The Cattle Business

[Carpenter]

     We had a heck of a year.  Sold our yearling steers for record high prices.  For about a minute I had more money than I knew what to do with.  Then, I paid back the cattle loan and the feed bill and the land payment and now I'm trying to figure out a plan for next year and with these high feed prices unless cattle prices continue to rise I am having a hard time figuring that this is going to work.  I've been over every scenerio that I can think of too.  I'm pretty good with cash flows usually I'm pretty close to right on the money and I've been to college in an agribusiness major, that has helped some. 
     To make a long story short, when we first moved back to Nebraska it was to get into the cattle business.  I've been in the cattle business my whole life really, but as an owner operator for 7 years now.  At first we bought about 100 weaned steer calves per year in December and sold them as yearlings the following August or September.  That worked out pretty well to get us started.  At the time I was working with my Dad who owns a section of ground and a 40 cow herd and he was basically leasing me the ground in exchange for labor to help us get started.  I would buy his steer calves and buy the others at auction.  A piece of ground with a house close to my Dads place came up for sale so we bought it, 80 acres of pasture ground.  I think about 35 more payments and it'll be mine.  The cattle do make the land payment every year there's just not a lot left over, that's fine, it's almost like a free place to live just with a lot of work involved.  And, I can handle that I like to work.
     We started our own cow herd when we bought this place and we quit buying calves at auction, we just keep mine and my Dad's steer calves to sell as yearlings.  I buy my Dad's steer calves at a pretty reasonable price, and I am still having trouble making everything work out on a cash flow.  The price of weaned calves is high, the price of feed is high and the price of land is through the roof.  I'm just not exactly sure how this all is supposed to work out.  I've gone over several cash flow scenerios and I can't decide wether to hold onto the yearling steers or just hold some of them and sell the rest as weaned calves or to sell some extra cull cows and keep extra heifers.  There's a lot of options and none of them really works out on paper at this point unless the beef price is on the upswing. 
     I know all agriculture is like this, I remember just a few years ago paying 2$/bushel for corn.  My Dad quit raising corn because he could buy it cheaper than he could raise it for.  It just seems like such a rat race to basically starve ourselves and compete against each other to feed a few ungreatfull people.  Most of the people may be greatfull, they just have no idea what it takes to get their food to the table.  I'm glad I don't actually try to make a living with agriculture, it would be pretty darn tough.

[beenthere]

Perk up Carp.
It's not all that bad. 

[zopi]

Farmers made this country...unfortunately, the country got away from the farm.

Big agribusiness has been allowed to starve the little guy out...and not just agribusiness...the big lumber interest controlling the grading of softwood lumber is no different...

There is a better way, but getting off the big economy into smaller local economies is a tough nut to crack....consider alternate farm outputs..a whole buttload of saleable produce can be produced in not much room...

[bugdust]

I don't know about others, but I really appreciate you guys.  

[shelbycharger400]

what is a 600-700 lb beef steer goin for at auction?   i was looking at buyin one from a local farmer at 2.25/lb plus process.... something seems a bit high with the fact that i will loose 1/2 the weight just in bones and guts alone

[Carpenter]

what is a 600-700 lb beef steer goin for at auction?   i was looking at buyin one from a local farmer at 2.25/lb plus process.... something seems a bit high with the fact that i will loose 1/2 the weight just in bones and guts alone

Lately I've seen 400# calves bring close to $2/lb. at local auction.  But, they really won't be ready to butcher untill their between 1200-1400#s.  I just checked the fat cattle report, yesterday out of Souix Falls they brought 125-132/cwt.  It takes a lot of feed to get one fat.  Were you looking at buying a 6-700 lb calf on the hoof and feeding it?  6-700lb feeder steers right now are bringing about $1.45/lb at auction. 

[sandhills]

Carpenter I hear ya, my dad and I run about 180 head of pairs, most pasture is rented and the land prices are absolutely rediculous.  We have had a pretty strong market around here for cattle (thankfully I'm on the selling end but we don't sell until march) but the feed costs are about the same as land.  I just bought my landlords share of the hay for 125 a ton, put that together with $6 plus grain makes for a pretty tight go of it, still I'm glad I'm not on the finishing end of the business.  Sounds a lot like the loggers here, if it was easy everybody would do it.

