Producer v Feeder v Packer

[Dave]

Pretty good conversation here. I’m glad to see it being discussed, it seems like the associations want to shut down conversations and inevitable questions. I think we are being led to believe that our numbers are causing the competition, however per an article I read recently but can’t recall whether it was online or in a cattle publication, it stated that fast food restaurants bought a high percentage of the beef and a significant part of that was of out of country origin. It stated that there was a shortage of lean beef. I realize the concept is to provide as cheap of food supply as possible but I would think that if the reasoning is a shortage of lean beef that our domestic pound cow and bulls, as well as feeder cattle perceived as lower grading should be stable and relatively good at all times price wise.
Around here it used to be said that 40 or so cows would make for a modest living. I believe that would be closer now to 60-70 at the minimum, and that’s talking a bare minimum with no room for errors. I think that’s why a lot are folding up around here the land prices are not comparable to the cattle income for most.

This is one of the single biggest obstacles an American producer now faces; unless you live in one of the few places left where you can buy large parcels of ground for under $2500 per acre. This number is the number generally agreed upon by several savvy real estate/cattle guys from this very board(some are still here and some are not) as about the most you could pay for land and run a cattle operation. Some would argue for 3k. Doesn't matter to me, I couldn't buy sh:t ground here for under 4k anymore. However, as land prices continue to creep upwards, it will impact everywhere eventually.

It has been a very good discussion and remained very civil. One thing for certain, there are no simple answers. I am ALWAYS interested to hear how the guys that are making it work for a living do it. Unfortunately, we rarely hear the how, just that it looks like they are.
I know the 2 BTOs that are near me are both nervous. I hate to see it because they are awesome people. Good as folks as you could hope to know.

Here you can certainly buy places for under $2500 an acre but it takes a lot of acres per cow. Places are priced based on the carrying capacity. Ranches and realtors searching for someone with big money wanting a lifestyle will ask $10,000 per cow. That doesn't pencil unless you have the big bucks. For most working cattlemen the number is more like $6,000 per cow. Of course house, facilities, and number irrigated acres all come into play. There are some around where some one with money bought a place and built a mansion. They decide that they don't want the lifestyle but their price now includes the mansion. SIL is in the process of buying a place that has a carrying capacity of 300 cows. It is cheap at only $1,000,000 which works out to $3,333 per cow, The down side it is entirely dependent on forest service grazing lease. If the forest service decides to pull or reduce the lease he will be out his money with nowhere to go for the cows. That is another issue. How much is deeded ground and how much forest service or BLM lease. Everyone things those things are cheap but it puts you at the mercy of the government.

 

[Stocker Steve]

Sustainable dairy operations either have a market niche, or have segmented the commodity supply chain and identified both the geographical locations and the portion of the supply chain where they can win. Will sustainable beef operations be any different?

 

[bball]

Pretty good conversation here. I’m glad to see it being discussed, it seems like the associations want to shut down conversations and inevitable questions. I think we are being led to believe that our numbers are causing the competition, however per an article I read recently but can’t recall whether it was online or in a cattle publication, it stated that fast food restaurants bought a high percentage of the beef and a significant part of that was of out of country origin. It stated that there was a shortage of lean beef. I realize the concept is to provide as cheap of food supply as possible but I would think that if the reasoning is a shortage of lean beef that our domestic pound cow and bulls, as well as feeder cattle perceived as lower grading should be stable and relatively good at all times price wise.
Around here it used to be said that 40 or so cows would make for a modest living. I believe that would be closer now to 60-70 at the minimum, and that’s talking a bare minimum with no room for errors. I think that’s why a lot are folding up around here the land prices are not comparable to the cattle income for most.

This is one of the single biggest obstacles an American producer now faces; unless you live in one of the few places left where you can buy large parcels of ground for under $2500 per acre. This number is the number generally agreed upon by several savvy real estate/cattle guys from this very board(some are still here and some are not) as about the most you could pay for land and run a cattle operation. Some would argue for 3k. Doesn't matter to me, I couldn't buy sh:t ground here for under 4k anymore. However, as land prices continue to creep upwards, it will impact everywhere eventually.

It has been a very good discussion and remained very civil. One thing for certain, there are no simple answers. I am ALWAYS interested to hear how the guys that are making it work for a living do it. Unfortunately, we rarely hear the how, just that it looks like they are.
I know the 2 BTOs that are near me are both nervous. I hate to see it because they are awesome people. Good as folks as you could hope to know.

