Making money on cattle

[SF]

Done business there.

I take it you covered the financing with your first job.

:shock: :roll: :cboy:

Nope, I didn't use them for my financing. I used a bank called First Horizon. I own a couple of companies, one of which is building custom homes. I've sent a few clients there. I also own a technology company. I grew up farming and raising cattle, went into the construction business when I was in my early twenties. I've owned several companies since then. Some went well, some not so well. There is always about a million things that can make a business fail, including the cattle business. In our ever changing world, one must constantly find new markets, avenues, niches, etc... to market products at a premium price. JMO
Greg

 

[Wewild]

Nope, I didn't use them for my financing. I used a bank called First Horizon. I own a couple of companies, one of which is building custom homes. I've sent a few clients there. I also own a technology company. I grew up farming and raising cattle, went into the construction business when I was in my early twenties. I've owned several companies since then. Some went well, some not so well. There is always about a million things that can make a business fail, including the cattle business. In our ever changing world, one must constantly find new markets, avenues, niches, etc... to market products at a premium price. JMO
Greg

So you got the loan based on your job and not raising miniature Herefords?

Reckon greenhorns got that kinda resume?

 

[SF]

Nope, I didn't use them for my financing. I used a bank called First Horizon. I own a couple of companies, one of which is building custom homes. I've sent a few clients there. I also own a technology company. I grew up farming and raising cattle, went into the construction business when I was in my early twenties. I've owned several companies since then. Some went well, some not so well. There is always about a million things that can make a business fail, including the cattle business. In our ever changing world, one must constantly find new markets, avenues, niches, etc... to market products at a premium price. JMO
Greg

So you got the loan based on your job and not raising miniature Herefords?

Reckon greenhorns got that kinda resume?

I got my loan based upon my credit and my ability to repay. If Greenhorn gets one, he will get it on the same criteria.

 

[Wewild]

I got my loan based upon my credit and my ability to repay. If Greenhorn gets one, he will get it on the same criteria.

Hypothetically then. Is the advice you been passing around good for everyone of for those like you that can bank roll the project with their day job?

 

[Texan]

please explain. i will be glad to show you the sales records of my cattle sales

Explain me saying that with your figuring you would lose plenty of money in the cattle business? Okay, but not for your benefit because I know that you will never be convinced. But, since this is the Beginner's Board, I think we owe it to them to give sound advice. So, here goes---

First off, I don't need to see your sales records. I have no reason not to believe you. But sales are only part of the equation, aren't they? What about expenses? Producing 100% weaned calf crops and weaning 800 pound calves must be pretty expensive. Do you even keep up with expenses? You've made some statements here that are taking for granted things that will simply not happen. For example:

You lead people to believe that they will sell 100 weaned calves from 100 cows? It just doesn't work that way. Selling ninety would be more realistic, but 85 would also be more likely than 100. But you've still got the expense of paying for 100 cows and keeping them up.

You tell them that they can sell $75,000 worth of calves from 100 cows? That is asking for trouble if anyone uses that figure for their budgeting. You speak of weaning 700-800 pound bull calves. Most cattlemen don't produce those. And there's a price to pay for trying. Maximum production doesn't always equal maximum profit. Eight hundred pound calves just wouldn't be profitable for many of us to try to wean. Buying maximum production isn't an option for somebody just starting out. It takes time and money to build a herd like that. Or a lot of feed. We should be honest with people and tell them that.

You talk about putting all of your land, cattle and equipment on one note?

...and you note which contains all your land,cattle equipment has been paid down some....

Where do you get a deal like that? Not at a bank that deals with cattle, surely. And somebody just starting out isn't going to get to do that. The only people I've ever seen do that are the people that don't need to borrow money, anyway. They already have plenty of collateral or cash to put up. And even if you could get it all on one note, why would you want to? You talked about building equity in equipment and cattle. It seems to me that it would take a long time to build any equity on equipment and cattle with the interest from that land purchase stacking up against your equipment and cattle liens every year.

You mentioned paying on your loans throughout the year?

...you go throughout the year paying the note...

