Who's breaking even or better?

[rkm]

Mr Billy, from reading your past posts you have at least 3 different beef enterprizes. You sell seedstock, have a cow-calf operation and sell freezer beef. I was wondering if all 3 enterprizes are struggling or one or two carrying the load for the other?

 

[Stocker Steve]

We try to separate the return from different operations, and do a net worth calculation, each year.

We have a preconditioning operation, a grazing operation, a freezer beef operation, and a cropping operation.

We usually make money on spring preconditioning, but the main goal is to have cattle ready for grass. We use sell - buy calculations and try to buy cattle that will upgrade.
We have always made money on grazing and freezer beef, but the freezer beef operation is only a couple head per year. We had a very low investment (leased land and financed cattle) when we started our bootstrapping our way up which gave a very good return on equity. We purchased some land last year and the banker asked why we don't invest more in ranching. Had to think a while on that one...
I buy used equipment and patch it up, or hire custom work, and/or rent tractors. Even so - - cropping is an easy place to lose money in our area so we don't do it except to renovate pastures. Feed has been cheap until this year when we had the driest summer since the mid 70s.

I think making a profit is mostly a function of where you invest your time and money.

 

[MrBilly]

Mr Billy, from reading your past posts you have at least 3 different beef enterprizes. You sell seedstock, have a cow-calf operation and sell freezer beef. I was wondering if all 3 enterprizes are struggling or one or two carrying the load for the other?

We are so small that all three parts (enterprizes?) are usually lumped together. Registered cattle sales means bulls to us; they are taken to a friend after weaning and after a couple weeks on feed. He is a real seedstock guy, he feeds them out and puts them in his annual sales - we split the receipts on the bulls with him. The females we keep. We do make some money on the boys.

We are in the process of separating out the freezer beef because I am not really sure that our return is worth the expense of feed and the amount of labor and time the calves spend on the farm to get finished? We will have a handle on that soon.

Billy

 

[Bama]

The one biggest number I go by is how much a cow makes me in "dollars per day" The program I use figures it down to that per cow or calf. If calf "a" makes me $150 and calf "b" makes me $ 60 dollars which one is best. If it took calf "a" 425 days to do it thats only .35cent per day. If calf "b" did it in 90 days thats .67 cents per day. I could turn three type "b" calves as opposed to 1 type "a" calf in the same amount of time. I plug in the current prices for cattle and my program figures the dollars per day. If one ain't gaining weight to my advantage I dump it and replace it with one that will. Cattle ain't my number one source of income but I look at it as it is. If I can't make money on them it would be cheaper to invest in a CD and and rent or sell hay off of the land. I realize I micro manage my herd. Some call me a tightwad or a nerd. I admit I resemble both those remarks. Caustic is right you have to have a number as to what ole Belle is costing you before you can figure your profit. Ugh ohh I think I just called Caustic a nerd. He has been called a lot on here but thats the first time I remember him being called a nerd.

 

[popsjp]

Have been reading this post and would like to thank all for taking the time to make their posts. Some great information sharing here.

 

[Wewild]

The one biggest number I go by is how much a cow makes me in "dollars per day"

How do you calculate their consumption?

 

[Wewild]

The one biggest number I go by is how much a cow makes me in "dollars per day"

How do you calculate their consumption? That is the sheep dipping expense wouldn't you say?

 

[llcupit]

I do a total cost and profit analysis to determine profit per head. I then look at each cows calf sale to determine which cow cost more to keep. As someone else stated if cow A's calf sale price was $650.00 and cow B's calf was $550.00 and both are steers born when 5 days of each other(2 real cows) Then cow B cost more to keep. I might keep cow B around but most likely she will end up on the cull list. I've seen that a cow like cow B will usually be an under performer every time. Finished taxes the other day and profit per cow figured at $107.52 per head for 2007.

 

[Bama]

The one biggest number I go by is how much a cow makes me in "dollars per day"

How do you calculate their consumption? That is the sheep dipping expense wouldn't you say?

You lost me on the sheep dipping expense??