Like a lot of others I’m personally at a crossroads now as far how to make it work so it’s a subject near and dear to me. I’m a small time full time farmer and the only option I have at the moment is to go all in on cows and calves and forget the feeders and bred heifers. That will cut out the expense of having to buy and then worry about paying out if the market goes worse. At least with a cow calf outfit you still have the cows after selling off the calves. I can run cows without having to feed near as much grain. I am figuring on running more cows and rotating between fields where I haven’t been able to do that with the other projects. I’m also considering the possibility of maybe selling out here and relocating to a less expensive area.

A. This is an area to explore; maximizing pasture production through various means (rotation, MIG, soil improvement) well documented here at CT. Having said that, will you be able to add enough cows to make a significant financial impact?
B. Relocating within state or headed elsewhere? I have heard mention of OK still having reasonable land. Dave had me packed and ready to head for PNW ;-) ... until his last post (the part about being at govt mercy on some of the forest/BLM lands).

I wish you the best :tiphat:

 

[bball]

Sustainable dairy operations either have a market niche, or have segmented the commodity supply chain and identified both the geographical locations and the portion of the supply chain where they can win. Will sustainable beef operations be any different?

Market niche? Like organic? Agritourism?

Can you give examples of segmented supply chain Steve? This is interesting and I have never heard it mentioned before.

 

[bball]

Here you can certainly buy places for under $2500 an acre but it takes a lot of acres per cow. Places are priced based on the carrying capacity. Ranches and realtors searching for someone with big money wanting a lifestyle will ask $10,000 per cow. That doesn't pencil unless you have the big bucks. For most working cattlemen the number is more like $6,000 per cow. Of course house, facilities, and number irrigated acres all come into play. There are some around where some one with money bought a place and built a mansion. They decide that they don't want the lifestyle but their price now includes the mansion. SIL is in the process of buying a place that has a carrying capacity of 300 cows. It is cheap at only $1,000,000 which works out to $3,333 per cow, The down side it is entirely dependent on forest service grazing lease. If the forest service decides to pull or reduce the lease he will be out his money with nowhere to go for the cows. That is another issue. How much is deeded ground and how much forest service or BLM lease. Everyone things those things are cheap but it puts you at the mercy of the government.

Thanks for taking the time to post this. Very informative and provides better insight into how things are done where you are. The $6k per cow makes a lot of sense due to the larger amount of acreage needed to support a cow there. It essentially translates to $3k per acre pricing in the 2 acre/ per head world. I have noticed the prices you post from calf sales are consistently as good or better than most anywhere else reports. Very insightful post. Basically, the successful ranchers there have the numbers figured down very similar to what the guys in $2.5k to $3k per acre have figured for financial viability.
I am happy to hear there are still places where those numbers are obtainable.

 

[HDRider]

Government grazing, huh

 

[Ky hills]

This is one of the single biggest obstacles an American producer now faces; unless you live in one of the few places left where you can buy large parcels of ground for under $2500 per acre. This number is the number generally agreed upon by several savvy real estate/cattle guys from this very board(some are still here and some are not) as about the most you could pay for land and run a cattle operation. Some would argue for 3k. Doesn't matter to me, I couldn't buy sh:t ground here for under 4k anymore. However, as land prices continue to creep upwards, it will impact everywhere eventually.

It has been a very good discussion and remained very civil. One thing for certain, there are no simple answers. I am ALWAYS interested to hear how the guys that are making it work for a living do it. Unfortunately, we rarely hear the how, just that it looks like they are.
I know the 2 BTOs that are near me are both nervous. I hate to see it because they are awesome people. Good as folks as you could hope to know.

Like a lot of others I’m personally at a crossroads now as far how to make it work so it’s a subject near and dear to me. I’m a small time full time farmer and the only option I have at the moment is to go all in on cows and calves and forget the feeders and bred heifers. That will cut out the expense of having to buy and then worry about paying out if the market goes worse. At least with a cow calf outfit you still have the cows after selling off the calves. I can run cows without having to feed near as much grain. I am figuring on running more cows and rotating between fields where I haven’t been able to do that with the other projects. I’m also considering the possibility of maybe selling out here and relocating to a less expensive area.

