Warren Buffett on the Beef Business
- Thread starter HDRider
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SBMF 2015
Well-known member
A lot of us run on profit margins that the non livestock would sees as lunacy. They only see profit in dollars. We all realize that it takes more than dollars to make a person wealthy.
Stocker Steve
Well-known member
Attended the Omaha Berkshire annual event in a previous life. Outstanding people watching. Charlie is a piece of work, and they are both obviously showing their age.
They are correct in that the average cow/calf producer does not make a real profit during an average year. Thus the articles on "cash profit". That said, most CTers are above average and eating alot of steak!
Warren was/is a part owner of his son's initial crop farm. He provided a down payment, but had stipulations on the (low ball) purchase price.
The financial issue with ranching is you are usually in several businesses at once, and that is a lot to capitalize and manage. Hopefully you enjoy it and find a lot of fringe benefits. Otherwise you may want to break the finances down into several enterprises.
They are correct in that the average cow/calf producer does not make a real profit during an average year. Thus the articles on "cash profit". That said, most CTers are above average and eating alot of steak!
Warren was/is a part owner of his son's initial crop farm. He provided a down payment, but had stipulations on the (low ball) purchase price.
The financial issue with ranching is you are usually in several businesses at once, and that is a lot to capitalize and manage. Hopefully you enjoy it and find a lot of fringe benefits. Otherwise you may want to break the finances down into several enterprises.
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That's a beautiful thought, think my banker will agree?
Stocker Steve
Well-known member
Depends how honest you are with him.
They come across as pompous windbags in this clip.
Silver
Well-known member
They remind me of Statler and Waldorf.
SBMF 2015
Well-known member
Hahaha! I think my banker cringes when we talk. He is a good guy and also farms, but has a job to do. He always asks " do you think you will be able to pay us back? " That used to scare me a little. But now I just ask him to tell me what the price will be for corn and cattle. As long as the prices hold you'll get your money.
I love this story of a neighbor long passed away; Herman was starting out and had talked to his banker about borrowing some money to buy a rail car load of cattle to feed out.
He went to Missouri and bought two loads of cattle. When he got back his banker read Herman the riot act telling he that was not what they had agreed on. Herman's response; "You'll either get your money or you won't"
I don't know if he was a millionaire when he died, but he had to be close.
Stocker Steve
Well-known member
You have to cut senile billionaires some slack when they try to answer a poorly worded question.
I can do without the snide remarks and laughter regardless of their wealth.
Dave
Well-known member
I knew some guys who were on the verge of bankruptcy. They owned a fair amount of cattle. They sorted them by color into different pastures. They toured the banker around to show him all their cattle. As soon as they left a pasture the cowboys showed up with trailers and hauled the cows to another pasture. On that second pass they mixed the colors to a degree. So they weren't all Angus or Herefords like they were the first time the banker saw them. Thus to the banker they looked like different cattle. Lots of cowboys, horses, dogs, and trailers involved. Of course they treated the banker to lunch mid day to give the cowboys time to work. It did work that day. But they went bankrupt the next year.
I know another guy who the bank pulled his loan. He hauled one semi load of cows a week to the sale. He had told the bank that they would sell them as they came down out of the hills. Told the sale to sell them all as a single draft of open kill cows (they were bred). They sold cheap to his brother. The bank got the check. The cows went back on the same truck that brought them to town and were back to the ranch about 6 hours after they had left. They did this every week for a couple months.
I know another guy who the bank pulled his loan. He hauled one semi load of cows a week to the sale. He had told the bank that they would sell them as they came down out of the hills. Told the sale to sell them all as a single draft of open kill cows (they were bred). They sold cheap to his brother. The bank got the check. The cows went back on the same truck that brought them to town and were back to the ranch about 6 hours after they had left. They did this every week for a couple months.
KAstocker
Well-known member
They're actually great guys, if you ask me. They worked for their riches and still work now in their 90s. They don't seem greedy. They just enjoy investing. You can't judge someone from one clip. If you watched their annual meetings, you'd see their personality better. They're not snobby. They just have a sense of humor.
KAstocker
Well-known member
And if farmers and ranchers took notes from them about how they value businesses, they wouldn't lose so much money.
Stocker Steve
Well-known member
I have very wide ranging discussions with my banker. He understands that ROI is not everything. An issue is that large scale farming is all about leverage and ROI. We have continuing failures of family dairies here that can not compete with 10,000 cow modules staffed by guest workers living in on site motels. Then some local businesses fail because the family farms have gone under, and it just spirals... Corporate cows don't buy from local businesses, family farmers do.
My banker will loan you $$$ for low return businesses as long as you have equity.
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Stocker Steve
Well-known member
Happened to a BTO here last winter. He sold most of his British cows and bought back longhorns. Not sure how that will work.
Stocker Steve
Well-known member
Howard Buffet is on RFD at 9 AM Central January 1.
