Can the family farm survive?

[pknoeber]

You need cattle, land, and equipment, and you had better have two of the three paid for.

So they have to inherit it to make it work?

Phil

 

[Econ101]

I don't think the gov't has chosen a 'cheap food' policy on purpose. I think competiton in agriculture has kept the price of commodities down.

The first thing we do if we need to expand is grow more. More pounds of beef, more acres of grain.

The yield per acre or pounds of beef per cow has gone up dramatically. At the same time fewer people are needed to provide the same level of product.

30 years ago no one had heard of 500 cow ranches. Today they are not considered out of place. 30 years ago a farmer cultivating 2-3000 acres was a big deal, now that is small.

Why does the packing industry which has had to change dramatically over the last 30 years take the flak for all the industries woes?

Econ would have us believe BSE was caused by the packers to manipulate the market. That's like shooting your foot off to get a disability pension. He says pushing a swing makes it go higher, but then it comes back and swings higher the opposite direction as well. So much for a positive manipulation if it causes an equally large loss.

Family farms are using the same mechanisims the packers are. Greater numbers of cattle, or more pounds of beef supplying the living of fewer people on the same overhead. This is called efficiency.

A family farm that grows crops and has a feedlot included is a good example of vertical integration. Costs are avoided on the calves and on the transportation of feedstuffs. More dollars per head are realized and the owner stays fully employed. The owner knowing how the calves have been handled knows they are better than average and wants to capture some of the extra value they hold on the rail. They approach a packer and look for a deal on the grid. The packer gets a group of cattle without some of the risk of buying unknown cattle. If they don't grade well the price is adjusted, the owner takes the hit. If they do better, the owner does better, and the packer is glad as they have a better carcass to sell.

Somehow R-calf and Econ hate to see a private deal like this occur. R-calf has a LMA bias, Econ is just anti packer. How did the packer manipulate the family farm into becoming more efficient and asking for a larger share of value put into the cattle?

If the industry continues this direction, the cattle owners will continue to expand, Tyson and Cargill might have to offer more competitive contracts (if possible) to get any cattle. Or they will be relegated to those hobby cattle spoken of earlier. The cattle owners have he most incentive to expand into slaughter and even retail ventures to capture the most dollar from each pound of beef.

Jason, Please don't turn into SH or Agman and try to put words in my mouth:

Econ would have us believe BSE was caused by the packers to manipulate the market. That's like shooting your foot off to get a disability pension. He says pushing a swing makes it go higher, but then it comes back and swings higher the opposite direction as well. So much for a positive manipulation if it causes an equally large loss.

I never made the remark that BSE caused the packers to manipulate the market but they sure took your country to the bank didn't they? I said that they sold MBM (in the name of "efficiency") to be used as feed which is regarded by both the U.S. and Canadian govts. as one of the sources for spreading BSE. If you want to use my words, do a quote, but don't do it out of context. If you have to make something up that you say I said to win an argument, maybe your the one with a losing argument. The problem with imports right now is that the U.S. producers have already hit the valley. Why should they share the up swing with anyone else? Tyson makes out in the poultry anyway and with the packer margins what they are, they gain on their competition in the packing side.

What I don't understand is why you continue to mischaracterize what I say and that you continually back the packer's positions.

Somehow R-calf and Econ hate to see a private deal like this occur. R-calf has a LMA bias, Econ is just anti packer. How did the packer manipulate the family farm into becoming more efficient and asking for a larger share of value put into the cattle?

I do have a problem with captive supplies. They decrease the price paid to the market as a whole. Packers are "margin operators" as SH puts it. The only problem is that they are playing both sides of the fence for their own benefit and it is hurting producers. Why don't you get that? Maybe you don't want to. It is like the gun issue. I am not against gun control unless the person that owns the gun has committed a crime with it. At that time it is perfectly allright for me to want the gun taken away. You want them to keep the gun. We disagree on this point. If you can't see what has happened to the cattle producers in Canada with this whole BSE thing, then there really is no hope for you ever changing your mind. You have shown before with your posts just exactly how you decide to act. Lets just say I wouldn't trust someone like you to guard the vault. That is the problem right now. We have too many foxes guarding the henhouse and the lions are asleep. George Bush sent them to Iraq.

Just because you are a packer, it doesn't make you evil, but when you show that you are, it is time to do something about it. My father-in-law had to debrief Germans at the end of the last world war. He had to sort the common German fighter from the leadership that may be held more accountable. Not all Germans were necessarily the problem. Some were. You are for a policy of no accountablity. I am not. If packers gained because of market manipulation, which was proven in Pickett, then they should pay the damages they incurred to the producers. That is pretty simple.

