Grassfarmer
Well-known member
I thought I'd start a new post around PC's comment in the calf price thread as it seems to have taken a turn from baaaad to worse.
Maybe more people should look longer term than the profitability of the current calf crop? The way I look at it is that cash in the bank is only one way to store wealth. If we are in the cattle business we are likely in the grass business too. Whereas I agree that the $100 a head cash return suggested is low (and it is likely way more than most people will achieve this year) there is the other benefits that accrue from the deal. Every cow on the place is pumping out something like 40c/day in fertiliser value from her rear end. That's nearly $150 per cow/year that could be viewed as a deposit (no pun intended) straight into your land bank account. Similarly managing your grass and land resource well like PC does is improving the well being and productivity of your soil and forage production base. This is another accumulating asset on your operation that will yield a good return at some point in the future. Building and improving a cattle herd with good genetics is another way to build assets that doesn't always show an immediate cash return. Another is the likely real estate value appreciation that seems to go on through thick and thin. My property here is likely worth at least 33% more than what I paid for it 8 years ago.
With these things in mind and taking a longer term view I would suggest that the biggest problem is cashflow - too often we think of cashflow on a yearly basis but perhaps it is more realistic to think of it on a multi-year basis?
I know everyone will say this is all irrelevant if you can't pay your bills this month and that is right to an extent. There must be profitability to be sustainable but maybe that profitability isn't available to be harvested on a cash basis every year? At the end of the day though most of us who own land are asset millionaires - it's our choice to continue with what we do and we are so much better off that large segments of the general population . Some folks prefer to quit and work in the oilpatch around here - a job that generates good cash flow but if you are only an employee you aren't building an asset base and your cash flow might be terminated tomorrow.
Just thought I'd throw in that perspective. Everyone will have their own set of circumstances and opinions - I'm lucky to come from a multi-generational farming family background. I think that in one way or another our family has made it successfully through lots of diverse challenges over the years and generations by taking a longer term view - agriculture has never been a get rich quick scheme!
PureCountry said:
Maybe more people should look longer term than the profitability of the current calf crop? The way I look at it is that cash in the bank is only one way to store wealth. If we are in the cattle business we are likely in the grass business too. Whereas I agree that the $100 a head cash return suggested is low (and it is likely way more than most people will achieve this year) there is the other benefits that accrue from the deal. Every cow on the place is pumping out something like 40c/day in fertiliser value from her rear end. That's nearly $150 per cow/year that could be viewed as a deposit (no pun intended) straight into your land bank account. Similarly managing your grass and land resource well like PC does is improving the well being and productivity of your soil and forage production base. This is another accumulating asset on your operation that will yield a good return at some point in the future. Building and improving a cattle herd with good genetics is another way to build assets that doesn't always show an immediate cash return. Another is the likely real estate value appreciation that seems to go on through thick and thin. My property here is likely worth at least 33% more than what I paid for it 8 years ago.
With these things in mind and taking a longer term view I would suggest that the biggest problem is cashflow - too often we think of cashflow on a yearly basis but perhaps it is more realistic to think of it on a multi-year basis?
I know everyone will say this is all irrelevant if you can't pay your bills this month and that is right to an extent. There must be profitability to be sustainable but maybe that profitability isn't available to be harvested on a cash basis every year? At the end of the day though most of us who own land are asset millionaires - it's our choice to continue with what we do and we are so much better off that large segments of the general population . Some folks prefer to quit and work in the oilpatch around here - a job that generates good cash flow but if you are only an employee you aren't building an asset base and your cash flow might be terminated tomorrow.
Just thought I'd throw in that perspective. Everyone will have their own set of circumstances and opinions - I'm lucky to come from a multi-generational farming family background. I think that in one way or another our family has made it successfully through lots of diverse challenges over the years and generations by taking a longer term view - agriculture has never been a get rich quick scheme!