A. This is an area to explore; maximizing pasture production through various means (rotation, MIG, soil improvement) well documented here at CT. Having said that, will you be able to add enough cows to make a significant financial impact?
B. Relocating within state or headed elsewhere? I have heard mention of OK still having reasonable land. Dave had me packed and ready to head for PNW ;-) ... until his last post (the part about being at govt mercy on some of the forest/BLM lands).

I wish you the best :tiphat:

Thanks. I am planning to add another 20 cows over the next couple years if it looks to be comparable that would get to 70 give or take. I would then be looking at buying most of our hay but the way we are working it now with hiring that done it shouldn’t be a lot different price wise. I have also started raising most of our bulls that cuts a significant expense out.
It’s kind of a difficult decision to make about leaving here as I am 7th generation farming in this county. My wife is from Oklahoma which is where we would go to be close to her family as I am the only one remaining in my immediate family. I believe the area there that she is from is somewhat comparable maybe not quite as high of ratio of acres per cow but not far off. Hills are another factor I often think I’m going to meet my demise somehow with a tractor on the hills around here. She calls them hills and mountains out there but to us here that’s a walk in the park so to speak. Plus I think the winter is a little warmer out that way. If I had it perfectly I would be in middle to southwest Florida but land would be much more expensive there.

 

[Stocker Steve]

An econ definition of a commodity is that alot of people are able produce it, and on average, they break even. But there are usually a few that make good money. For example - - a cow/calf niche might be low cost leased grazing or "free" crop aftermath grazing.

There may also be a portion of the break even supply chain that makes a consistent profit. For example - - the packer... But a supply chain look is much more detailed than the three operations listed in this title. This is what we are doing when we debate making hay vs. buying hay vs. extended grazing. This is what we are doing when we debate raising vs. buying replacements or bulls. These are some of the key management decisions - - not saving 15% at the farm store.

One of the MN mega dairies advantages is they avoid investing in overpriced land by contracting for corn silage. It is a ROI thing. If corn ever went back to $7 they could be in trouble. Right now these specialists have the cash to expand their milking operations while their traditional do it all competitors are selling out. Government programs are trying to prop up these traditional producers but it is a belated CYA action.

 

[Dave]

An econ definition of a commodity is that alot of people are able produce it, and on average, they break even. But there are usually a few that make good money. For example - - a cow/calf niche might be low cost leased grazing or "free" crop aftermath grazing.

There may also be a portion of the break even supply chain that makes a consistent profit. For example - - the packer... But a supply chain look is much more detailed than the three operations listed in this title. This is what we are doing when we debate making hay vs. buying hay vs. extended grazing. This is what we are doing when we debate raising vs. buying replacements or bulls. These are some of the key management decisions - - not saving 15% at the farm store.

One of the MN mega dairies advantages is they avoid investing in overpriced land by contracting for corn silage. It is a ROI thing. If corn ever went back to $7 they could be in trouble. Right now these specialists have the cash to expand their milking operations while their traditional do it all competitors are selling out. Government programs are trying to prop up these traditional producers but it is a belated CYA action.

I have a friend who is milking 1,500 cows. He happens to be located a very short distance from a rail road siding. He also told me that he is "partners" with a grain broker. Grain is delivered 4 to 6 rail cars at a time to that siding. He supplies grain to about 5 or 6 other dairies (700-1,500 cows) . He doesn't charge them a bunch for delivery but enough to off set the cost including the handling cost on the grain he uses. He also has a contract for the waste from a nearby vegetable processing plant. They do sweet corn, peas, and carrots. All that waste gets put into silage. The largest single expense on a dairy is feeding the cows. He feeds his cows pretty cheap.

 

[Dave]

Government grazing, huh

There are huge areas in the west which were never homesteaded. That is why the government still owns it. The reason it wasn't homesteaded was the settlers just couldn't make on the ground. Two times the government up the amount of acres one was allowed to homestead. Even that didn't work on a lot of it. This county has over a million acres of public land. About two thirds is forest service land. Most is pretty mountainous and heavily timbered. Along with high elevation. About a third is BLM. That tends to be arid land. A lot of it is steep and rocky but the water holes tend to be a long ways apart. I have grazing rights on a shared BLM allotment. It is just under 5,000 acres and allows 200 cows for 5 months of the year. It is steep. And a cow better be able to walk because it can easily be well over a mile in any direction to water. The picture is part of the grazing allotment. Not the best ground but certainly not the worse either.