The government has decided on a "cheap food policy" by catering to the pressure of industry of subsidy and overproduction. The same is true on your Canadian BSE subsidy. Why can't you see that?

I hope you do get your operation reversed.

 

[Sandhusker]

You need cattle, land, and equipment, and you had better have two of the three paid for.

So they have to inherit it to make it work?

Phil

Sadly, that's about what it boils down to. Put a pencil to buying land and cattle both and see if it works.

 

[pknoeber]

Sadly, that's about what it boils down to. Put a pencil to buying land and cattle both and see if it works.

Agreed. I'm on the short end of that pencil trying to make it work. :shock: Actually more into farming than cattle. I can see a huge niche developing for hunting though & that might make it feasible again. Unfortunately I'm not a hunter so I couldn't guide, but I can see a great opportunity for some of the ranchers south of me (Clarke Co., Ashland, KS) to do this. Great whitetail down that way & maybe more importantly, they've gotten the name as having the trophy bucks. The King of the Rednecks (Jeff Foxworthy) is down there hunting again this year. Probably a lot of others that go there that you don't hear about. Don't your sandhills have some pretty decent deer? Soap sure posted some nice pictures. Bucks like that would bring in $4-5,000/hunt pretty easily I'd think.

Phil

 

[Jason]

When you take a position on an issue you put words in your own mouth Con101.

You have resorted to innuendo and name calling everytime I show your position is for gov't control of ag.

We have laws in place that protect us from corporate greed. You say they don't work and want more laws. I say prove they don't work and you say proof is not for this type of forum.

The cattle are the power in the cattle/beef industry. Control of the cattle controls the industry. Sell the cattle, pass the control. Eventually the consumer is the ultimate control. You want to price beef out of the range of many consumers. These are all your words based on the positions you take.

Admit you have no real knowledge of the beef industry other than your little stories of how you hate wal-mart because the beef you got there once didn't match your taste. I wouldn't buy beef there either because they don't sell the quality of beef I raise. But I am glad they sell as much as they do. It is good for producers.

You said American producers shouldn't have to share this high end of the cattle cycle with anyone, no one is asking them to. What you don't get is with extra imports from Canada and imports from Australia the high prices are still there, and will last longer than creating a false shortage of beef and driving the consumer away from beef. The US might be the largest consuming nation in the world, but even that has it's limits.

Have you figured out who number 2 and 3 are yet? Or are you factually void and have to infer another name?

 

[rancher]

Ok then there is another important piece to the puzzle. The land base.

In some areas it would take nearly 4000 acres to run 350 head.

In this area grass is selling for $7-900 per acre. 4000 acres at $800 is 3.2 million dollars.

A $32,000 annual income is 1% of the land investment.

Payments on 3.2 m over 20 years (no interest) $160,000 per year.

Income from 350 calves at $600 is $210,000 (100% weaned calf crop)

That leaves $50,000 to take a $35,000 living wage from, that leaves $15,000 to pay for 350 cows or just over $42.85 per cow for bull power, deworming, winter feed etc.

Can anyone winter a cow for $42.85?

How about 11,000 acres at the least to run 350 cows, then you need hay based land.

 

[Jason]

Ok then there is another important piece to the puzzle. The land base.

In some areas it would take nearly 4000 acres to run 350 head.

In this area grass is selling for $7-900 per acre. 4000 acres at $800 is 3.2 million dollars.

A $32,000 annual income is 1% of the land investment.

Payments on 3.2 m over 20 years (no interest) $160,000 per year.

Income from 350 calves at $600 is $210,000 (100% weaned calf crop)

That leaves $50,000 to take a $35,000 living wage from, that leaves $15,000 to pay for 350 cows or just over $42.85 per cow for bull power, deworming, winter feed etc.

Can anyone winter a cow for $42.85?

How about 11,000 acres at the least to run 350 cows, then you need hay based land.

Exactly rancher, the costs vary by area, but land base is very expensive.

Then again some areas run 1 pair per acre at $3000/ac so they can be cheaper to run.

The 11000 acres to run 350? cost? $500 per acre?

 

[Sandhusker]

Sadly, that's about what it boils down to. Put a pencil to buying land and cattle both and see if it works.

Agreed. I'm on the short end of that pencil trying to make it work. :shock: Actually more into farming than cattle. I can see a huge niche developing for hunting though & that might make it feasible again. Unfortunately I'm not a hunter so I couldn't guide, but I can see a great opportunity for some of the ranchers south of me (Clarke Co., Ashland, KS) to do this. Great whitetail down that way & maybe more importantly, they've gotten the name as having the trophy bucks. The King of the Rednecks (Jeff Foxworthy) is down there hunting again this year. Probably a lot of others that go there that you don't hear about. Don't your sandhills have some pretty decent deer? Soap sure posted some nice pictures. Bucks like that would bring in $4-5,000/hunt pretty easily I'd think.

