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tom4018

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Over the last five years with a small herd, we have averaged $160 per head profit before taxes. First few years we lost money getting things in place and trying to grow.

I have heard the same thing about herd sizes, in Ky I hear about 38 is the average herd. We have learned to pinch the pennies as much as possible. I feel we raise a quality calf and they usually sell in the top range at the sale.
 

Alan

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twabscs":1gq1qkwx said:
How do they hurt the margin? By adding inventory to the sales? Are not being smart enough to sell calves at the going rate. Please elaborate.

Yeah, they add to the supply without regard to the input costs/profit. Price is driven by supply/demand, thus a lower price. Most businesses would reduce production if the item being produced creates a loss.

Actually, though, it's probably not that simple. Eventually, even those that are trying to make a profit will, themselves, go out of business if there are too many producers working for free. This would then reduce supply.

Anyway, it seems intuitive that if the guy down the street is willing to work for free, it would reduce the profits/wages available to those that won't, but I could be wrong.

I can't agree, just simply because of the cattle prices the last couple of years.

Alan
 

Alan

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Sorry, I hit submit before I was done.

Lots of things drive cattle prices, weather, BSE, CAB,time of year,etc. I don't think you can lay it on the small (hobby) producer.

Alan
 

backhoeboogie

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Most of us doing small scale operations do not have to make a profit. Face it, you are not going to "make a living" with 30 head. We all need to at least break even, build the herd, and build equity into the operation.

It does not make sense to spend $30K to save $10K in income taxes, but the savings on property taxes in some areas of the country are substantial. Real estate has risen substantially too. So if you are breaking even, the appreciation will be realized, some day. If you are making a profit it is all the better.

Right now there is much more money to be made in hay than cattle here locally. Next year it could be the opposite. It helps to diversify your operation.

Setting goals and making plans are the first step. There is an old saying about failing to plan is simply planning to fail. There is a lot of truth in that old saying.
 

aplusmnt

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Rogerwilco":1ryz7dle said:
The fact that small producers exist indicates that efficient and profitable operations can be run on smaller scale and that realistic returns are possible at different levels of buy in.

This is not necessarily true, just because there is many small operations does not mean that they are making a profit. Some maybe doing it for tax breaks as Backhoeboogie mentioned, the cattle can be loosing money and as a separate venture they save on Property taxes so it works for them.

But small time Cattle operations are a lot different than a normal business. If my Janitor business goes in the red, my family has no roof over there heads and we starve or I quit and get a new job. If a small time Cattle Operation looses money, they take there Janitor money and buy some hay many times. So just because many small guys exist is not a sure sign that it is profitable.

Part-time farming, ranching, Hobby Farming might be one of the only business that will exist even if people loose money. Most all other businesses would fold and do something else.
 

Rogerwilco

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aplusmnt":et3w4q2e said:
Rogerwilco":et3w4q2e said:
The fact that small producers exist indicates that efficient and profitable operations can be run on smaller scale and that realistic returns are possible at different levels of buy in.

This is not necessarily true, just because there is many small operations does not mean that they are making a profit. Some maybe doing it for tax breaks as Backhoeboogie mentioned, the cattle can be loosing money and as a separate venture they save on Property taxes so it works for them.

But small time Cattle operations are a lot different than a normal business. If my Janitor business goes in the red, my family has no roof over there heads and we starve or I quit and get a new job. If a small time Cattle Operation looses money, they take there Janitor money and buy some hay many times. So just because many small guys exist is not a sure sign that it is profitable.

Part-time farming, ranching, Hobby Farming might be one of the only business that will exist even if people loose money. Most all other businesses would fold and do something else.

So would you go so far to say that it is unlikely that a small operation can be run efficiently and profitably, or are you just saying that most smaller producers are not necessarily reliant on the profitability of their operations, which is obvious?
Actually the fact that the "average" operation is small and tends not require profitability as part of it's justification also supports the notion that the average profitability of cattle production is greater than statistics indicates. In an assesment of profitability the average among producers is fairly low. Right around break-even. But who owns all the cows? Are most cattle sold at break even, or is there substantial profit in the sale of cattle that is hidden by the large number of unprofitable producers, statistically?
Excuse me for being picky, but we're talking about money and there really isn't any other good way to discuss money.
 

Alan

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Rogerwilco":57xfd0s3 said:
So would you go so far to say that it is unlikely that a small operation can be run efficiently and profitably,

Kind of broad statement, depends completly on sales less expenses. I have a lot of expenses, I have only been paying on my land for 5 yrs, still buying cattle and equipment. I may never make a profit, but like a lot of small operators I have income from other sources. My investment is my properties... buy land...God isn't making any more.


or are you just saying that most smaller producers are not necessarily reliant on the profitability of their operations, which is obvious?

Yes.