Doesn't sound to me like you've ever depended on a calf crop to pay on your notes. Most of us just get paid once a year---when we sell calves. Our bankers understand that they will get paid the same way---once a year. That's if everything goes well. When it doesn't, we just have to pay interest and renew.

We should also be honest with beginners and ourselves about these record markets. I know some of you think there will never be another poor day and we'll have record markets from now on. I hope you're right. History of the cattle cycle tells us that you are wrong.

We need to be honest with people that want into the cattle business. Realistic with figures. To tell someone that they can get all the way through the end of a land note with today's cattle prices isn't being very honest.

I'll tell you what let's do, plb. Instead of arguing about it now, let's just meet back here on the other side of the cattle cycle. Then we can see what kind of figures we have to work with. I use conservative figures making my plans, so I'm pretty sure I'll still be here then. Will you?

 

[SF]

I got my loan based upon my credit and my ability to repay. If Greenhorn gets one, he will get it on the same criteria.

Hypothetically then. Is the advice you been passing around good for everyone of for those like you that can bank roll the project with their day job?

If Greenhorn or anyone else wants to get into a business, whether it be agriculture related or not, then more power to them. I encourage the Entrepreneurial spirit. I think this spirit in people is great and part of what makes America strong.

We each have our own opinions, and we will just differ on this one. As with any business he will need capital to get it started and keep it operating. He will have to find a way to make it profitable. If he cannot do these things, or does not believe he can do these things he should not go into the business.

 

[Wewild]

I got my loan based upon my credit and my ability to repay. If Greenhorn gets one, he will get it on the same criteria.

Hypothetically then. Is the advice you been passing around good for everyone of for those like you that can bank roll the project with their day job?

If Greenhorn or anyone else wants to get into a business, whether it be agriculture related or not, then more power to them. I encourage the Entrepreneurial spirit. I think this spirit in people is great and part of what makes America strong.

We each have our own opinions, and we will just differ on this one. As with any business he will need capital to get it started and keep it operating. He will have to find a way to make it profitable. If he cannot do these things, or does not believe he can do these things he should not go into the business.

I was talking about the ability to get financing.

 

[SF]

Wewild;
There are enough banks out there, if he structures the correct business plan, he can probably find financing. Without experience in the business they will require a cash source to guarantee payments to protect their collateral. He didn't post his resume, so I didn't think it was my job to piss all over his idea. I prefer to be the voice of encouragement.

I'd rather try and fail than to never try at all.

Greg

 

[Wewild]

I prefer to be the voice of encouragement.

I'd rather try and fail than to never try at all.

Greg

I like to be the voice of encouragement when I don't think someone is going to take a bath.

For one, only people that can afford to lose money can borrow money. You either have your income or collateral. Loan institutions are set up to take what you have if you don't pay the note. Bankruptcy is for those that don't have collateral.

You are just what you have said. You are an entrepreneur. I really think you are confusing 2 facts.

Some people have dreams and want to borrow money to make them happen. Sometimes they are successful. I wish they all were.

And then their are people that can afford to go to Las Vegas.

 

[SF]

I prefer to be the voice of encouragement.

I'd rather try and fail than to never try at all.

Greg

I like to be the voice of encouragement when I don't think someone is going to take a bath.

For one, only people that can afford to lose money can borrow money. You either have your income or collateral. Loan institutions are set up to take what you have if you don't pay the note. Bankruptcy is for those that don't have collateral.

You are just what you have said. You are an entrepreneur. I really think you are confusing 2 facts.

Some people have dreams and want to borrow money to make them happen. Sometimes they are successful. I wish they all were.

And then their are people that can afford to go to Las Vegas.

:lol:
LOL
Never been able to afford to go to Vegas. Just can't bring myself to enjoy throwing money away.

I see your point Wewild. My point isn't whether or not he should get a loan, just that he probably can. I don't know wha his resume or experience is. Without experience or a lot of cash, no one will loan money for the cows. Lots of places will loan him money for the land, that is the easy part. Land isn't going anywhere, God isn't making any more of it. They can always forclose on the land and get their money back. They are not going to loan 100% on it either. Maybe 95% LTV, but it will take impeccable credit and a very low DTI to get 100% LTV.

I see your point.