Phil

Most guys around here charge by the day or the simply lease out their entire place to groups.

 

[Sandhusker]

Ok then there is another important piece to the puzzle. The land base.

In some areas it would take nearly 4000 acres to run 350 head.

In this area grass is selling for $7-900 per acre. 4000 acres at $800 is 3.2 million dollars.

A $32,000 annual income is 1% of the land investment.

Payments on 3.2 m over 20 years (no interest) $160,000 per year.

Income from 350 calves at $600 is $210,000 (100% weaned calf crop)

That leaves $50,000 to take a $35,000 living wage from, that leaves $15,000 to pay for 350 cows or just over $42.85 per cow for bull power, deworming, winter feed etc.

Can anyone winter a cow for $42.85?

How about 11,000 acres at the least to run 350 cows, then you need hay based land.

Exactly rancher, the costs vary by area, but land base is very expensive.

Then again some areas run 1 pair per acre at $3000/ac so they can be cheaper to run.

The 11000 acres to run 350? cost? $500 per acre?

Around here we generally figure 13 acres/pair. Land has been selling for $250/acre give or take, and trending up. In addition to that 13 acres (for hopefully 6 months grazing) you need hay ground for winter feeding or you're going to have a sizable hay bill.

 

[Econ101]

Jason:

When you take a position on an issue you put words in your own mouth Con101.

Jason, I do take positions, but just as I have told SH before, you do not have the qualifications to characterize those positions. You get it wrong too much of the time.

You have resorted to innuendo and name calling everytime I show your position is for gov't control of ag.

Show me where I have called you a name. Then compare that with the times that you have mischaracterized what I said.

We have laws in place that protect us from corporate greed. You say they don't work and want more laws. I say prove they don't work and you say proof is not for this type of forum.

First of all, you are Canadian. You do not have U.S. laws. Secondly, you have no idea whether or not they are being enforced. In the U.S. we have a jury system that is supposed to make the determination of whether or not a law is broken. That system is being brushed aside by activist courts that are trying to re-write the laws themselves. If you don't understand that then you really can't comment on it any further. I personally don't think we need more laws, we just need more efficient and intelligent interpretation of the laws we have. We are not getting that now down here in the good ole USA. We have a regulatory agency that is in the pocket or influence of giant agribusiness. I don't know about Canada. Rkaiser has already stated what he thinks and I would trust him way before I ever thought about trusting someone like you.

The cattle are the power in the cattle/beef industry. Control of the cattle controls the industry. Sell the cattle, pass the control. Eventually the consumer is the ultimate control. You want to price beef out of the range of many consumers. These are all your words based on the positions you take

There you go again mischaracterizing what I say and my positions. Producers are part of the economic equation. They deserve to be paid, not underpaid for the product they produce. If you want to give your products away, then do it. I don't want the producers or the consumers to be cheated out good quality beef. Market manipulation allows that to happen. Right now beef prices are high. They would be lower if there had not been the manipulation and movement down the supply curve. My arguments (if you knew economics you might understand them) are arguments for the maximization of benefits to all. Consumers, packers and producers.

Admit you have no real knowledge of the beef industry other than your little stories of how you hate wal-mart because the beef you got there once didn't match your taste. I wouldn't buy beef there either because they don't sell the quality of beef I raise. But I am glad they sell as much as they do. It is good for producers.

Why don't you admit you are wrong? If you think it is good for the beef business for consumers to be cheated through making the meat look fresher with treated air, then just keep your ideas in Canada and preach them there. Maybe Canadians are different. Your ideas might fly up there. I happen to think it reduces beef demand. Why don't you admit you have no real knowledge of the beef industry in the USA. How long ago did you inherit your operation? I have toned down using those $100.00 words at your request. I don't think it has helped you any at all.

You said American producers shouldn't have to share this high end of the cattle cycle with anyone, no one is asking them to. What you don't get is with extra imports from Canada and imports from Australia the high prices are still there, and will last longer than creating a false shortage of beef and driving the consumer away from beef. The US might be the largest consuming nation in the world, but even that has it's limits.

You need to read some of those books I suggested. You are the one who is asking. I personally don't think there is a lot of difference between Canadian producers and U.S. producers. They are both being rookered by these agribusinesses and are in a business where their interests are being manipulated. There is no false shortage of beef. There are lower supplies. These lower supplies are partly because of lower prices and Pickett proved that Tyson was making that happen through captive supplies and discrimination against the cash market. Fraud and deception of the quality and freshness of the beef being sold is what is driving consumers away from beef down here in the U.S.