Alan
 

Alan

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Roger,

I guess what has to be asked is where is the money being made in the beef industry? Is it by the cattleman, the feed yard, the slaughter houses, or the retail outlets? I know if a sell a 600lb steer @ 125 cwt that is along way from the $8 per lb I pay for the steak at the store. I don't think the big profit is made by the cattlman. So is why I talk about cutting over head and improving product.

Alan
 

Caustic Burno

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Never said you can't make money just don't get the idea this is the next best thing to the lottery.

This is a tough business and you have to be tough to survive it
Mother nature is your best friend one year your worst enemy the next.
People seem to have real problems culling which is a management tool.
Knowing when to innoculate with a 44, 44 bullet fifty cents, vet bill 200 bucks on a cow that can't be saved.
The one I love the most is I have 10 cows so I get 10 calves a year, right. Here comes that never ending culling cycle again.
Buying the 30,000 dollar tractor to write off taxes has loser all over it.
If you need a tractor and can justify the cost is one thing but buying it for a tax break is a sure path to the poor house.
I think my 79 Massey still has a couple of years left on the warranty.
Now land is really the problem, depending on where you live in start-up cost in my area you can run a unit per acre to areas you need 10 acres or more,
Getting your infrastructure set up from fences to working pens cost have skyrocketed in the last couple of years.
T-post are almost 5 bucks a pop here now with wire at 40 dollars a roll.
How are you going to supply hay buy it? do you have a local dependable source? How are you going to transport it? Have it delivered? Are you going 100,000 dollars in debt to buy the tractor, baler, cutter, rakes.
Are you a jack of all trades and can do this work yourself or going to have to hire it out.
You need to be welder, machinist, carpenter, mason, laborer, electrician, vet, and others that don't come to mind right now.

Its a lot more than going and buying some cows and making money off them. I left a ton of stuff off this list.
 

aplusmnt

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Rogerwilco":34n35xg7 said:
aplusmnt":34n35xg7 said:
Rogerwilco":34n35xg7 said:
The fact that small producers exist indicates that efficient and profitable operations can be run on smaller scale and that realistic returns are possible at different levels of buy in.

This is not necessarily true, just because there is many small operations does not mean that they are making a profit. Some maybe doing it for tax breaks as Backhoeboogie mentioned, the cattle can be loosing money and as a separate venture they save on Property taxes so it works for them.

But small time Cattle operations are a lot different than a normal business. If my Janitor business goes in the red, my family has no roof over there heads and we starve or I quit and get a new job. If a small time Cattle Operation looses money, they take there Janitor money and buy some hay many times. So just because many small guys exist is not a sure sign that it is profitable.

Part-time farming, ranching, Hobby Farming might be one of the only business that will exist even if people loose money. Most all other businesses would fold and do something else.

So would you go so far to say that it is unlikely that a small operation can be run efficiently and profitably, or are you just saying that most smaller producers are not necessarily reliant on the profitability of their operations, which is obvious?
Actually the fact that the "average" operation is small and tends not require profitability as part of it's justification also supports the notion that the average profitability of cattle production is greater than statistics indicates. In an assesment of profitability the average among producers is fairly low. Right around break-even. But who owns all the cows? Are most cattle sold at break even, or is there substantial profit in the sale of cattle that is hidden by the large number of unprofitable producers, statistically?
Excuse me for being picky, but we're talking about money and there really isn't any other good way to discuss money.

Saying that just because there is lots of small producers that in itself is not proof that there all making a profit. Some are making a small amount of money, some are breaking even, and some are loosing money and some have no idea. But most likely all three will stay raising Cattle vs if you open a Restuarant and it looses money it is shut down for sure!
 

Workinonit Farm

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Small operations can be, and some are, run efficiently. However, I have to agree with Aplus, many aren't for many reasons.

I also have to agree with Caustic, spending cubic-thousands of $$ on equipment for small tax breaks is foolish when less expensive alternatives can be implemented. That is, if you are planning on being profitable.

Roger, yes, it is my opinion (and just an opinion) that generally many small producers are not reliant on the profitablity of their operations to survive in this world. I also do think (again, just an opinion here based on my own personal observations of some of the "outfits" around me), that many of the cattle/calves/feeders/whatever are sold at break-even prices.

I also think (again, just an opinion) that the middlemen (read-as-the-retailers), are making a fair amount of money on most of the beef animals sold.

Unfortunately I am not as eloquent as others so as to put what I'm trying to say, into writing as clearly as the thinking.

Katherine
 

gberry

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aplusmnt":1jntjqr8 said:
Saying that just because there is lots of small producers that in itself is not proof that there all making a profit. Some are making a small amount of money, some are breaking even, and some are loosing money and some have no idea. But most likely all three will stay raising Cattle vs if you open a Restuarant and it looses money it is shut down for sure!

I think the sad fact is that the average producer falls into the third category above and has no idea if they're making money or not.
 

Rogerwilco

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Caustic Burno":3rna688k said:
Never said you can't make money just don't get the idea this is the next best thing to the lottery.