 

[Stocker Steve]

Nice western cow country photo. I don't expect that you have many small hobby farms in that area.

 

[Dave]

Nice western cow country photo. I don't expect that you have many small hobby farms in that area.

Yep, no hobby guys on that ground. I lease out my grazing rights up there. It is no country for old men either. The nearest hobby farms are probably 50 to 60 miles to the east or west in the irrigated flat ground around La Grande or the treasure valley.

 

[bball]

Government grazing, huh

There are huge areas in the west which were never homesteaded. That is why the government still owns it. The reason it wasn't homesteaded was the settlers just couldn't make on the ground. Two times the government up the amount of acres one was allowed to homestead. Even that didn't work on a lot of it. This county has over a million acres of public land. About two thirds is forest service land. Most is pretty mountainous and heavily timbered. Along with high elevation. About a third is BLM. That tends to be arid land. A lot of it is steep and rocky but the water holes tend to be a long ways apart. I have grazing rights on a shared BLM allotment. It is just under 5,000 acres and allows 200 cows for 5 months of the year. It is steep. And a cow better be able to walk because it can easily be well over a mile in any direction to water. The picture is part of the grazing allotment. Not the best ground but certainly not the worse either.

25 acres per head. Yea, I imagine it would be tough for a hobby guy to make that work..judging from that picture, and your other posts, there aren't many folks living up that way..and the pic explains the why. Essentially, a niche, as SS described previously.
Dave, on those grazing rights you have access to and lease to someone else, do you have to pay for that access or is it an application process and grants you specific access upon approval? I am somewhat familiar with the BLM from my days in NM, but never utilized any of the land.

 

[Dave]

Government grazing, huh

There are huge areas in the west which were never homesteaded. That is why the government still owns it. The reason it wasn't homesteaded was the settlers just couldn't make on the ground. Two times the government up the amount of acres one was allowed to homestead. Even that didn't work on a lot of it. This county has over a million acres of public land. About two thirds is forest service land. Most is pretty mountainous and heavily timbered. Along with high elevation. About a third is BLM. That tends to be arid land. A lot of it is steep and rocky but the water holes tend to be a long ways apart. I have grazing rights on a shared BLM allotment. It is just under 5,000 acres and allows 200 cows for 5 months of the year. It is steep. And a cow better be able to walk because it can easily be well over a mile in any direction to water. The picture is part of the grazing allotment. Not the best ground but certainly not the worse either.

25 acres per head. Yea, I imagine it would be tough for a hobby guy to make that work..judging from that picture, and your other posts, there aren't many folks living up that way..and the pic explains the why. Essentially, a niche, as SS described previously.
Dave, on those grazing rights you have access to and lease to someone else, do you have to pay for that access or is it an application process and grants you specific access upon approval? I am somewhat familiar with the BLM from my days in NM, but never utilized any of the land.

I am not sure how it was originally decided. That happened back before I was born. Which was a long time ago. But it did have something to do with your base acres of deeded ground These rights came with the place when I bought it. I also have some rights in another allotment on the other side of the canyon. Both allotments are shared allotments. The one pictured is me and one other guy. The other allotment there is four people who share it. You can buy, sell, or lease the grazing rights. Leasing the BLM requires a 3 year lease. You can buy or sell forest service grazing rights but you can't lease them. The forest service requires that all cattle run on your allotment have your brand. With the buying and selling it is not nearly as cut and dry as it originally was.
I was surprise that this works out to 25 acres per cow. I guess I never figured that one. There are some areas of good grass but there is also a lot of rock and steep ground. If it were all ironed out flat there is probably 10,000 acres or more.

 

[1982vett]

Wouldn’t grazing rights on the blm land be a bit difficult to use if you don’t own or lease land next to it?

 

[Dave]

Wouldn’t grazing rights on the blm land be a bit difficult to use if you don’t own or lease land next to it?

There are a lot of people who haul cattle to BLM leases. Some a long ways. In fact ads for ranches for sale will state, "out the gate BLM allotment" because it is a benefit not having to haul. One of the ranchers who shares on one of my allotment brings them in from about 150 miles. An other drives them up the road for about 4 miles. i would have to drive them down the road about 2 miles to that allotment. The one pictured is out my back gate. The guy I share that allotment with drives them about 3 miles and cut across my place to get them out on BLM.

 

[HDRider]

Whole different ball game.