Have you figured out who number 2 and 3 are yet? Or are you factually void and have to infer another name?

Jason, I know more about economics than you will ever know. I am not saying I am smarter than anyone else, I am just saying that I think a lot different than you and a lot of people. You could learn a lot by the books I suggested. If economics is not your interest then stop trying to teach me something about it. I know the answer to your question but I chose not to take questions from you unless they are sincere. I don't believe you are.

When I tell you I hope you have your operation reversed it is up to you to determine how to think about what is meant. It is a question for you to answer more than I. In all regards I am wishing the best for you. What is best, though, is something for you to determine.

 

[mrj]

Jason, we figure 25 acres per cow-calf pair per year, some places require at least 2 times that, while in the south east, it is cows per acre! Such variability, and the fact that some people raise only cows, while others are diversified agriculturally. We generally are able to graze year round, but have to have hay for backgrounding calves, and emergency if the show gets too deep for too long (fortunately pretty rare here). Grass /farml land recently sold for $400+ in this area. Can't make that pencil for raising cattle!

Something I've heard for years is that 'agriculture' generates about 1.5 to 3% return on investment. Is that accurate? Across the board, or different between products such as grains, cattle, hogs, forestry, etc.?

I do see and hear a major problem in keeping young people coming back into agricultural operations is the fact that they see their "city cousins" having access to, time and money for such a variety of entertainments and just plain easier living that it is very tempting compared to what a farm or ranch out in the boondocks can offer. The "bright lights syndrome" is quite a draw. Combine that with the financial picture, and the horror stories we read about disastrous family relationships that sometimes happen in "farm families", returning to the "family farm" is really a tough decision.

I wonder, should "rich families" be prevented from owning "family farms"? Why is it we like to hate or at least put down "rich" people? I've met some and heard of some very nice ones who have contributed greatly to the cattle industry.

Does anyone know how many people there are strictly raising cattle, with no farming except dry-land hay? Or what the typical split between crop land and pasture land of those doing both?

Interesting topic, and I suspect there are about as many systems and theories of how to best operate a farm or ranch as there are farmers and ranchers!

MRJ

MRJ

 

[cowzilla]

Jason; In this area it takes 4 Acres/ cow calf pair on rotational grazing. Another 2-3 acres for winter feedwith land worth about $400/acre. You can grow Grain Hay Corn Canola Sunflowers ETC. Alot of people on this site suggest most of your assets will have to be paid for and I think there right :!: Maybe it will have to be done the OLD FASHION WAY.Young Hard Working Men can make $100000/year working the Oil Pach . Your gonna need some way to get those Tax dollars back and after 5-6 years you got some good cash to pay for those assets. A lot of farms where bought that way :wink:

 

[frenchie]

Someone has to own this land.

That maybe true, but does it have to be you..

There is a lot cheaper land available in other places with the same carrying capacity.

That (long term lease on land is considered 3-5 yrs.)

Not if you run cows on crown lands in Manitoba.

 

[Jason]

The tax laws in the US favor working at a high paying job and buying ag assets. The IRS allows a direct write off when buying cows from income derived from the oil patch or elsewhere.

In Canada the tax dept. watches and if you earn more from off farm work you can't deduct your ag expenses at all. Definately a disadvantage, but it can be worked around with the use of corporations where losses can now be sold.

Where you are cowzilla, you are close to being able to buy land and pay for it with ag. How long will those areas exist? Land investors are driving the price up most everywhere.

One study said only 7-10% of producers actually make money on cattle. The rest will survive on the real estate end.

MRJ you are close on your ROI numbers. What incentive is there to work hard and make what you could by investing the money from selling the land? 1-3% is easily achievable in garanteed investments.

The best cattle operation I have seen money wise was a customer of mine in Idaho. He leased 90% of his ground. Fed for a maximum of 3 months a year. Paid a fair bit of tax. His lease was yanked and all his work was lost. The outfit was going to have to sell off cows and take a major tax hit. I haven't talked with him in a while, I hope he found some new leases and got a chance to reduce his tax liability.

Farming can deal with lease loss better than cows. Machinery can sit and not eat you alive until you find new ground.

I don't know of any new or growing outfits that don't either have income from other sources or are integrated with farming and feeding operations.

