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Soapweed

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A good friend of mine is considering putting his cows out on shares, and then taking in calves for the winter to eat his feed. This is all still in the "considering" stage and no particular ranch is in mind to put the cows out with, and no commitments have been made for calves to take in.

There are three main elements to ranching--land (feed), livestock, and labor. Another crucial element is capital (money to operate). My friend has feed, his place is stocked with his own cattle, and he has labor. His trouble is he is in debt quite a ways. From my point of view it seems like he would be better off keeping his own cattle at home to eat the feed, rather than taking a chance having his cows out with some unknown operator. Then finding calves to take in for the winter might be hard to do also. Even from a banker's point of view, does any of this make cents? :?
 
What is his end goal? Is he trying to avoid the calving part of the cycle? If he can move his cows off his ranch and still make a profit on them it does free the ranch up for another enterprise. Essentially it is an expansion. There are several here that have done similar things. One is grain farming yet still retains his herd on shares somewhere else. One bought another herd and put it out on shares with a young starting up rancher. Both allow the herd to stubble pick the original farms they came from. The idea is worth exploring.
 
This is not my strong suit, but I assume the cost of feeding his cows would come out of the "shares"...so he should look at the difference in the lose of income from his cows compared to the potential income from the calves. Figure high on the cost for his cows and low on the income from the calves and if it still pencils out, he should have a chance to make some money.
This advise is worth what you paid for it.
 
I would say the main elements of ranching are land, livestock, capital,labor, and expertise. Where is the bottleneck?
Obviously capital is one.
Expertise may the the next, Does he believe he is better equipped and more able to care for calves then cows and calves, a lot of his feed would need to be harvest and stockpiled to winter calves.
Maybe he should try to see and decide just what he is selling. Is it labor, feed or his expertise?.
A cow calf operation is labor intensive, so is wintering calves. A yearling operation requires less labor, but requires ready capital and has more risk. If he is selling labor and expertise I would stick with the cow calf operation. If the other party can make a profit with them, he should be able to also. If what he is selling grass, maybe he should look at a yearling operation.
 
I imagine all of us are in debt to some degree :wink: My opinion is, no one is going to care for your livestock the way you would. You're a fool to believe anything else. I've seen the wrecks from people doing exactly what your neighbor is contemplating. Taking calves in during the winter is a gamble. What will the weather do to them? Will they gain or just maintain? Herd health of the calves coming in? We got in a load of calves last winter (we have a starting yard) from Pennsylvania. They ate everything in sight and had absolutely no conversion. Another aspect is, someone has to keep track of the days on feed, yardage, vaccines, etc. and generate bills to the owners. We bill every two weeks. Then, you hope and pray you get a check in return. Can he keep his own herd at home and take in some calves? He could buy calves, own them himself, feed them and re-sell. The Spring feeder calf market is usually good. It adds to his short-term debt load, but you don't own them long. Last option would be to sell of some of his cows. Last week,at a local market, mid-stage, 4-7 year olds brought $1,300 apiece. He could down-size and sell the extra feed.
 
I would, if it were me, not send my cattle elsewhere or take in unknown cattle. Just take the best care of his own that he can, and ride it out. It has probably take a period of time to get in debt as he has, and it will take time to get out. Let the market cycle. If these cattle get good again, maybe he can catch up a little.
 
Bad idea...... Never in a million years.... If for some reason you don't want cows..... Sell them...Never would I ever share out cows and exspect any returns. Only thing I would consider is helping a young rancher get started.. But they would have to be a pretty speical kid.
There is nothing wrong being a yearling man. I know lots of people who make a very good living buying yearlings and going to grass...
 
