Ranching For Profit

[greenwillowhereford II]

I'll try to dig up the websites later, but I read an interesting article in HW about an outfit that teaches classes on profitability. One statement was that most of us treat our operations like a collection of jobs rather than a business.

 

[1982vett]

I would venture to say that a lot of folks might like to make a profit but don't really expect to.

 

[msscamp]

I would venture to say that a lot of folks might like to make a profit but don't really expect to.

Profit does not generally happen by accident. If one does not go into a business expecting to make a profit, how can that person make the decisions that are necessary to insure a profit? I realize that there is a whole lot more to it than just expecting a profit, but that is the start.

 

[bigbull338]

profit isnt an accadent.you have to work your tail off to make it.ive learned that the calves pay for the cows.but you have to have quality reg or commerical calves to sell.im trying to turn a profit on my reg cows every year.

 

[MikeC]

A problem arises when your competition is ranching for hefty a tax write-off...........................

 

[MikeC]

A problem arises when your competition is ranching for hefty a tax write-off...........................

How so Mike?

Two things come to mind first. The high cost of feed/grain does not deter the rancher who is using big time assets derived from other sources for tax write-offs. People perceive fatter/heavier cattle to be genetically superior.

Ranch "eyewash" sells cattle. A buyer who visits a ranch with the more plush facilities subliminally believes this rancher to be more successful and equates him to be a superior breeder. He LOOKS successful because he can afford labor and materials more readily.

These are just some of my general observations.

Try selling some range fed cattle next to some who have been fed grain ad libitum.

 

[bigbull338]

he means when they ranch to write off their expenes.an get ag exemption on their land.alot of the big boys ranch because they need to show a loss from other business ventures.an with ranching you can show some big losses.

 

[MikeC]

I can tell you that most of the major write-offs come to an end at some point.

You may be right, but what damage is done to smaller producers while these big ones they are rolling?

We will never know.

Camp Cooley Ranch
Southern Cattle Co.
Three Trees Ranch

The list goes on, and on, and on.

 

[Brandonm22]

I am kind of with Mike on this.

There is only X number of bulls that are going to be bought in any given year. Obviously, a big tax writeoff outfit that is willing too buy the back cover of your state cattle magazine, mails out a color catalog to everybody remotely affiliated with cows, advertises nationally, and has the $$$s to buy whatever genetics are hot today has an advantage over a competitor that has to clear $400 a bull and has to sell 100 of them to pay the mortgage and the light bill. THEN there are the people who just like being in this business. How many bulls are sold by guys with 50 cows or less who will sell below costs just so "burt the bull" doesn't go to the stockyard??? Both the multi-millionaire who just likes to sell cows and the little guy with a nice job who just likes to sell cows (who probably buys all his seedstock from the rich guy) are marketing a lot of cattle and both can afford to sell at their cash costs (or less). In Alabama the average cow herd is 23 so the VAST MAJORITY of bull buyers are NOT "pros". Everyone of them has the option of buying a bull from some celebrity who will wine and dine them with concerts and free steak dinners OR of buying an AI sired bull from a guy who will take a ~$1000. That makes the middle path very very difficult.

 

[Aaron]

I am with Mike 100%. I think he is forgetting the most important part of problem tax farmers. That is, the IMAGE it portrays to the rest of society. A farmer with all brand new machinery, a nice big barn and about $500,000 in visual/obvious investment, does not portray the actual image of the average farmer....but to the general public, it does. That burns me up something fierce. Although I continue to hope for a day when farming is no longer a tax-haven. Then the rest of us can do a little better in our farming career. :cowboy:

 

[SRBeef]

I realize most of the folks on this board are focused on cattle, however given the overall picture of agriculture including crops and cattle, cattle prices in general do not offer the same opportunity for profit that crops do.

Large scale cattle ranching, in areas where there is the potential to also raise row crops, has to produce comparable income and return on the investment required as row crops or folks who are good businessmen as well as farmers/ranchers, will shift to the more profitable operation.

We can complain about the hobbyists, tax-deduction ranchers etc all we want. In the end however the economics of each type operation must compete and the more profitable use of land and investment $$ will win out.

If you look at the "dispersal sales" I don't believe that ranch land is not sitting idle, it's going to other more profitable uses.

I heard on the radio recently that we currently have the smallest calf market in the US since 1950! Now that is NOT due to tax write-offs, hobbyists skewing the market etc. It's due to the fact the economics just are not favoring cattle right now.

Either cattle prices need to come up or production needs to shift to maybe smaller, lower investment operations, or both. We have recently been IMPORTING low cost beef from 3rd world countries into the US at the same time that we are EXPORTING higher quality US beef overseas! In some cases I am aware of, trucks take US carcasses to the seaports for export and load up with IMPORTED carcasses and take them back to the midwest! Now that sure makes a lot of economic sense especially with $4 diesel! We need to look at why things like this are happening....

Overall I think that eventually the economics will determine if folks stay in cattle or shift their land and resources to other ag ventures such as row crops. I would not blame hobbyists nor tax-deduction ranchers. While those both exist, the problem with cattle producer economics in the US beef production system as we have known it in recent years is much more widespread than either of those. jmho.

 

[Brandonm22]

I don't know if I go THAT far. I am certainly not going too borrow ~$950,000 to buy a combine, a 435 hp row crop tractor, 32' wide disk harrows, a grain trailer, 150,000 bushels of on farm grain bins, a spray rig, irrigation equipment, subsoilers, and a 30' wide planter just because grain prices have quadrupled in the last 4 years. Down south the question is whether or not the cows are worth the trouble. Pine trees, hunting clubs, golf courses, and selling lots is what happens when ranches die down here.

 

[dyates]

Don't forget that there are multitudes of acres that really aren't suited for anything other than pasture or hay. If all you can do is pasture and hay, then that's what you're gonna do, even if you don't make much money doing it. The only chance you have is to try to get better at it.