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<blockquote data-quote="Craig-TX" data-source="post: 103376" data-attributes="member: 39"><p>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…</p><p></p><p></p><p></p><p>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.</p><p></p><p></p><p></p><p>That is the voice of experience. Anybody considering the cattle business should heed it.</p><p></p><p></p><p></p><p>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.</p><p></p><p></p><p></p><p>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.</p><p></p><p></p><p></p><p>Exactly. The cattle will be dead and the equipment worn out before they're paid off. Negative equity.</p><p></p><p></p><p></p><p>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.</p><p></p><p></p><p></p><p>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.</p><p></p><p>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.</p><p></p><p>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.</p></blockquote><p></p>
[QUOTE="Craig-TX, post: 103376, member: 39"] 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… 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. That is the voice of experience. Anybody considering the cattle business should heed it. 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. 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. Exactly. The cattle will be dead and the equipment worn out before they’re paid off. Negative equity. 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. 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. [/QUOTE]
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