[WildDog]

Carpenter I hear what youre saing. Its the same down under, fortunately we have 2 off farm incomes. I breed some cows and most years sell off the weaners, our farm isn't suitable for fattening with light soils, native grasses and cold winters. On the other hand dad is 5hrs away near the coast and has an ex-dairy farm that has high carrying capacity with no frosts and buys in weaners to fatten. He'd let me fatten there but cattle from up on top don't do well down below.

Rainfall over the last couple of years has been the best on record so I have retained the weaners over winter feeding bypass protein, more to eat the grass than chase the extra dollars. Producers this year on the good country are suffering losses to bloat and pulpy kidney.

There is a lot of cattle guys diversifying into sheep again especially since the Dorpers have taken hold and don't require shearing or suffer fly strike. At work today I was in a room with 4 cattle producers, one guy said he was resurecting the old shearing shed in case he needed it, another said there hadn't been sheep on the place in 70 years but that would change after he upgrades the fences, another had just got back into sheep for the 1st time since 1983 and the last guy said he would but couldn't because the Wild dog problem was to great.   

sell some extra cull cows and keep extra heifers.

This comes with its own problems e.g no return for at least 20 months, management issues with keeping bulls away from the heifers, calving heifers down.
 
I have some caste for age cows but with the high prices and uncertain future I won't be buying replacements, instead I will enlarge my Boer goat breeder herd by breeding replacements. This comes at a cost because normally they would be exported to Malasia. At leaste with goats I get the added benefit of them improving the rougher country and the higher stock numbers allow me to chase more lucrative markets.

The way I see it, if your not in it for the love of it or for the tax incentives there is probably better ways to invest your money and effort.           

[Roxie]

If you are finding yourself at zero after making all your land payments and loans, then you are doing good, based on the standards in this area.  The only way to begin to make money is to own your land, and have no loans. 

After you have payed off the land, you then take the money you would have paid and buy your stock.  That will be the first year that you don't need a loan. 

I remember when I began going to auction with Cowboy Bob, and I was amazed because he could make more money in a day than I made in a week.  He could also lose more in five minutes than I made in a month. 

[Woodwalker]

The drought has caused a lot of folks to sell out around here. Hay is out of sight. 4X5 rolls of cow hay 800-1000#'s selling from $80.00 to $100.00. I've seen horse quality hay advertized as high as $140.00 for 4X5 Bermuda grass.
This is last weeks sales results from where we usually haul to. Calves are selling good, but everything else goes to slaughter.
NAVASOTA LIVESTOCK AUCTION CO.
FOR SATURDAY NOVEMBER 19, 2011
Volume:
1758
Total Sellers:
298
Total Buyers:
93
Trend of Market:
$ 4 --$ 6 Higher
WEIGHT:
STEERS:
HEIFERS:
150-300 lbs.
1.25—2.25
1.20—1.70
300-400 lbs.
1.10—1.75
1.15—1.475
400-500 lbs.
1.10—1. 65
1.15—1.41
500-600 lbs.
1.10 --1.50
1.05—1.39
600-700 lbs.
1.05—1.41
1.05—1.30
Slaughter
Bulls:
.50—.77
Slaughter
Cows:
.30--.65
Pairs
$ 575-- $ 870
Stocker
Cows:
$ 575 -- $ 975

[Bandmill Bandit]

I was in the cattle Business till 88. Grew up with cattle and all other manner of live stock you can grow on a farm. By the time I was in my early teens Dad had "bought" Grandpa out(grandpa carried mortgage for Dad) and we had a 80 ish cow dairy and about 90 moma cows, with 20 of them pure bred Saler. Total ranged from around 330 to 340 at weaning/penning time in the fall with 70 to 80 in the dairy barn.

We had room for about 380 to 400 head total in the winter feeding pens and just like you would buy 60 to 100 weaned calves from 2 of my uncle neighbors to fill out the feed lot for the winter.

What we did when the livestock market and feed prices were high is not fill the feedlot that fall, sell the extra feed and the weaned steers, heiferets, & cull cows in late October ish.  We grew about 30% more feed than we needed for a full lot on average anyway.

