Profit made off of cattle !

[Caustic Burno]

Now when you say the rancher is only getting so much for his cattle is this compared to what he makes at the sale barn or when the consumer pays for it at the grocery store. I think I read somewhere that when the consumer buys meat at the store the rancher only gets only a quarter of the price. Something like that, it's been a while since I read the article maybe I can dig it up again and put out some concrete facts.

The problem for years in the commodity cattle bussiness is we have to take what is offered. You can get mad and take your little wagon home and you still have a pile of calves to feed and dispose of. Cattlemen will not unite on a common front just way to many independent thinkers.
You raise the calf haul it to the sale barn.
You pay a yard fee
You pay a vet fee
You pay a brand inspection fee
You pay a beef board fee
This has cost an average of 8 bucks a head and the calf has never hit the scale.
Calf sales to an order buyer you gets paid
Pay auctioneer fee
Calf is trucked to a feedlot in North Texas (trucker gets a cut)
Calf is held X number of days on feed (feedlot gets a cut)
Calf is trucked to xyz slaughter plant slaughter plant (gets a cut)
Beef is trucked to local store (truck gets a cut)
Beef is cut up and packaged sold at your local market they get cut.
All this is depending on how Suzy homemakers budget is doing due to the economy. Now Suzy might not be buying T-bones any longer and has switched to rounds, the price of the T-bones won't come down. The price the order buyer is paying will.
There a lot of hands getting a piece of the pie.

 

[C HOLLAND]

Now when you say the rancher is only getting so much for his cattle is this compared to what he makes at the sale barn or when the consumer pays for it at the grocery store. I think I read somewhere that when the consumer buys meat at the store the rancher only gets only a quarter of the price. Something like that, it's been a while since I read the article maybe I can dig it up again and put out some concrete facts.

The problem for years in the commodity cattle bussiness is we have to take what is offered. You can get mad and take your little wagon home and you still have a pile of calves to feed and dispose of. Cattlemen will not unite on a common front just way to many independent thinkers.
You raise the calf haul it to the sale barn.
You pay a yard fee
You pay a vet fee
You pay a brand inspection fee
You pay a beef board fee
This has cost an average of 8 bucks a head and the calf has never hit the scale.
Calf sales to an order buyer you gets paid
Pay auctioneer fee
Calf is trucked to a feedlot in North Texas (trucker gets a cut)
Calf is held X number of days on feed (feedlot gets a cut)
Calf is trucked to xyz slaughter plant slaughter plant (gets a cut)
Beef is trucked to local store (truck gets a cut)
Beef is cut up and packaged sold at your local market they get cut.
All this is depending on how Suzy homemakers budget is doing due to the economy. Now Suzy might not be buying T-bones any longer and has switched to rounds, the price of the T-bones won't come down. The price the order buyer is paying will.
There a lot of hands getting a piece of the pie.

CB, the above example is why I am going to try out the Pasture to Rail system the BCIA has here in Alabama, I can send any amount I want and I pay a transportation cost up front and I get paid after they are processed and paid based on how they grade out and minus the feed and meds cost. I also get a report on what each animal graded and then I can make better decisions on what bull to use and what cows to cull...etc.



I will see how it works and decide what way to go in the future.

 

[TheBullLady]

That's an excellent program, and personally I think ALL producers should send a group of calves through a program like that. It will be an eye opener on what breeding does what in the feedyard, where it really matters.

 

[vs_cattle]

Now when you say the rancher is only getting so much for his cattle is this compared to what he makes at the sale barn or when the consumer pays for it at the grocery store. I think I read somewhere that when the consumer buys meat at the store the rancher only gets only a quarter of the price. Something like that, it's been a while since I read the article maybe I can dig it up again and put out some concrete facts.

The problem for years in the commodity cattle bussiness is we have to take what is offered. You can get mad and take your little wagon home and you still have a pile of calves to feed and dispose of. Cattlemen will not unite on a common front just way to many independent thinkers.
You raise the calf haul it to the sale barn.
You pay a yard fee
You pay a vet fee
You pay a brand inspection fee
You pay a beef board fee
This has cost an average of 8 bucks a head and the calf has never hit the scale.
Calf sales to an order buyer you gets paid
Pay auctioneer fee
Calf is trucked to a feedlot in North Texas (trucker gets a cut)
Calf is held X number of days on feed (feedlot gets a cut)
Calf is trucked to xyz slaughter plant slaughter plant (gets a cut)
Beef is trucked to local store (truck gets a cut)
Beef is cut up and packaged sold at your local market they get cut.
All this is depending on how Suzy homemakers budget is doing due to the economy. Now Suzy might not be buying T-bones any longer and has switched to rounds, the price of the T-bones won't come down. The price the order buyer is paying will.
There a lot of hands getting a piece of the pie.