Greg

 

[Wewild]

:lol:
LOL
Never been able to afford to go to Vegas. Just can't bring myself to enjoy throwing money away.

I see your point Wewild. My point isn't whether or not he should get a loan, just that he probably can. I don't know wha his resume or experience is. Without experience or a lot of cash, no one will loan money for the cows. Lots of places will loan him money for the land, that is the easy part. Land isn't going anywhere, God isn't making any more of it. They can always forclose on the land and get their money back. They are not going to loan 100% on it either. Maybe 95% LTV, but it will take impeccable credit and a very low DTI to get 100% LTV.

I see your point.

Greg

Good talking with you.

 

[Craig-TX]

Texan made some outstanding points, good enough that any beginner or person contemplating beginning should read them again and again. I'll take the liberty of quoting a few…

…sales are only part of the equation…

This can't be overstated. You don't have to know how to read a statement of earnings to know that sales does not equal income.

…sell 100 weaned calves from 100 cows? It just doesn't work that way. Selling ninety would be more realistic, but 85 would also be more likely than 100. But you've still got the expense of paying for 100 cows and keeping them up.

That is the voice of experience. Anybody considering the cattle business should heed it.

…weaning 700-800 pound bull calves. Most cattlemen don't produce those.

That would be because it doesn't pay. If we want to start a thread about backgrounding that would be fine. But backgrounding is a whole different type of operation with its own set of risks. It requires a fair amount of skill and a lot of luck. And the staying power to take a bath now and then without getting wiped out. Anybody who's never been beat in an operation like that is still new at it.

You talk about putting all of your land, cattle and equipment on one note? "...and you note which contains all your land,cattle equipment has been paid down some...." Where do you get a deal like that? Not at a bank that deals with cattle, surely.

Correct. Completely different LTVs and amortizations. No bank will give you 20 years on equipment and you would be crazy to give them a 20 year note if they would take it. Same with cattle.

And even if you could get it all on one note, why would you want to? You talked about building equity in equipment and cattle. It seems to me that it would take a long time to build any equity on equipment and cattle with the interest from that land purchase stacking up against your equipment and cattle liens every year.

Exactly. The cattle will be dead and the equipment worn out before they're paid off. Negative equity.

We should also be honest with beginners and ourselves about these record markets.

Sober advice. I sure hope it holds and I tend to be a little more optimistic than Texan but there's no doubt it will fluctuate. The downs will come with the ups. And there are plenty of things that could send it through the floorboards. The worst thing then is to be loaded with too much debt.

We need to be honest with people that want into the cattle business. Realistic with figures. To tell someone that they can get all the way through the end of a land note with today's cattle prices isn't being very honest.

It's not realistic to think that cattle will pay their own way in a start-from-scratch endeavor. They won't, plain and simple. They will not pay for the land, much less expenses, overhead and capital investments. Much less a living for the operator.

That said, you can make money off cattle. But it requires a head start in the form of being fortunate enough to inherit land etc. – or having other income that can cover things until you get the operation planed out and running. And that takes time, time, time. In the meantime, it is nice to have a sideline interest that can put some money in your pocket and help you build equity.

One other thing. It wouldn't be advisable to go interest only - if you could even find a lender who would do that. If your having to figure things that tightly you might as well lease a place, save the difference in payments, and use the cash you would have put down on the land for livestock. Don't forget that land prices are at all time highs just like cattle. Not saying that were in a bubble in either one, but it's not advisable to work up a pro forma based on record breaking numbers.

 

[frenchie]

It puzzles me why people fiqure they have to own the land they run cattle on.Can you not lease land down there and be better off.I have got some leased land here for next to nothing ,compared to buying it.Not fantastic land ,(9 acres to a pr) but still pencils out to only $9.00 cdn a cow/ calf pair per yr.

Make some money on them cows and get some cash flow started 1st

 

[msscamp]

It puzzles me why people fiqure they have to own the land they run cattle on.Can you not lease land down there and be better off.I have got some leased land here for next to nothing ,compared to buying it.Not fantastic land ,(9 acres to a pr) but still pencils out to only $9.00 cdn a cow/ calf pair per yr.