This is a tough business and you have to be tough to survive it
Mother nature is your best friend one year your worst enemy the next.
People seem to have real problems culling which is a management tool.
Knowing when to innoculate with a 44, 44 bullet fifty cents, vet bill 200 bucks on a cow that can't be saved.
The one I love the most is I have 10 cows so I get 10 calves a year, right. Here comes that never ending culling cycle again.
Buying the 30,000 dollar tractor to write off taxes has loser all over it.
If you need a tractor and can justify the cost is one thing but buying it for a tax break is a sure path to the poor house.
I think my 79 Massey still has a couple of years left on the warranty.
Now land is really the problem, depending on where you live in start-up cost in my area you can run a unit per acre to areas you need 10 acres or more,
Getting your infrastructure set up from fences to working pens cost have skyrocketed in the last couple of years.
T-post are almost 5 bucks a pop here now with wire at 40 dollars a roll.
How are you going to supply hay buy it? do you have a local dependable source? How are you going to transport it? Have it delivered? Are you going 100,000 dollars in debt to buy the tractor, baler, cutter, rakes.
Are you a jack of all trades and can do this work yourself or going to have to hire it out.
You need to be welder, machinist, carpenter, mason, laborer, electrician, vet, and others that don't come to mind right now.

Its a lot more than going and buying some cows and making money off them. I left a ton of stuff off this list.

Well don't stop now. It looks like a pretty good list so far.
This is turning into a pretty good thread. We've actually almost got cattlemen talking about a proactive approach to the business instead of talking about losing money and how cautious we should be getting in.
Don't worry. We'll be careful. Now just tell us how you gained or lost money in the business so we can decide whether that is something we can accomplish in our own situations.

I kow that is kind of dangerous because there are a lot of people more emotional about their money and their investments than you think. But go ahead.
 

Caustic Burno

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Start out slow buy 3 in 1's stay away from black cows as you have no options. You can purchase red cows cheaper.
You can turn your calf crop what ever color you want by the bull. Stay with moderate frame cattle takes less to operate and stay away from heavy milkers hard keepers.
 

backhoeboogie

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Caustic Burno":1cosgjj7 said:
Start out slow buy 3 in 1's stay away from black cows as you have no options. You can purchase red cows cheaper.
You can turn your calf crop what ever color you want by the bull. Stay with moderate frame cattle takes less to operate and stay away from heavy milkers hard keepers.

Excellent advice. I wish I would have had this advice when I started. Maybe I would have listened.
 

Susie David

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I thought that I was getting new tires for our Ollie Super 55 for my birthday...thought wrong...wouldn't even think about a new tractor.
We are a small time operation but expect black ink this year.
From selling cut beef at the farmer's markets we have sold six extra locker animals this fall and have orders for our March slaughter....so CB is right on track saying that it's a niche market that will support the small operator...going to a grass finished steer, it's what the customer is asking for and willing to pay the prermium price.
With the talk of all the deductions and such...I wonder just how many folks actually file Schedule F...and use it as a management tool. Just my two bits worth...again
Dave Mc
 

john250

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Susie David":3fou4mzt said:
I thought that I was getting new tires for our Ollie Super 55 for my birthday...thought wrong...wouldn't even think about a new tractor.
We are a small time operation but expect black ink this year.
From selling cut beef at the farmer's markets we have sold six extra locker animals this fall and have orders for our March slaughter....so CB is right on track saying that it's a niche market that will support the small operator...going to a grass finished steer, it's what the customer is asking for and willing to pay the prermium price.
With the talk of all the deductions and such...I wonder just how many folks actually file Schedule F...and use it as a management tool. Just my two bits worth...again
Dave Mc

Surely everyone uses schedule F? Cash accounting really helps average out those lumps in income.
 

Caustic Burno

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Salebarns are not evil, lots of money to be made to the experienced eye. You will have your trainwrecks it is a heck of a lot easier to eat a 500 dollar trainwreck than some fru fru cow with papers at 1500 bucks.
Papers don't make the cow they are a tool to lure the buyer.
You are trying to produce the most pounds of beef in the least time and input into the product, this is where stategies start varying greatly. You are a grass farmer turning grass to beef to cash. Pasture management has to be number one management tool to conquer. Everyone like's Coastal I can't grow it so you have to find what works best to give you the most return on the land for me it is bahia. That doesn't mean you can't grow coastal down the road a mile on different soil.

I am through rambling some one else's turn.
 

Workinonit Farm

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Caustic Burno":1y4c544z said:
You are a grass farmer turning grass to beef to cash. Pasture management has to be number one management tool to conquer.

I couldn't agree with you more. While many of the cattle folks I know also abide by this, surprisingly I have met many who do not. And from those that do not, I have heard some pretty strange reasons/excuses.

I'm not saying that folks need to go out and go broke trying to fertilize, seed, etc. But do the best one can with what is available to you within your budgets and capabilities. It can't always be done all at once.

Katherine
 

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