But Thats America

If beef Producers buy out all factors of production we will be running a monopoly like other large companies in certain industries of the past which got to much power and ran out all the markets compitition

 

[Rod]

I have to agree a profit is not an easy thing with cattle and its buy far the least profitable thing I do, but for some reason or another I enjoy it. Having said that, I made it a point to for it to become more profitable for me. These are things that I have implemented that work for me.
A cow-calf operation is a very slow return on your money and I mix in a few other practices in with it to create a steady cash flow and a quicker return on money. Year around I have bulls for sale that I buy either at herd sale offs,out of the paper or groups that dont get sold at disposal sales. The $1000-$2000 range works best in my area and this creates a monthly cash flow. Every spring I buy calves and cow-calf pairs and keep them till the grass is gone and they're off to the salebarn. The calves are heavier and the cows are rebred. I dont have any extra expenses associated with wintering these catlle and I turn a profit in 6-7 months.
Without being said there are alot of do's and dont's with the up above and the more experience I gained the lessor the headaches (first year was he##). Best of luck !

 

[novatech]

A few of the ranchers around here have gotten together and sell their cattle directly to the feed lot or backgrounder in truckload lots. They cut out the sale barn and get a premium for their cattle.
They keep their breeding season the same as the rest of the group.
They produce what their buyer wants.
All the calves are uniform.

 

[Jogeephus]

A few of the ranchers around here have gotten together and sell their cattle directly to the feed lot or backgrounder in truckload lots. They cut out the sale barn and get a premium for their cattle.
They keep their breeding season the same as the rest of the group.
They produce what their buyer wants.
All the calves are uniform.

This is an excellent way to market smaller groups of cattle. It is really not that hard to do either but you might be surprised at how difficult it is to get people to agree to do it and work together even when its all but guaranteed to put more money in their wallets.

 

[dun]

A few of the ranchers around here have gotten together and sell their cattle directly to the feed lot or backgrounder in truckload lots. They cut out the sale barn and get a premium for their cattle.
They keep their breeding season the same as the rest of the group.
They produce what their buyer wants.
All the calves are uniform.

The state started a couple of programs in different parts of the state that are similar. Each area is seperate and the only support that the state provides now are graders. We've been doing it for the past 6-7 years and it's paid off but the feedlots even though they clasim they're going to provide carcass data as part of the deal haven't been very reliable. We're still waiting payment for the last bunch that was killed in june-july.
One positive is we normally recieve around 7-8 bids on each pot load and we'll generally have at leats 3 pots, sometimes 4-5. Each producer has a single vote regardless of if they have 1 or 20 or more calves in a given pot.
There are specific age groups and weaning and vaccination dates and vaccinations that have to be given to qualify. Last year another group of producers started another similar deal locally and I think we'll put some calves in that program just for comparison.

 

[ArrowHBrand]

I've never sold directly to the stocker, but I have bought directly from a seedstock producer. Up here, I don't know if they do it in other parts of the country, there is what is called a Green Tag Sale held in September of every year. At this sale the seller must have all calves weaned and on feed, UTD on vaccinations, and all breeding heifers must be given their calfhood vaccines. This gives the buyer the peace of mind that he is getting a superior animal that can go right into his breeding program. For doing these extra little bits, we receive a premium on our animals. My wife and I also have talked about buying steer calves in the spring and pasturing them all summer and selling them in the fall. The biggest preventer is the ever present cost of start up. It's always a killer.

 

[vs_cattle]

I have to agree a profit is not an easy thing with cattle and its buy far the least profitable thing I do, but for some reason or another I enjoy it. Having said that, I made it a point to for it to become more profitable for me. These are things that I have implemented that work for me.
A cow-calf operation is a very slow return on your money and I mix in a few other practices in with it to create a steady cash flow and a quicker return on money. Year around I have bulls for sale that I buy either at herd sale offs,out of the paper or groups that dont get sold at disposal sales. The $1000-$2000 range works best in my area and this creates a monthly cash flow. Every spring I buy calves and cow-calf pairs and keep them till the grass is gone and they're off to the salebarn. The calves are heavier and the cows are rebred. I dont have any extra expenses associated with wintering these catlle and I turn a profit in 6-7 months.
Without being said there are alot of do's and dont's with the up above and the more experience I gained the lessor the headaches (first year was he##). Best of luck !