Make some money on them cows and get some cash flow started 1st

The biggest problem I can see with a lease, is that the owners can always jerk that lease out from under you. Maybe it will happen, maybe it won't, but if it does, where are you going to go with those cows?

 

[bigbull338]

leased land is very tricky. they can pull lease anytime they want to. an besides that lease land is hard to find. an priced at $15 to $20 an ac . scott

 

[eric]

Why is everyone tying the land payment in with the cows? What if you just wanted to buy a piece of land for investment, or better yet, as I did, just got fed up with living in the city and wanted to buy a large piece of property? I would still have the land payment whether I decided to raise cattle or raise pigs or peaches. One of the reasons I bought where I did was because of the rising land values, which have only gone up and up each yr. Are you saying that you have more than $500 in each calf you sell? Or rather $400, since you're only making $100 a hd?Does it really cost you $400 a pr for hay/feed/vacs and such? Sure, you have to build your facilities, but after a couple yrs, most of your infastructure, i.e. pens, corrals and such, will be mostly completed. After that, it's mostly repairing, and replacing the pieces which cant be repaired, which around my place are few and far between. I, as most of my neighbors do, tend to repair everything we can before spending any money to replace. My tractor? I had to have a tractor before I had my cows. My grass still needed to be brushhogged and drives still needed to be cut. The tractor didnt have anything to do with the cows.
I am making good money off my cows. I use my day job to pay for the land, house, tractor and everything else I do around here. All of which I would still have rather I had cows or not. So therefore, I am calling BS on you guys with the paid for land, paid for equipment and such and claim you aren't making any money. I try to run my business as close as I can to breakeven, mainly for tax reasons, but that breakeven scenario sometimes forces me to buy new trucks and give bonuses at the end of the year. Sometimes not making any money gives one a pretty nice lifestyle!

 

[SF]

It puzzles me why people fiqure they have to own the land they run cattle on.Can you not lease land down there and be better off.I have got some leased land here for next to nothing ,compared to buying it.Not fantastic land ,(9 acres to a pr) but still pencils out to only $9.00 cdn a cow/ calf pair per yr.

Make some money on them cows and get some cash flow started 1st

If I could find land to lease at that price, I'd do it. I'd even be willing to pay 10 x that amount.

 

[Bez]

SF - at those prices (in Yankee bucks) I will lease you 250 acres of ground today - fenced and ready to go - with water in all the important spots - reasonably good handling facilities - and I will look after the feeding and watering of the animals provided you bring in the feed. I'll even let you pay for the fence up keep but will help you with calving.

Room for about 70 pairs. A few chores, a cheque and hardly any responsibility - how could I go wrong? I will make far more than I do at present! :lol:

Unfortunately it is on the wrong side of the border. :roll:

Bez

 

[SF]

SF - at those prices (in Yankee bucks) I will lease you 250 acres of ground today - fenced and ready to go - with water in all the important spots - reasonably good handling facilities - and I will look after the feeding and watering of the animals provided you bring in the feed. I'll even let you pay for the fence up keep but will help you with calving.

Room for about 70 pairs. A few chores, a cheque and hardly any responsibility - how could I go wrong? I will make far more than I do at present! :lol:

Unfortunately it is on the wrong side of the border. :roll:

Bez

LOL
I sure do wish you were closer. I'd take you up on that offer.

I'm going to have to come up and check out that country north of the boarder. Hear it is just beautiful this time of year. Only part of Canada I've ever been in was near Red Deer, Alberta, just north of Calgary. It was in January, all cold and white. I was just there for a day. Wasn't much to see then, except snow.

 

[frenchie]

It puzzles me why people fiqure they have to own the land they run cattle on.Can you not lease land down there and be better off.I have got some leased land here for next to nothing ,compared to buying it.Not fantastic land ,(9 acres to a pr) but still pencils out to only $9.00 cdn a cow/ calf pair per yr.

Make some money on them cows and get some cash flow started 1st

The biggest problem I can see with a lease, is that the owners can always jerk that lease out from under you. Maybe it will happen, maybe it won't, but if it does, where are you going to go with those cows?

I have a 33yr written lease.I also get paid fair market value for any improvements that I put in as well at the end of it.it also has a formula for rental increase written into it.