Then and Now

[rockridgecattle]

I read a thread this morning "deal or no deal" and read a post by Bez who mentioned the hidden costs that we rarely tell newbies to expect, followed by a post by tn and how he never loses... It got me to thinking about a conversation i had with my mother in law yesterday, and how we look at costs differently these days. How a family farm back then thought, if they had money to live a bit, they were ok and made money. That off farm income was a good thing to help keep the farm running. That by combining the income, the farm was in the black. Today however, our off farm income is what we live on, and the farm trys to pay for itself. The farm is a business and is treated like a business. The following is a paraphrase of our conversation and the differences between our generations, or maybe the difference in our views these days:

So i was talking with my Mother in law (MIL). the conversation started on repairing the engine on the 3020 tractor and the cost. Hubby and i just got a price quote from John Deere on fixing, or just buying the parts and we fix. Our problem was the 3020 is used every day so we need a replacement loader. If we got JD to fix they would provide a loader for us to use for a nominal fee and if we fixed, we needed to rent and maybe pay a bit more in rent cause we would never be able to fix as fast as the dealership.
Back to the story. So i was explaning to MIL the cost of this, and how hubby had said maybe we should just get rid of the cows. MIL says "but that is income you would be losing". My reply was something along the lines that there is no income in cattle cause of the expenses. That we are losing money, so our income is really a loss. Her reply was "but you did not buy your cows so you did not lose money" HUH?!? Any how a guy down the road had bought grassers last spring and sold a couple of weeks ago and did not even make back the purchase price. And he definitely did not even cover the expenses.

I had to explain to MIL, that even if we did not "buy" our cows, we did not cover our expenses this year. She was quite shocked. I explained the vet expenses, the fuel, fertilzer, feed etc. Then along the list was accounting fees, insurance, cost to operate a tractor, loan payments.
Her reply was "you can't count everything, or you would never make money!" :o :shock: :shock: :shock:

the differences in accounting between us is amazing. She added in the off farm income, and always came in the black since they had enough money to "live on". No actual cost on keeping the cow, no actual $ for profit or loss...just if they had enough money to live on. Some years you did and some years you did without.
Me, I keep the off farm separate from the farm income. Living expenses separate from the farm, and even break down the hives and the cows and when we had chickens, to see where the money was ok and where we needed bandades cause we were hemoraging money. This of course led to some corrections as to how we operated our farm, to cut some of the losses. We took a tougher stance on cows and illness, and culls, a tougher stance on bull performance, and how we made hay and even fed hay. Looked for ways to cut costs. And it has worked, for the most part...
For the in laws though, ah give the cow another chance, no need for a defined breeding season, not that bad of a calf, so it costs a bit more to make hay, or feed hay...oh well...
I look at the changes we made over the last several years. I see how we look at things different than what they did when they farmed and yet I am wondering,are we really any further ahead... :o

 

[Stocker Steve]

You are right - - keep things seperate even though it hurts some times to look at the numbers. I don't like doing it, but I have to so I know where to focus and what to change. It was different when land was cheap and family expenses were a fraction of what we expect today.
I have just started to update our "profit plan" for each enterprize. We have four farm enterprizes - - pairs, replacements (for resale), stockers and one piece of deeded land.
There is no year to year profit in land so I have to cover that with off farm income. :(
Stockers are a real roller coaster but we rent most of thier pasture and try to buy cattle that will upgrade.
Replacements can be real profitable if you know how to market them... Still working on getting better at marketing. :?
Cows get interesting. If you by cheap cows (that don't die or try to kill you), and buy in low cost hay, and don't have much equipment, and give them credit for the manure, then they can/may/should also make a profit. Low cost hay is not avaliable every year here so I need to line up or lease some more meadow to have custom hayed.:?:

 

[Lotu]

Previous generations didnt have the extra expenses or luxuries we do now. Cell phones,TV provider,multiple car/truck payments,Credit cards with high interest,Internet,grocery bills, and many more icant think of at the monent. Even farming practices and livestock managment have changed greatly in the past 50-75 years.Livestock wasnt as pampered as it is now. Losing body condition and even livestock deathes was just survival of the fittest.

K.I.S.S. - Keep It Simple Stupid ......is a favorite of mine

With the number of farmers dwindling everyday the burden falls on the shoulders of the ramaining farmers to feed even more people as the world's population expands. It is not possible to continue infinite consumption and infinite population growth on a finite planet.

 

[novaman]

I see the same thing in my family. My grandparents made good money on dairying because they grazed and had nearly no expense. They don't understand it still costs something to graze cattle. These days everything is under a microscope. We must be productive yet efficient. Back in the day expenses were minimal and income was decent so there was more margin for error. I've notice that everybody calculates profits differently but in the end we all do what we love and try to improve practices in order to do a better job. My opinion is that there are differences between generations because the older generations do just enough to get by and the newer generations are more intent on constantly improving and implementing the latest technologies to increase efficiency of the operation.

 

[SRBeef]

I am not an accountant so I don't know the correct terms.

What I think is being described as the "old approach" is more of a cash flow/cash accounting system: if you weren't hungry and had more cash in your pocket at the end of the year than at the beginning of the year it was a "good" year.

Nowadays I think we are more into accrual accounting where we recognize costs and gains even if they are not immediately visible in our wallet. We recognize that you can make a "profit" on paper but still have no cash in your pocket.

We also realize we can have cash in our wallet and still have had a terrible "loss" for the year.