I feel the same way I just Love the life style the comes with being around cattle

 

[Stocker Steve]

You know if cattlemen make only about $125 profit a head off of a weaning age calf. I dont see how anyone who has to pay for all of their start up exspenses can make any money at all in the cattle bussiness. And how they can keep from losing money ?From all of the discussions in the pass that i have read. $125 a head on feeder calfs is about right isnt it ? -Or do i have that number wrong ?

-An old timer told me it is more like make $200 profit per head some years and nothing the other years... Seems to be about right.
-Start up expenses are usually funded by off farm income or you have to find a generous leasing arrangement. I rented.
-Most folks don't make money in cattle so you want to only copy the ones that do. There are a few cattlemen without off farm pay checks that are making 6 figure incomes. They have worked hard for a couple decades to learn the game, establish relationships, and expand their operations.
-Land prices seem to run in cycles like most things. History suggests it is a pretty long cycle running 30+ years. I cann't predict the future but I did try to buy land in the mid 80's. The banker was in a panic and required 50% down...
-There is still ag land that will cash flow, but it is probably not where you are living today nor is this land raising what you are today.

 

[Rod]

The profit margin, depends on how you look at it. I agree that If you go and buy land, equipment,etc.,etc. and etc SOLEY for the cattle business you may never see a profit in your lifetime.
I look at it like this:

I bought my land because I wanted it for me and my family(hunting, fishing , atv riding and privacey) and even if I didn't own one cow I would still of bought it.

I could either buy a tractor, atv, implement, farming supplies and more cows, or I could just hand that money over to uncle sam each august. These are all fun write-offs for me and office supplies, insurance, employee's and such just dont have the same effect.


I enjoy it! Keeps me moving and my mind turning. There's no laying around the couch around here.

My biggest profits are my atv ride through the herd before work or after a he## day at work. I kinda look at those salebarn checks as all profit to me!

 

[Sir Loin]

Rod,

Thanks for your honesty.
If only some other people on here would be that honest with themselves, they would have a much better understanding why they don't make a profit.

And if they knew how to define "profit" they would understand that they most likely are making a profit, they just don't know it. Even with under 30 cows/calves.

IMO, most of hobby farmers haven't got a clue if they are making a profit or not as they are building a dream, or are delusional, instead of thinking like a businessman with a plan.
Nor do they understand that the minute the first hoof hits the ground on their new property that they have already made a profit from the property tax ag exemption vs residential.
In most areas that alone could amount to a $1,000 or more.

Glad to see someone has their head screwed on straight.
Enjoy! Life is too short to do otherwise.

SL

 

[Caustic Burno]

Rod,

Thanks for your honesty.
If only some other people on here would be that honest with themselves, they would have a much better understanding why they don't make a profit.

And if they knew how to define "profit" they would understand that they most likely are making a profit, they just don't know it. Even with under 30 cows/calves.

IMO, most of hobby farmers haven't got a clue if they are making a profit or not as they are building a dream, or are delusional, instead of thinking like a businessman with a plan.
Nor do they understand that the minute the first hoof hits the ground on their new property that they have already made a profit from the property tax ag exemption vs residential.
In most areas that alone could amount to a $1,000 or more.

Glad to see someone has their head screwed on straight.
Enjoy! Life is too short to do otherwise.

SL

Yes you saved in taxes but that cow wasn't free unless you are running website cattle.
That cow has a cost and your liabilty exposure has went up greatly.
A lot of people think land is always an investment.There is more than one way to look at property as land values don't always go up and there are corrections, most of you are not old enough to remember the Savings and Loan failures.
They were loaning money right and left to anyone with a pulse to buy land, prices skyrocketed and then it went bust just like the home lenders are doing now. People couldn't sell there land if they wanted to, prices here are just now getting back to what people were paying during the S&L boom.