I have them in groups as to size. My spreadsheet subtracts the day they went on feed from the day they went off feed. This may occur a couple of times a year depending on their weight and what time of year I bought them. Then it figures a total of feed consumed and at what cost. From this I can get a total cost in feed per calf. That would be grain consumed. It also does this with hay. It doesn't figure the exact feed to each one as this would be cost prohibited. If I have 50 to a group and put out 200 pounds of feed it goes with 2 pounds per head. This don't figure in one eating 1.9 pounds and the one next to it eating 2.1. It means that each one had the oppertunity to eat 2 pounds. I only feed grain and hay when I have to in winter. I perfer to grow them on grass. Grass is figured in at a cost as well. Grass cost is determined by cost of fertilizer and chemicals as well as fuel and a few other expense. I can get a fairly close estament in dollars per day all the time, But it is not to the exact penny until years end. At that time all of the years expenses have been divided out over the entire years worth of cattle. If I buy 100 in January and sell out in May due to a really bad drought and only carry 20 till December then buy back 500 you can see why I use "day on the farm" to figure with. These are extremes of course, but you can get my point. I sold 20 today. They will be charged with only 14 days worth of this years expenses plus all of last years expenses they had. This years expense won't be exact until years end. The grain, hay, Vet, salt, mineral and protein, medicine, stockyard fees and commissions, and utilities are a constant the fertlizer, lime, chemical, fuel, oil, seeds, pasture expenses, supplies, equipment repairs, improvements and maintenance are not. Thats why I have to wait to years end to get a figure to a exact penny.

 

[Caustic Burno]

I do a total cost and profit analysis to determine profit per head. I then look at each cows calf sale to determine which cow cost more to keep. As someone else stated if cow A's calf sale price was $650.00 and cow B's calf was $550.00 and both are steers born when 5 days of each other(2 real cows) Then cow B cost more to keep. I might keep cow B around but most likely she will end up on the cull list. I've seen that a cow like cow B will usually be an under performer every time. Finished taxes the other day and profit per cow figured at $107.52 per head for 2007.

You did better than me by 30 bucks a head. The Big Chief tablet and red crayon are out, front end cost have to go down and production of pounds has to go up. The scales at the salebarn are not going to change.

 

[Jeanne - Simme Valley]

It seems to me that running a feedlot is easier to calculate income & expenses. Animals come in and they all go out. With a cow/calf operation, you may only sell 1/2 your calf crop some years, so those replacements have to be calculated into the profit. It's just not as "cut & dry".
Do you calculate depreciation into the figures??
If I take Advertising, Breeding/Registrations, Feed/Hay, Fertilizer, Land Rent, Sale Expenses, Show Expenses, Vet/Vet supplies as expenses.
And, Cattle Sales & Show Income, I come up with $141/head of mature cows. But, I ended up keeping 14 replacements.
Now, that doesn't take in any tractor expenses, supplies, depreciation and other farm tax deductions, value of replacement heifers retained.
So what are you guys using as income/expenses?

 

[MrBilly]

It seems to me that running a feedlot is easier to calculate income & expenses. Animals come in and they all go out. With a cow/calf operation, you may only sell 1/2 your calf crop some years, so those replacements have to be calculated into the profit. It's just not as "cut & dry".
Do you calculate depreciation into the figures??
If I take Advertising, Breeding/Registrations, Feed/Hay, Fertilizer, Land Rent, Sale Expenses, Show Expenses, Vet/Vet supplies as expenses.
And, Cattle Sales & Show Income, I come up with $141/head of mature cows. But, I ended up keeping 14 replacements.
Now, that doesn't take in any tractor expenses, supplies, depreciation and other farm tax deductions, value of replacement heifers retained.
So what are you guys using as income/expenses?

OK, you make good sense. I just lump all my expenses and all the cash received as income, BUT i think we should then determine the average value of a purchased heiferin our area, of equal quality, and list that as a source of "income" for those heifers retained? I need to think that over and talk to my accountant, but just ignoring the replacements and using their upkeep as an expense without acknowledging them as a new asset (assuming they will be) isn't kosher AND it should make the bottom line look better - I like that.

Billy

 

[Caustic Burno]

It seems to me that running a feedlot is easier to calculate income & expenses. Animals come in and they all go out. With a cow/calf operation, you may only sell 1/2 your calf crop some years, so those replacements have to be calculated into the profit. It's just not as "cut & dry".
Do you calculate depreciation into the figures??
If I take Advertising, Breeding/Registrations, Feed/Hay, Fertilizer, Land Rent, Sale Expenses, Show Expenses, Vet/Vet supplies as expenses.
And, Cattle Sales & Show Income, I come up with $141/head of mature cows. But, I ended up keeping 14 replacements.
Now, that doesn't take in any tractor expenses, supplies, depreciation and other farm tax deductions, value of replacement heifers retained.
So what are you guys using as income/expenses?