While accrual accounting is technically the "better" "more accurate" way to look at things, it definitely makes life more complex than the old "cash in the wallet" approach!

Merry Christmas all.

Jim

 

[Stocker Steve]

Well, there is no cash in my wallet but the neighbors think I have a lot more cattle so I am going to buy a jug of Black Velvet and call it a good year.

Merry Christmas! Steve

 

[rockridgecattle]

We work on mostly cash based as well. We pay cash for most things. However, we do keep the personal from the farm.
I think one of the biggest differences between then and now is we look at the cost of machinery, they did not. For them, my in laws, the cost to keep a cow was mineral, salt, vet, and purchased feed. If you put up hay, that was a cost in fuel, but you did not really count the oil, filters, machine parts. Knowing what it cost to put up and then haul hay home was not really considered a cost since it was on your own land. Fertilizer was not a bottom line cost, cause if you had the $ great, if not you went without. Fencing was not considered a cost either.
The older generation was and is more willing to put the money -- for example--- to fix a hay sickle mower. They spend half the time fixing and half the time cutting after having it in the shop getting it ready for about 2 weeks before haying. Then they feel like they are saving money cause they got that piece of machinery working for one more year. In some respects, that is good! They have the pride in getting it to work one more year, doing the job. We the younger generation look at the cost of repairs, the down time, the quality of the feed that got put up cause we were down during the driest parts of the summer instead of out in the field. We are pressured to be more efficient to save a $ and we are trying to do more in a day that we find fixing and holding together a piece of "older than Moses" equipment more of a chore...we just do not have the time anymore to fix the old stuff, so we go out and buy new or used equipment with some life still. We have to value our time, otherwise we are not efficient in what we do...
...but then since we are trying to do more in aday to keep ahead, do we enjoy what we do? I know i do not have the time to work in my gardens with so many things on the plate. Ask the question again...are we really any further ahead?

Just a thought

Merry Christmas

 

[JRGidaho`]

My philosophy is the farther you can stay away from iron and oil the more profitable you can be. You have no control over the price of fuel, fertilizer, or equipment, but you can choose whether or not to own it or use it.

 

[grubbie]

I operate about as economically (cheap b/a/s/t/a/r/d) as anyone I know of. I keep EVERYTHING seperate from my personal finances. Just takes one little thing to throw you in the red. This year, some much needed repairs to my ranch truck ate up all my profits for the year and even a little of next year's calf check. It's hard not to buy the things we want, we have the money. But we want it to be cattle money that buys the cattle equipment. This means we have to be extremely frugal. We get by with our old junk, and thank the Lord that we don't have to try and make a living on these cows. At least we can supply our kids' families with good beef, and put a couple bucks in our pocket, for now.

 

[MO_cows]

Wonder if the business end of farming/ranching just didn't get more complicated along with the tax code?

 

[Stocker Steve]

...but then since we are trying to do more in a day to keep ahead, do we enjoy what we do? I know i do not have the time to work in my gardens with so many things on the plate. Ask the question again...are we really any further ahead?

I hear you, and it depends on your goals:
Some folks look at their sod where the garden used to be
Some folks look at their check book balance
Some folks look at their tax return
Some folks look at their net worth
Some folks look at their soil test
Some folks look at their life style
Some folks look at what is in their garage and closet
Some folks look at where their children end up
Some folks look at what gives them joy

Do you have written down goals?

 

[Stocker Steve]

Wonder if the business end of farming/ranching just didn't get more complicated along with the tax code?

Tax code is a factor. Global competition is another factor.
Tax code and global competition are major reasons for US businesses going overseas and ag input costs going up.
Some of the very long range thinkers keep pointing to future water shortages (particularly in Asia) driving up ag commodity prices. An interesting thought but not something I can control nor count on.

 

[Jogeephus]

I don't believe in putting all my eggs in one basket. To me, cattle are but one facett of how I make a living from the dirt. Keeping it simple has worked fairly well for me. The droughts have hurt but I have stayed in the black. I won't be buying a new truck with the cattle this year but between the cattle and other little things my children will be wealthier than I am today.

 

[bigbull338]

i to am from the old school of raising cattle.my labor is a 0 cost.my feed parts an supplys are 0 cost.an heres why im going to fool with something an pump money into it.might as well be something i enjoy doing.if you factored every lil cost there was to cattle you would be losing a $1000 a cow a year.because the calves will bring from $300 to $500 a hd.an if you quit running cattle youd have to sale the farm because you could not afford to pay the land taxes.my 1 an only tractor is 32yrs old.so if it goes down im hung.thats why im looking into getting another new or used tractor in the future.

 

[TexasBred]

Bull the old 'cigar box' still works pretty well....an as owner you get paid last so you're labor is free unless there is a little money left in the cigar box at the end of the year and that is your pay

 

[Susie David]

Our taxman keeps reminding me every year that I should be doing something else, sage advise from a man who still farms on the side. Anyway, considering that I'm now officially retired and have a small operation on the side I can look at the business a bit differently; still break even with the farm and Susie still has a good town job so life is OK. Still account for every nut, bolt, seed and postage stamp but know that I can quit any time. Sold 3/4 of the cows in early summer then my old ahy supplier let me have half of his first cut and all of the second...couldn't pass up a hundred bucks a ton for 21% alfalfa, so now we have a barn full of hay and only a handfull of cows and our old customers are ordering srping and fall beed already...looks like I'll be buying a few head from our friends and staying in business another year or so.
Yes, I'll be counting every nickle.
And that's my two bits worth, asked for or not....DMc