The share deal scares me what happens if they get a scour bug and 30% of the calves end up in the dead pile? Also I know of several guys who had share cows in Dairy cows and the owner would get his money from the milk check. All of a sudden the share of the check got real small ended up the guy sold the cows and skipped the country. Last I heard he's in prison now. I guess I'd just sell out vs putting out on shares. I looked into taking in 100 bred heifers on shares it was a 3 year deal cash $163 per cow per year I had to pay the trucking from South Dakota to here so it figured out to be pretty high interest. Short term cows at Ft Pierre were in the $500 range on saturday bred heifers were around $900 both pretty reasonable I thought.
 
Just reading between the lines I'm guessing this is a cash flow issue or debt servicing-with bringing calves too custom feed some money would be coming in every month-if the bill gets paid promptly!!! There are quite a few cattle lets out on shares up here-a couple friends have over a thousand cows out-if you find a good oiperator it's usually a good deal-if you find a bad one it's a nightmare. We had some share cows at one time-I'd rather just cash lease cows and manage them how I want. On the selling cows and wintering calves or running yearlings-it's a whole different skillset keeping bought in cattle healthy and profitable-we don't ever buy in bawling calves usually more short yearlings that are straightened out already. Some of the big auction barns have put out cattle to grass or to be backgrounded -I've never seen those deals work out too good-usually it's on a fixed cost of gain and the rookie gets some expensive schooling. Without knowing much of the situation-he might be better off just selling some cows to pay down debt then maybe custom grazing some cattle till he builds numbers back up-that's kind of my plan.
 
I have to agree with some of the others, putting their own cows out on shares doesn't seem like the best way to turn a profit to help pay down debt. Maybe he can get a really, really sweet deal where his cows would go, but I don't know that.

IMO, you only put cows out on shares if trying to expand beyond what your own land base can sustain, or try to help some youngsters as Kato eluded to. THen again, if he could get a clear $1-200 per cow as a lease w/o any costs or labor, it may not be so bad.

To me it all depends on the numbers he can get from a share deal on his cows, VS. the numbers on what he can make feeding others' calves. We've thought about selling more cows and custom grazing for others since we have lots of grass coming next year. Who knows where we'll end up, but one things for certain, we always set a goal first, then lay out the plan of how to get there. :wink:
 
Northern rancher-cash leasing cows questions--how many year contract? price per cow per year? death loss on cow? If I lease you 100 cows for 3 years do I get 100 cows back from you in 3 years if you had 3 die and you sold 10 opens---do you replace the culls with replacements?? SORRY for the hijack, soapweed
 
I think he needs to weigh the upside potential against the downside risk.

A lot would depend on just who he leased the cows to. They'd have to be pretty top notch operators before we'd let our cows go out, I know that for sure. The downside risk is pretty big if they don't go to a good home.

The other big thing is who's calves he took in, and what kind of deal he made on the cost for feeding them. There are some guys around here who sign feeding agreements that are absolutely brutal, and we can't figure out why they would ever get involved in them. They are paid on a cost of pound gain, with discounts applied if they gain too much, and the death loss is absorbed by the feeder. They are crazy to sign on for this! :shock: :shock: :shock: They can, and some do, lose money on it. They have no control over what cattle are sent to them, so they often end up with burnouts, and then are stuck with the vet bill to try and keep them alive. It's just crazy. I guess the guys doing the feeding must not have any credit to buy their own calves, so they think this is their only option.

This guy needs to do some serious thinking before doing anything too radical. Maybe there are other options to deal with the debt that he hasn't thought of. Maybe he should talk to a farm management specialist to get another set of eyes on the problem. There could be a better solution.
 
The way I'd do it is the leasee would get the cull cows income but have to replace with a bred heifer to keep your assets current or else you'd get a wore out cowherd back. I think it would be best if the lease was paid a year in advance. As for death loss that would have to be negotiated-the first one percent probably the owner would stand and then after that it would be betwen the parties-I guess the cattle could be insured too. Some guys that are phasing out just lease them and don't replace the culls to spread out their income over a little longer time. THE BIGGEST THING is to put things in writing and have both parties sign-seen a few handshake agreements turn into fistfights over share cow mishaps. What is the going cash lease rate down there-I'd think I'd peg it top a % of the cows value.
 