 

[Brandonm2]

You are being too negative, Caustic. Yes we are in a boom. Probably even in a bubble. 200 cow ranches are selling for as high as $2 million in places where there is NO development potential. But the dollar is just paper and a lot of people are still making huge wads of dough....either from actually working or .......more commonly from investing. They need harbors for that money. You can sink $2 million into a 300 cow ranch, a stock that is valued at 20 times earnings, a commercial building that won't return 5% IF you can keep tenants in it, or a big house in a subdivision http://ahometour.com/listings/l0154.html

I would do it a little reluctantly; but I think I would go with the ranch. The key thing too remember is most of this is not a RISE in value as much as it is a drop in the value of the paper dollar versus land, gold, beef, corn, even the Euro! Around here it is NOT newbie cattle investors that are buying everything up; but rather professional who want their own hunting retreat. They don't even CARE about the land returning them anything at all!!! INFLATION is the big bugaboo in the economy. After a short term, 2-4 year period where you can't sell anything, I think it is a lot more likely that today's 200 cow $2 million ranches will be 200 cow $10 million ranches....but it might cost $250 to fill up your gas tank then too.

 

[Stepper]

I might be missing something here. And sure you can consider the money you get back on taxes money made from farming. BUT !!!! you dont get no more back than what you have paid in. Unless there is something i dont know about. And I dont see anybody running 100 head of cattle or less paying in very much federal income tax. As far as that goes even with 300 head of cattle i dont see anyone paying that much tax from the money made soely off of the cattle. I guess i should specify on a cow/calf operation that is.

And then to you can only write this equipment and other exspenses off up to a cetain extent before having to buy more to write off.

And if you sit down and put a pencil to exspenses that i think alot of people fail to take into consideration like the interest accured on loans to buy that equipment, cattle, upkeep on the farm etc...., And if you are honest with yourself. Alot of people would find they are not even breaking even on cattle alone. And are probably actually losing money by staying in the bussiness.

If your in it for the life style or because you enjoy it. That is fine. There is no difference than any other type of hobby that other people enjoy, hunting, fishing, gardening. The majoritys of all thoes hobbies are money losing to. But people do get enjoyment from doing them. So they are getting something from them.

But cattle is a exspensive life style if that is the only reason someone is in it. And a life style that the average person can not afford to stay in. Unless they have some deep pockets or they had the family farm and all of the equipment etc...., handed down to them. Or alot of money willed to them to buy everything with.

That is just my take on it for what ever it is worth.

 

[Rod]

I must be doing something wrong then, accountant said the farm did too well last year.

 

[Sir Loin]

Rod,
Re:

I must be doing something wrong then, accountant said the farm did too well last year.

Well, your account is probably right.
Did you expense your land cost, your labor, your vehicle, your office in your home, etc etc etc etc.
Did you depreciate all your equipment?
Do you have life and health insurance?
Do you have a 401K?
Do you have a golden parachute just like the CFO's of General motors and Microsoft?

If you answered no to any of the above, your accountant is correct.
And he is telling you to check or up your expenses or pay more income taxes.
SL

 

[Brandonm2]

WHY would anyone EVER expense the cost of raw land??? That is an insane accounting practice if your goal is to build real net worth. Raw land is MONEY IN THE BANK whether a cow ever walks on it or not. Generally the appreciation is greater than interest on certificates of deposit, money market accounts, or T-bills and the yearly tax liability (property taxes) is generally going to be less than the tax liability (federal and most places state income taxes) and that interest compounds. Secondly, you want to keep your BASIS in your property so that the original purchase price/inherited value can be deducted (tax free) from the eventual sale of your real estate.

Take this example....you buy a $1 million ranch make money off hunting leases, timber thinning, and livestock raising for 10 years. Wealthy developer offers you $4 million for it. If you still had a basis in it You would only pay capital gains taxes on $3 million of that sale. Your tax liability would only be $990,000 (28% federal and 5% Alabama income taxes) versus $1,320,000 if you had expensed the cost of land.

That is BAD. Lets look at the WORSE case scenario:. You fall off your horse and break your neck. Can't ranch anymore. Need to cash in your assetts and there is no white knight who is willing to pay 4 times what you paid for it. IF you did not depreciate the land you can get your million back free and clear with NO tax liability. Paid a million sold, it for a million. Now if you had depreciated all of your basis in the property away, you owe $330,000 in taxes, essentially taking a 33% hit in your net worth and probably have less income from the interest on the 670,000 (~36850 at 5.5%) than you made running cows.

 

[dun]

Take this example....you buy a $1 million ranch make money off hunting leases, timber thinning, and livestock raising for 10 years. Wealthy developer offers you $4 million for it. If you still had a basis in it You would only pay capital gains taxes on $3 million of that sale. Your tax liability would only be $990,000 (28% federal and 5% Alabama income taxes) versus $1,320,000 if you had expensed the cost of land.

How about if you buy a 12 dollar ranch and spend a million in fencing?