profit and shares

[denoginnizer]

You know how we often read that the average cattle farm makes about 100.00 dollars per head in profit? Occasionally I will see the question come up on how to farm cattle on shares. Usually people will talk about the man doing the work getting 60% and the guy with the desk job getting 40% of the sale of the calves. I am not agreeing or disagreeing with the share percentage but if the profit is only 100 per head why wouldnt it be fair to say the man doing the work gets 60 dollars or 60% of the profit per head and the other guy gets the rest? Anything paid over 100 per head and the cattle owner is losing money right? I only bring this up for discussion and I do all my work myself.

 

[Angus Guy]

You bring up an interesting point. The problem I see with what you're saying is some years you lose money. What would be the investors incentive to place the cattle with you? What having cows on shares has done for me is not having to invest $100,000 to buy the cows I have. This lets me have a chance to pay down equipment and operating loans. Then the possiblity of buying cows to get 100% of the profit is easier to handle.

 

[denoginnizer]

Lets say the owner has 100 calves. on a 60/40 split the rancher would get 40 of the calves. 40 calves times 600 dollars per calf equalls 24000. 40 times the 100 dollars per head profit, that the average producer makes, is 4000. This leaves us with a 20000 dollar difference.

 

[eric]

Not sure I am following you correctly, but if I am, then what you are saying is the owner of the cattle should get his cost of goods sold, COGS, back before determining the total profit. The COGS, vacs, death, feed and such should all be taken out before profit would be decided. The $20,000 difference is probably what the owner pd for 100 young calves. The $4000 the operator makes is for watching / working the guys place for 4-6 mos, the time from purchasing $200 calf (prob 2 mos old) to weaning time, around 7-8 mos.

 

[stocky]

denog, you are talking about 2 different things. in one you are talking about the profit and in the other, you are talking about gross sales---the two cant be compared to each other

 

[Andrew]

You have to look at it from a risk/reward point of view. If the investor looses, he'll loose money. If the laborer looses, he will loose time and perhaps some money but not as much as the investor.
Its just like any corporation, public or private, in which the owners of capital do not work but are also usually the last ones to get paid and only do so if there are profits.

 

[Angus Guy]

The one thing I think some of you are confused with is the investor (cow owner) gets 40% of gross sales minus any cow expenses(worming ,preg check, vaccination). The farmer gets the 60% plus all the other expenses.