .. the note is auto drafted out ... Right not I'm ahead a year and a half on my note... It takes about 40. calves to pay the note on 200k dollars .

 

[Brute 23]

I payed 1200 an acre for my land .. I sold 60 k worth of timber off the place... I bought a 10k dollar dozer.. I have half in pasture now . Took me 3 years and I should have the other half cleared by this time next year... I agree that land is an expence however you are building equity so in a since that'd be makin profit. As would paying off a tractor or other equipment.. unless u were born into a family that handed down a large amount of land it would be hard to make a living at first.. but most things take time to get off the ground. I believe you can either cut your own hay or rotational graze to eliminate paying for feed...

Technically when you pay off you land and equipment that is not profit. You gained an asset, or added value, to your net worth. You would have to sell those items for more than you paid to make a profit.

Any time you talk about debt you have to factor risk in to the equation also.

 

[Anonymous]

And cattle retained are an asset as well

 

[highgrit]

Right now land is as cheap, interest is low and it's good time to buy. I live, hunt, fish, farm, and raise cows on my land. Why should my cows have to carry the note. If my cows pay their way, the taxes, and and up keep on my land I'am good for now. Making money with cows is hard, maybe one of these days we will. I enjoy my cows as much as some people enjoy their hay burners with alot less work.

 

[JSCATTLE]

I'm not sure there is much risk in buying land ... Over the last 80 years land has gone up in value . So would it be better to put money in an account an earn .2,% on it ?.. I think ill take my chances buying land and cattle... As far as I can tell my return is much better than any bank or governmet bonds .

 

[Brute 23]

From what I can tell it is impossible to pay for land with the cattle you can produce from it. Land is now valued on its recreational use, not what it can make in revenue.

My calf check pays my land note .. as I sell calves I put the money in a future payment account .. the note is auto drafted out ... Right not I'm ahead a year and a half on my note... It takes about 40. calves to pay the note on 200k dollars .

When did you purchase your land? Are you able to pay for the land, the cattle, and the expences associated with both from the calf crop? What do you do in drought years when expences on cattle are higher than usuall? What about when we get .80 lb and revenue is lower than usual?

Not being a smart azz. Just curious what is factored in your operation. Its the only way to compare
apples to apples. There is no right or wrong way.

 

[ddg1263]

I just disagree isomade. I am certain you are a great trader of property, probably the very best. However, businesses do experience capital gains on the property locations too. It happens every day. Every business has a capital cost in property, and they pay for it and account for it. I have several subdivisions and investment property too and they all have a cost associated for land and it's improvements.

Even when a bank buys a piece of property for a branch it has to allocate an expense for it. 30 years later they may make a huge gain on that investment, but the original business plan was still in tact, and costs are allocated for property.

Now someone may handle the purchase with funny accounting, but if hard dollars are going in somehow cash has to be generated somewhere to pay for it. In the 30's during the depression my grandfather was the county agent. He use to say that an acre of land was worth what it could produce. He also help many dairy's get set up. He would say that a dairy cow was worth what she could produce.

Even the stock market and their high multiples of days past have come down dramatically. Now a multiple of a stock can be seen below 10 times earnings. Over the past several decades they were selling as high as 20 times earnings, and junk bond status was set up for debts over 20 times earnings.

My point is this. Markets have to come back into equilibrium where earnings match value. The times where property was over valued is being faded out. Inflation has picked up to close the gap, and prices of property is decreasing to match true valuation. Banks are hurting because their foreclosed sets are not set at a true valuation.

I think the same thing is happening in the cattle business. Cattle farmers are getting squeezed out by many factors, weather, the economy, and the high entry cost associated by land purchases. At some point things have to come back into a reasonable balance.

If you have a piece of property where you can cull out a commercial lot and clear the entire land cost, this does not represent the true cost of doing business of running cattle. If it is 1200 an acre cost or 3500, there has to be something associated in the land when producing beef. The money of that land cost will be in the beef at some point when it reaches the diner plate.