OK, you make good sense. I just lump all my expenses and all the cash received as income, BUT i think we should then determine the average value of a purchased heiferin our area, of equal quality, and list that as a source of "income" for those heifers retained? I need to think that over and talk to my accountant, but just ignoring the replacements and using their upkeep as an expense without acknowledging them as a new asset (assuming they will be) isn't kosher AND it should make the bottom line look better - I like that.

Billy

The retained heifer has no value as you have written off all the expenses in raising and maintaining her. This makes retaining even a bigger loser in the event you have a loss. With the purchased cow there is some insurance value in you can write off the purchase price plus the cost of upkeep.

 

[Jeanne - Simme Valley]

CB wrote: "The retained heifer has no value as you have written off all the expenses in raising and maintaining her. This makes retaining even a bigger loser in the event you have a loss. With the purchased cow there is some insurance value in you can write off the purchase price plus the cost of upkeep."
Obviously you are referring to no value at the time you sell her on your income tax forms. Correct, you cannot depreciate anything you raise.
Trust me, my heifers HAVE VALUE! I'm glad I don't have to pay taxes on the "value" until I actually sell them.

 

[Caustic Burno]

CB wrote: "The retained heifer has no value as you have written off all the expenses in raising and maintaining her. This makes retaining even a bigger loser in the event you have a loss. With the purchased cow there is some insurance value in you can write off the purchase price plus the cost of upkeep."
Obviously you are referring to no value at the time you sell her on your income tax forms. Correct, you cannot depreciate anything you raise.
Trust me, my heifers HAVE VALUE! I'm glad I don't have to pay taxes on the "value" until I actually sell them.

If she falls over dead or dies calving you have no value you have already depreciated the cost of raising and maintaining her. She only has value if you sell her profit to be claimed or if you buy her a cost to the business that can be depreciated with upkeep.

 

[gerardplauche]

The main thing to remember here is that everyone has a unique operation. When it comes to cattle, each grower will have a unique situation that will cause he/she to track profits/losses in a different manner. There is no best way to track cattle finances universally; just one that fits your situation.

 

[Arkieman]

CB wrote: "The retained heifer has no value as you have written off all the expenses in raising and maintaining her. This makes retaining even a bigger loser in the event you have a loss. With the purchased cow there is some insurance value in you can write off the purchase price plus the cost of upkeep."
Obviously you are referring to no value at the time you sell her on your income tax forms. Correct, you cannot depreciate anything you raise.
Trust me, my heifers HAVE VALUE! I'm glad I don't have to pay taxes on the "value" until I actually sell them.

If she falls over dead or dies calving you have no value you have already depreciated the cost of raising and maintaining her. She only has value if you sell her profit to be claimed or if you buy her a cost to the business that can be depreciated with upkeep.

However, from an income tax perspective, a retained heifer SAVES you taxes in the year that you would have sold her. IF you would have sold her, you would have to pay taxes on her ($500 x tax rate (est 20%) = $100 saved on taxes by keeping her.

 

[Caustic Burno]

The main thing to remember here is that everyone has a unique operation. When it comes to cattle, each grower will have a unique situation that will cause he/she to track profits/losses in a different manner. There is no best way to track cattle finances universally; just one that fits your situation.

It is still simple math it cost X number of dollars to upkeep them and you make Y dollars when you sell them.
If X is greater than Y then you are losing money no matter how you slice it.

 

[gerardplauche]

Caustic - That is exactly why I put the word "unique" in my post. Cattle operations are very prong to a lot of "brother-in-law" deals that are hard to tack a value to. Time spent is also hard to put a price tag on. I think you missed the point of my post.

 

[Jeanne - Simme Valley]

CB - you must be working on your taxes. I am NOT referring to a value for tax purposes. I'm talking dollars & cents in my pocket. Sure, I don't have any $$$ in my pocket for the heifers I raised, but I sure consider them $$ in the bank - so to speak. I'm not trying to brag, but I guarantee you my heifers are worth more than what it costs me to raise them, even if I had a "fire sale"
I do my own taxes, and I know exactly what you mean. Dead heifers RAISED = no tax benefit
Dead cow or heifer purchased = tax deduction. But that's not what we're talking about.
If you can raise your own heifers to proper breeding size for less money than what they are worth at that time (or what you can buy them for), then you have females added to your herd that many producers will agree have more "stayability" in their herds. If you can't, than YES, you should buy them. Or possibly you don't want the risk/time factor involved in calving out heifers, that's your choice. Calving out heifers is no problem for me.
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