We held the money (after inputs were paid) from the feed & stock sales to put grass calves in the 200 ish acres pasture ground (read "free" feed ground) in late May early June and then depending on how the summer went and the feed and live stock markets looked/responded they would go to market in late october or into the feedlot pens.

It worked out pretty good most of the time but I dont think we made a heck of a lot more money margin wise than cattlemen do now. One thing for sure inputs are higher now as a result of the Mad Cow scandal and a few other stupid political moves on beef markets around the world but I think a herd of moma cows will still do you right. I still miss it, especially calving time in the spring, and then haying and silage time. 

Land cost was lower for sure and a good portion of ours was home stead land.

Made a few decisions that turned out to be bad when the provincal Gov was handing out cheap money in late 70s jsut before interest went out of site to buy more land and expand that side of the farm. turned out to be a dumb move. Should a bought another 60 moma cows and rented the 2 1/4s (1 was pasture) I bought and I would probably still be there.

That tells you how close the business of farming is to the line when you are carrying external financing.

If I had left the Mortgage with my dad and grandpa the debt load would not have been over the top when the interest spiked to 23 ish % in the early 80s.

I understand that even internal family financing is getting real hard to do now because of the cost of a retirement home in town for dad and mom (in this part of the world any way). so looks to me like not much has really changed from the norm of rising cost on the farm and diminishing returns at the farm gate.

2 things that will never change.

While farm kids graduate from college (and should) FARMERS do not. You can take the boy off the farm but you will never take the farm out of the boy. When a farm shuts down you lose generations of education that you can not teach in any school along with with the most qualified and best "professors" that pass that education and experience down the generations. Farming is a genetic occupation.

Same applies to the Forestry industry IMHO. 

Food does not GROW on a grocery store shelf. 90% of the people in this part of the world dont seem to understand that.




 

       

[SwampDonkey]

The beef cattle business around here is about as bleak as hog farms where the past two decades. Everyone is about gone broke with beef cattle. One big farm just up the road closed up this spring and I know of two other farmers that shut the doors in the last two years.

I would like to say a whole lot more, especially about who is coming in and taking up farms and not producing enough to pay for them, whereas anyone else at their level of production would go broke. But, I'll stop while I'm ahead. You would have to live here to see what I do and a lot of others.

[DR_Buck]

I'm not in it a serious as some of you are.  I have full time off farm (non-sawmill) income.   The cattle keep me in the 'AG' catagory for tax purposes.  I currently have 24 head black angus.  The last calves I sold 2 months ago were right at 600# and sold for $1.65 lb.   Thats the highest since I started 9 years ago.   It took me around 3 years before I started to turn a profit off of my initial stock investment.  From then on I've been able to cover all costs for feed, hay and vet with sales and take in a little xtra cash as well.   Profit is good, but in my case the tax benefits are much better.

[paul case]

Its sure changing.
When I was a youngster, noone kept their calves and weaned them. They were sold to ''backgrounders'' who raised them on some cheap input like wheat pasture or the like an those fellas sold contracts to feedyards. Heavy cattle,700lbs, at action only brought as much as 400lb calves that were right off the cow. So that is what I got set up to do, raise 400 to 500pound calves. I have enough land and 4 years ago I had the 100hd of momma cows to fill it. Now the heavy cattle are bringing a premium, probably because the feedlots starved all the backgrounders out of business.
I am now hung with a 1 time a year land payment in November that forces me to sell most of my calves at weaning. Thanks to some other things I am down on cow numbers and in a couple more years, my mortgage will be paid off, so I will be able to wean my calves and sell the in the spring with more pounds going across the scale.
My whole point is.... You got to roll with the punches. Be careful about getting to tied into any one scheme of thinking. A backup plan for your ground is a good thing. Some years you won't be able to afford to keep those calves. Many folks here ar dealing with that scenario right now, as hay is real expensive and in short supply and feed is double what it was 2 years ago.
Some of my land can be baled for hay when I am short on cows and some cant so since I am short on cows we bale a lot more hay. Some folks can plow their pastures and plant crops, and many near me are renting their pastures to folks who are trying to hold on to their cows through the drought time. Keeping your options open is a good idea.
I still enjoy raising cattle and owning land. When you can no longer enjoy it get out. That may be the only time you really make any money. PC

[red oaks lumber]

 with corn prices hovering around the 6 dollar mark, i don't think you could make that cash flow. maybe growing your own corn.until all of these markets (beef corn ect.)settle down. the only way to be profitable is sell the calves at weaning and don't put any grain into the animals.

