profitability question-school term paper help

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IluvABbeef

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Can anyone help me find some resources to this question (for a beef cattle term paper I've been working on over the semester):

What would be the optimum herd size for a single operator in order to attain a net profit of approximately $20 000, $40 000 or $60 000 annually?

Thanks in advance
 

Mat Man

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They would have to inherit cattle, land,money and equipment from a family member to show any profit the first 5 years.
 

hillsdown

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IluvABbeef":1ef03min said:
Can anyone help me find some resources to this question (for a beef cattle term paper I've been working on over the semester):

What would be the optimum herd size for a single operator in order to attain a net profit of approximately $20 000, $40 000 or $60 000 annually?

Thanks in advance
Hey Karin , haven't heard fro you in a while.

Boy you picked a humdinger for a paper..I don't know if there has ever been anything written for our conditions. High land prices ungodly machinery prices, fuel , fertilizer, labor etc. prices never seen in this economy , and shYtty cattle prices..

Sorry I can't help but, good luck on your finals . :wave:
 

grubbie

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Pretty tough to calculate this when cattle prices vary .40 per pound across the country. That is a big difference in your final number. A little more info on your equation will help. Here, the last few years anyway, I can count on $500.00 to $550.00 per calf that i sell every fall. So, to get $60,000 every fall I would sell 120 head. My costs are fairly low compared to most here, mostly fuel, but I would have to figure that as taking a bite out of my profit. Other folks have land lease payments, and other things that I don't have to worry about. Some people take their animals in to the vet every time they have a chip in their hoof. This also adds cost. There are people who buy $5000.00 bulls while others buy $2500.00 bulls......There really is no concrete answer to your question. Too many variables.
 

dun

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The old rule of thumb was you make $100 profit per cow per year. Figre the math from there
 

Brandonm22

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IluvABbeef":3ue1w23e said:
Can anyone help me find some resources to this question (for a beef cattle term paper I've been working on over the semester):

What would be the optimum herd size for a single operator in order to attain a net profit of approximately $20 000, $40 000 or $60 000 annually?

Thanks in advance

I wish I could give you a decent link; but put it together kind of like this...
each cow needs ~2 rolls of hay a year (in Alabama that might be ~$30 a roll), figure 250 lbs of grain supplement (~$140 a ton here or ~$18), You probably are going to need more hay and feed in Canada, fertilizer cost at ~$32 a head (that could be a $120 too low), ear tag for calf at ~$2, vaccinations at ~$7 (jeffers Supply will have vaccination costs), fencing at ~$24 a head, marketing at ~$8, property taxes at ~$6, fuel costs at ~$18, preg check at ~$4, and miscellaneous costs at ~$4. You end up with something like $183 a cow in direct cash costs. Then there is machinery costs (both depreciation AND actual costs like oil, repairs, etc).

If you figure that the only machinery you NEED is a tractor (~$40,000), a bushog($10,000), corralls($6000), a chute($4000), livestock trailer ($7000) and 3/4 ton pickup ($30,000) or $97000. For tax purposes (IN THE U.S.) all that is 5 year property so tax depreciation would be $19,400. You will go broke if you can only get 5 years of life out of all that stuff. Figure REAL depreciation at 16 years or $6062.5. Used stuff won't cost nearly as much as new stuff; but it might not last as long either thus the real machinery costs CAN actually be as high. Figure cost of tires, repairs, oil, grease, etc at ~$2000 per year so your total machinery costs whether you are running ten cows or 5000 is ~$8062.5. It costs so much to have a vet come out too consult no matter how big the herd is figure $1100??? I got $9162.5 in total fixed costs. You probably need to add some barns to this scenario too.

Figure 88% of your cows have a calf every year and your calves bring $1 a pound and weigh 550 when you sell them so your cows gross ~$484 a head per cow. After direct per cow costs they only bring in $301. Figure that salvage value on culled cows bring enough to keep replacement heifers

$20,000 profit plus $9162.5 in fixed costs divided by $301 is 97 cows
$40,000 profit plus $9162.5 in fixed costs divided by $301 is 163 cows
$60,000 profit plus $9162.5 in fixed costs divided by $301 is 230 cows

AND all of that is assuming no land costs other than fuel, fertilizer, and property taxes. IF you are servicing a $2 million mortgage, I am not sure you CAN make money. Change those numbers to whatever you pay/get in Canada and run both high dollar market numbers versus low dollar market numbers. For what feeders are bringing here right now you might need a thousand head to clear $60,000 even if your land is paid for.
 

Jim62

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............"I can count on $500.00 to $550.00 per calf "............

I used to use those same figures, but a couple weeks ago, they were bringing more like $350 to $400.

I don't think there's any way a single operator could handle enough cows to make a profit of $20,000.
 

backhoeboogie

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dun":1la3w4rq said:
The old rule of thumb was you make $100 profit per cow per year. Figre the math from there

Are there any adjustments for deflation? :D

How about inflation of fertilizer or fuel costs?:D

There is another rule of thumb that goes, "Buy low and sell high!" This certainly isn't the time to be selling :D
 

HerefordSire

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I am not referring to cash flow. I am referring to profit.

