Who's breaking even or better?

[Arnold Ziffle]

jeanne, I always regard my raised, but unsold, heifers the same as you do: they certainly have $ value at any point in time, even though I haven't converted that value to cash folding money.

Also, dead heifer raised --- the tax deduction has already been taken, right up to the day of her death, since we deducted all the costs of raising her.

Another little item to consider regarding taxes: Upon sale of a raised breeding herd animal the taxable gain is taxed at the preferential long term capital gains rates, even though we take "ordinary" tax deductions for all costs of raising them. But as to the sale of a purchased animal probably most (in many cases ALL ) of the sales price has to be reported as ordinary income since we have probably deducted the cost of the animal via tax depreciation.

 

[Bama]

On cows they are charged by their upkeep. Calves out of a cow on my place is credited back to the cow. Year one I buy a bred cow for $1000 in Oct. She is charge with her cost plus her feed and upkeep ( her share of pasture and all other expenses)Beginning of year 2 her cost is what was carried over from year 1 (1000 + upkeep) $1090. She calves in March and rebreeds to my bull, calf sells for calf sells for $700 in fall. She cost me $375 to keep and calf cost me $20 upkeep. ( meds and tags ) End of year 2 cow is $1090-$700+$375+$20=$785,. Cow is now $785 in my pocket at end of year 2. Year 3 she calves in mar. Now she is also charged for her part of the upkeep of the bull as well( $15). Calf sells for $700 again, she cost me $375 again and calf $20. End of year 3 - $785 +$15+$375+$20-$750= $445 Same thing for year 4-$445+$15+$375+$20-$750=$105 and 5- $105+$15+$375+$20-$750= a $235 dollar profit. Year 6 same thing but Now she is entered as - in her total column and left out in her yearly column. total -$235+$15+$375+$20-$750= $575 total profit remember this is over a 6 year period. Course these numbers were just thrown in. By year 6 she would be making me $340 dollars per year but her total will have to the included to get a true profit from her. Thats why I do things in dollars per day. Young cows dollars per day are in the negative numbers as she has not yet paid her cost, older cows are higher as they have a free and clear calf to sell. Retained heifers take longer to get into the profit years as their beginning cost will be really high. Everthing has to be managed to get into the profit sooner. Yearly cost, bull upkeep, calf expense, as well as when to sell her to get the most out of her all have to be figured in to make the most on her. I know this sound like a lot of work. It ain't. Thats why I had to write my own program to do the work. I will share this program with anyone that really wants it, but be forewarned it is highly suited to my needs and not very user friendly to someone that has limited experience with excell.

 

[Jogeephus]

I agree that everyone's operation is different and each area of the country is different. But from what I have seen many people overlook one of the main wonders of cattle and that is their ability to convert forages into salable meat. While I don't advocate starving an animal by any means, I do think there is a real temptation to feed them more than they actually require. I think it can also be said that many are guilty of over medicating, over handling and over pampering these four legged wonders.

Using CB's figure of $75 per cow, how many extra bags of feed can you justify feeding each animal each year? Or how many calves would it take to pay for one C-section? Its obvious that the margain is awefully slim given your investment. How you chose to address these issues can make or break your finances.

 

[MrBilly]

There are some basic accounting principles according to my accountant. :roll: He says, "You can not record any value for the retained heifers. Their cost basis is 0 and all sales proceeds are income when sold in the future." I think this is what several of you are saying, and I agree with Jeanne, I prefer my own heifers than buying somebody elses. :tiphat:

Billy

 

[Jeanne - Simme Valley]

Arnold Ziffle - have I been blind & unobservant - or haven't you been around for a while? Nice to "see" you again. Raised heifers don't enter into the picture on your tax returns - but they sure do on a "Balance Sheet" for assets & liabilities!
Jogeephus - if that bag of grain is justified in $$ returned, then it is money well spent. Each area requires different managements, and each "type" of operation requires different managements. I am in a severe winter area, and I sell show/breeding stock. I guarantee you I could not get the prices for my heifers that I get if they were "rough" raised in my climate. Of course, several of my heifers are sold at 8-9 months old, so I have very little grain in them - from weaning to sale time. Maybe max 60 days on grain, about 5#/hd/day @ $0.10/lb - so that's about $30/hd.
I start my weaned calves out with about 3#/hd/day and build up to maybe 6# till they are in great BCS than I'll back them down. I'm feeding less than 4#/hd/day now.
If I sell 1 heifer out of the weaned group, her "profit" more than covers any extra grain bill - probably covers their winter grain.
I'm not trying to brag - just pointing out that there are differences in operations - you cannot make a blanket statement in our business - way too many variables.
I realize there are a lot of hobby farms that just pamper their cattle, graining nursing calves, cows, everything. They never can justify their expenses, but they don't need to. I need to. I'm in this business to make money - just like the 500 head cattle operations down in Texas or wherever. Looking at the bottom line to make a profit.

 

[Caustic Burno]

There are some basic accounting principles according to my accountant. :roll: He says, "You can not record any value for the retained heifers. Their cost basis is 0 and all sales proceeds are income when sold in the future." I think this is what several of you are saying, and I agree with Jeanne, I prefer my own heifers than buying somebody elses. :tiphat:

Billy

This is dead on about the accounting, as far as value goes they have to you and you only and thats a number in your head. The only true value any of them have is the cash they can be converted into instantly and that is salebarn price.

 

[usernametaken]

There are some basic accounting principles according to my accountant. :roll: He says, "You can not record any value for the retained heifers. Their cost basis is 0 and all sales proceeds are income when sold in the future." I think this is what several of you are saying, and I agree with Jeanne, I prefer my own heifers than buying somebody elses. :tiphat:

Billy

This is dead on about the accounting, as far as value goes they have to you and you only and thats a number in your head. The only true value any of them have is the cash they can be converted into instantly and that is salebarn price.

Is this how it is always done - cost basis of 0 ? Could the retained heifers not be done like equipment - assign them a market value and let the farm make a paper purchase of them at breeding age and then depreciate them out over 5 years ?

 

[Jeanne - Simme Valley]

I'm not a tax expert, but, as far as I know, unless you are operating two different enterprises, and one can sell it (and show the profit) to the other (expense - and depreciate).
Otherwise, all raised cattle are 0 cost basis. You expense them out on a daily basis as normal operating expenses.

 

[Caustic Burno]

There are some basic accounting principles according to my accountant. :roll: He says, "You can not record any value for the retained heifers. Their cost basis is 0 and all sales proceeds are income when sold in the future." I think this is what several of you are saying, and I agree with Jeanne, I prefer my own heifers than buying somebody elses. :tiphat:

Billy

This is dead on about the accounting, as far as value goes they have to you and you only and thats a number in your head. The only true value any of them have is the cash they can be converted into instantly and that is salebarn price.

Is this how it is always done - cost basis of 0 ? Could the retained heifers not be done like equipment - assign them a market value and let the farm make a paper purchase of them at breeding age and then depreciate them out over 5 years ?

They have a 0 basis as Jeanne said. This is another huge stike against retaining in book unless your running a Registered herd or have a closed herd for some other economic reason.

 

[tom4018]

I am afraid we will have to sharpen the pencils a lot this year to make any money. Fertilizer is sky high and I bet fuel will get worse. And for those that feed grain will be high, but our product is not keeping pace.