[shelbycharger400]

carpenter... lookin at buyin for food...slaughter
and i believe his price at 2.25 was on the hoof
i thought it seemed a bit tooo high priced

[Carpenter]

with corn prices hovering around the 6 dollar mark, i don't think you could make that cash flow. maybe growing your own corn.until all of these markets (beef corn ect.)settle down. the only way to be profitable is sell the calves at weaning and don't put any grain into the animals.

     Well, it's a gamble either way of course.  I always sell the heifer calves this time of year anyway to cover feed costs for the steers.  I've got the hay and the pasture for the steers payed for and I own half of the steers right now as it is.  So, my major cash input into the steers is the grain.  I'll put about $200 worth of grain each into them.  Right now I could probably get $700-800 a head out of them, (and the scary thing is there's been several years that I've only gotten that much out of yearling cattle) the futures market indicates that August feeder cattle could be worth 1.50/lb which means that next August those steers at 800 lbs will be worth $1200 each.  The opportunity cost for the hay is approximately $135/ head, the opportunity cost for pasture rent would be approximately $100/head.  So, if I use the $700 as a base worth now I would need to get $1135/head as yearlings come fall just to break even and that doesn't include any potential death loss which I normally figure in at 2%. 
     The 5 year average price for yearling cattle according to USDA numbers is $1.10/lb. Our target weight is 800#s, so that would make the yearling steers worth $880/hd.  We normally do quite a bit better than the 5 year average price, but there's been a few years that I've been lucky to get the average price.  No banker in his right mind is going to loan money to buy $700 steers in the hopes that they will be worth $880 after putting $435 worth of inputs into them.  Of course they may be worth $1200 and they may be worth more.  The thing is, this year I could really pull this off without a loan at all, just barely.  I'm afraid that if I sell the steer calves now that I will be stuck selling weaned calves though just to make the land payment in future years.  If prices continue to rise and I sell the income bearing assets I won't have enough cash on hand to get back into the game.  And, if the calf prices fall and I am forced to sell just to make the land payments I could potentially lose money every year and I've got to tell you I can't do that for very many years in a row. 

     Things are really not as bleak as I make them out to be, I like to analyse every possibility though, it's so much easier to do this on paper before hand than to make a mistake and wish I had done things differently in a few years.  I generally figure business plans several years in advance and keep the plan somewhat fluid. 

     This really has been a bang up year for cattle producers though as far as prices have gone.  I know that Texas has been hit hard by a drought for the last few years.  I lived in Texas for 2 months, never saw so much rain in my life, but that was in 2003.  It would be really hard to be forced to sell out due to a drought. 

     I'm not thinking about selling out by the way, I'm just trying to figure out how best to stay afloat.  I started this thread to vent a little and to get some conversation going.  I know that there are several people on this forum involved in the cattle business and agriculture on this forum. 

     If you eat you are involved in agriculture!
     Just some food for thought.
     Jeff Carpenter

[Coon]

If you ate today thank a farmer!!! 

[Norm]

Do you have a source for DDG's in your area? My buddy I farm with has switched over to it hay and corn stover for finishing rations and really cut his feed expenses.

You do have my respect for raising cattle though. Nothing easy about it dealing with 1200# beefers that do what they want when they want.

[red oaks lumber]

iv'e been thinking more about your operation, a few questions come to me.
1) why sell the heifers to keep the steers? a smaller framed animal will finish out faster than larger animals, you should go for target condition not target weight. less input costs
2)do you treat your pasture ground like a good producing hay ground?  do soil samples evry year put on the recommended fertilizer rotate pastures so they can rest.
3)at weaning what are you weights? 8 month olds should be weighing around 450 lbs on good hay at 10 months should be around 600lbs..all depends on your breed .  i run black angus
4) do you condition your cows before calving? if you could put about 200lbs on the cow in the winter, your weaning weight will go up noticably.i side feed my cows corn silage.

5) why gain fed? is that how its always been done ? have you rthought about other methods ,so you are not trying to sell animals to the same saturated  markets as thousands of other producers.
these are just my thoughts,