 

[cowzilla]

Jason; I'm in southern Manitoba just north of hiway 16. Land prices vary either side of me because of land types Sand 400-500, Sand loam 600-800 Clay types 800- ?. Used to envy Big Grain Farms but not anymore,I think you have better chance paying for 400-500$/acre land with cattle then growing $2.00 wheat or $5.50 canola.Grain guys in our area hurting bad this year. I know its more cost to feed cows out here but guys are trying some of the ideas that you guys use out west. Not everything works but what I do know is the cost of steel will break us if we don't change :!: Example; Sold Fat Steers for .80/pound in 1978 and bought new round baler for $6700.00

 

[Jason]

Imagine feeding steers for that $1.10 barley I heard was out there. Here barley is $2.44 delivered or picked up at $2.20.

Your right about change. Change, expand, get more efficient or your not in business.

That baler built in 78 for $6700, I would venture that a new one will do a lot more bales now. I paid $15k for a 91 NH 660. It is a lot better then the older ones I saw my neighbors fighting with, but I get left behind by the newer 780's Cost per bale is fairly consistant.

How do you think a set price per unit of production would affect ag? IE a set $700 per calf, a set $3/bushel of barley etc.

 

[Econ101]

Imagine feeding steers for that $1.10 barley I heard was out there. Here barley is $2.44 delivered or picked up at $2.20.

Your right about change. Change, expand, get more efficient or your not in business.

That baler built in 78 for $6700, I would venture that a new one will do a lot more bales now. I paid $15k for a 91 NH 660. It is a lot better then the older ones I saw my neighbors fighting with, but I get left behind by the newer 780's Cost per bale is fairly consistant.

How do you think a set price per unit of production would affect ag? IE a set $700 per calf, a set $3/bushel of barley etc.

Who is setting a set price? We don't have that in the USA. You come a lot closer with your poultry industry in Canada. Price should always be set by supply/demand. Unmanipulated price, that is: not influenced by market power.

 

[Anonymous]

Around here even the ranchs that include large state and federal leases are being bought up by investor corporate interests ( buy up their improvements for govt. lease price negotiatons) - used as tax write offs along with semi-private hunting grounds and work the govt. (Equip, wetlands, etc) and private hunting & conservation payment programs (programs that won't even look at the family farm size guy, but will jump in when talking thousands of acres), then sublease for grazing at an ever increasing amount as the market will bear- $20 to 30 per AUM - and with the increased cattle prices now, few want to sign long term leases (over 3 years)...One corporate family locally has bought 4 large ranchs and several small ones in the last 5 years at an investment of somewhere around $15-20 million.....Lease back the farm and grazing, but at an ever increasing rate- whatever the market will bear, but usually in large allotments so you have to be big in the first place to have the assets to fill the leases....Almost impossible to buy deeded land anymore because some corporate or investment group will buy it for more than what it will pencil out for....

These were the same type of large ranchs that 20-30 years ago were being bought up by groups of 20-30 ranchers with FHA financing as a Grazing Association with each person running 100- 250 head.....Now they won't even pencil out to get approved for the financing....

One of the things I'm seeing that is changing with the family operations is specilization...For 40 and 50 years the government and "Ag experts" preached that you had to diversify- raise cattle, grow feed grains, raise hay, and grow cash crops- so that when the market was down on one segment you always had another to fall back on... Problem now is that with $200,000 combines, $100,000 tractors, $60,000 feed trucks, etc. its getting harder and harder to justify owning haying equipment, harvest equipment, cattle handling and feeding equipment, etc... I see more and more getting out of the crop production- selling cropland to the corporate farmers and /or putting crop land into improved pasture....If cattle prices stay the way they are, this is a trend I think may continue- especially if ? years from now the govt. actually drops crop subsidies and CRP....

 

[Anonymous]

Harlan Hughes' data shows as much as $250 per head difference between the low cost and high cost producers he's worked with. Some folks would lose their place even if it was given to them. What I usually see is that the producers that are not tending to their business are usually blaming their lack of success on imports, packer concentration, and captive supplies.

One of the very real aspects of this industry is that there is enough people willing to do it at a breakeven level for the lifestyle and we compete against that. City money is invested in ranching for a weekend getaway, for a tax writeoff, and for recreational hunting aspects. We compete against it.

Another reason there is less ranches than there used to be is a phenomina called "RANCHER CONCENTRATION". The larger more successful ranchers are buying up their packer blaming neighbors and here you thought concentration was unique to the packing industry?



~SH~

 

[Sandhusker]

SH, "What I usually see is that the producers that are not tending to their business are usually blaming their lack of success on imports, packer concentration, and captive supplies."

:lol: :lol: :lol: :lol: :lol: :roll:

How many financial statements and trends of other ranchers do you see, SH?