The answer is 'undefined' or infinite (loss) since the average farmer with a land base is losing money per head (negative). For example, if I owned and managed 10,000,000 head of cattle, I would lose more than if I managed 1 head.
 

milkmaid

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dun":6dv3yhdd said:
The old rule of thumb was you make $100 profit per cow per year. Figre the math from there

Yep. And here's an article that gives those numbers if you need to quote it Karin: http://www.ndfarmmanagement.com/Other%2 ... itcle2.doc (It's titled "Will $1.00/lb calves work in your operation?") We're quite a bit below that now, but maybe you can use some of the data.
 

Brandonm22

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Jim62":1avcvhcv said:
............"I can count on $500.00 to $550.00 per calf "............

I used to use those same figures, but a couple weeks ago, they were bringing more like $350 to $400.

I don't think there's any way a single operator could handle enough cows to make a profit of $20,000.

In last week's Alabama Livestock Market News 576 lb Med & Lrg 2 steers were bringing 79.73 cwt ($459) and Med & Lrg 2 525 lb heifers were bringing 73.67 cwt ($387) for an avg calf price of ~$423. They are bringing a little better down here than you are seeing there; but still it gets to be real tight at these numbers. This is a year where it would have been better to contract a price in advance or to have sold earlier and lighter. Instead of shipping trailer loads of $387 heifers, this MIGHT be a year too look into stockering or retaining ownership.

Using that $423 number and my admittedly low cost operator numbers I get 154 cows, 260 cows, and 366 cows add in higher fertilizer, feed, and fuel costs (like we saw this year) or a mortgage and it gets really difficult to come up with those levels of profits.
 
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IluvABbeef

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Boy did I ever open up a can of worms. :shock:

Well basically, my term paper's been this: find a cooperator with about 100 head of cattle or more and make a report on how profitable they are and what things they can do to change their operation to be more profitable. So I'm sort of acting as a "farm-consultant-in-training" sort of deal...not that I'll actually BE a consultant...

Anyway, I've had to go out to the farm to get info on things like expenses and revenues, building and machinery values, unpaid labour costs, and info on everything invovled running the cowherd: pasture, hay, crops, aftermath grazing, calf crop, calf and cull sales, the list goes on.

Then I was asked to ask my co-operator to come up with a few questions they would like to know in this report, and one of them was this one about a one-man operation making $20 000 or $40 000 or $60 000. The others they asked me to find out about were pros and cons of home-raised replacements versus bred or open heifers bought from somewheres else, and whether its more profitable to buy hay versus making it on your own land or making it on rented land.

Just to give you an idea of what I have to write up (and present to my co-operators) in this report, among other calculations and discussions of the SWOT analysis and recommendations.
 
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IluvABbeef

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Oh and by the way, thanks for the help. :) Been busy with exams and such (still busy with them: got one done today (yipee!!), still got 2 more to go), but this question of profitability kind of stumped me.

The calculations working out for the area in Alberta (being the boreal-transition zone....this would be a different zone than the one you're on HD), are something like, for low cost producers, a lot more than 100 cows to make even a net profit of $20 000. From the 2007 benchmark analysis even the low cost guys were losing money.

Can't wait to see how much money folks lost this year. :?

Thanks again.
 

1982vett

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IluvABbeef":3h9rg2rk said:
. Can't wait to see how much money folks lost this year. :?

Thanks again.

I know I made enough I won't need to make my 4th quarter 1040ES payment. :?

Profit on a farm/ranch depends greatly on how much you spend on "pretty" and then how much you spend to keeping pretty looking good. Fancy bites you in the wallet too. ;-)
 

Jogeephus

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dun":1cet8trs said:
The old rule of thumb was you make $100 profit per cow per year. Figre the math from there

So I guess what you are saying is that if I pay $3500 for a bred heifer it will take me 35 years to pay for it. I'm confused. ;-)
 

dun

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Jogeephus":27r03ge7 said:
dun":27r03ge7 said:
The old rule of thumb was you make $100 profit per cow per year. Figre the math from there

So I guess what you are saying is that if I pay $3500 for a bred heifer it will take me 35 years to pay for it. I'm confused. ;-)

If you market the calves as feeders that's about right. Of course you have to consider the salvage cost of her when she's 35, that maybe lowers it to only 30 years
 

mobgrazer

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This reminds me of 2 things I heard all the time when I started with a few cows as a tax write off. If a true farmer won the Mega million they would keep farming till they went broke again. It’s all about a few things; marketing, luck, management, luck, working for someone else, and finding a notch that you can feed into the market.

You have to be as good as a business man as a farmer to make it long term.
 

Jogeephus

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mobgrazer":2eij5a28 said:
This reminds me of 2 things I heard all the time when I started with a few cows as a tax write off. If a true farmer won the Mega million they would keep farming till they went broke again. It’s all about a few things; marketing, luck, management, luck, working for someone else, and finding a notch that you can feed into the market.

You have to be as good as a business man as a farmer to make it long term.

Good post. This, I think, is what makes cattle so interesting. There are so many ways to do things. There is no right way or wrong way to do things. It all depends on your situation. You have to be open minded and look to at different angles and strategies and figure out what works best for you and your situation. I think we all are guilty of forgetting this sometimes. (or at least I am)
 

hillrancher

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I see no shinning stars in these posts. You mean I have worked 35 years to get into a position to go broke?

Way cattle were selling today there is no doubt.
 
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