We have had both good and bad experiences leasing out cows. It is a good way to avoid selling cows in the low end of the cycle if someone wants them.
It can also be a train wreck. Don't forget cow depreciation - you need to cover this cost either with cash or replacements. Also, I would not lease cows out again without me supplying the bulls, and probably even specifying at least part of the health program.
The key is always the people part, and the success for everyone involved actually has very little to do with the cows...
Lessee - improved cash flow, lack of equity in cowherd
Leaser - cash flow, less labour, lack of control.
 
I know a guy that sets up alot of cow leases amd the way it worked was It cost you 160$ per cow per year and you were granted 1% death loss per year. On the opens you sold them and had to replace them, but you could replace them with a heifer calf if you didn't want to buy a cow to replace her.
 
Being in debt is no fun. I think alot of people panic when faced with a high debt load. They tend to make rash decisions that weren't part of the original business plan to begin with. What we all forget that Agriculture is a "Slow Business". In the 21st century of instant gratification patients has been lost. Soapweed, I think you should tell your friend to step back for a few minutes and really look at the situation. Don't be afraid to ask for outside help of an Accountant or even talk to the banker. Long term goals are way more important, than short term satisfaction.

I think he could make some money by leasing out his cattle. If he stays the course and runs something else in it's place. What an easy way to expand numbers and gain income. Rolling the dice on a new game is always riskier than staying with the original plan.
 
It reads to me like your friend is looking to in a sense cash flow his property. By taking in calves on a per head basis he stands to have income coming in every month. That payment then is applied to the bank and will help take out some of his interest monthly instead of just having his cash from calves in the fall. He stands to pay off debt monthly ensuring he will in the end pay less interest. The sooner the payment gets to the bank each month he even saves more. Then he will still have his cow lease check to apply in November or December. He stands to apply money every month to his debt. If getting out of debt is a agressive goal this might be the way to go.

Wether to lease out his cows or not. I've stood on both sides of the fence. We've paid pasture on ours to have them out and we've even leased them. In my opinion you have accept that nobody will take care of your cows like you do. You also have to look for a reputable person to deal with when you are doing either in my opinion. Everyone wants their own cows to have meat on their bones but not everyone does that for lease cattle. Leasing out the cows does however give you a set income to expect or to have already gotten that will not be effected by death loss or sick calves.

As far as labor during calving season the yearlings would be easier. You still have to check them just like pairs and make sure their needs are met but you don't have to calve them and yes they can be a pain to doctor but mean mama cows can be too.
 
If a guy can sell their cows for $1300 down there maybe they should do that and come up here and replace them with $600 breds (buy you the pick of good dispersal cows just now) crash the border with them and your back in business. Just don't tell OT :wink: :lol: :lol:

Lots of experts up here tell you you shouldn't own the cattle - do everything on a custom basis, pencil yourself the profit you require and let the owners take the risk. My concern with that policy would be the supply of potential owners might dry up if they take all the risk. Still it's the way the custom feedlot sector works.
 
That's a good idea.

Does he live far from the border? You would not believe the quality of cows that can be bought for very little over slaughter price in this country. :shock: :shock: :shock: Just get them home before they calve, or you'll have a bunch of little illegal aliens running around the pasture. :lol: :lol: :lol: :lol:
 
Since we have decided to semi-retire, we were faced with leasing our cows out, or selling them. We decided it
was best to sell them. I have known of too many wrecks from leasing cows out. A good friend of ours had a really top herd of Red Angus.
Years ago they sold Galena to ABS. They put those cows out on shares
over by Big Timber, Mt. The foreman of the ranch was a good stockman
and the cows were well taken care of for a year...until...they went to
see the cows the next year and they were on a blowed out ridge
and fed straw!!!! The owner had fired the foreman...and the owner had
no clue how to take care of cattle. The owner of the cattle had to
get some legal paper to get his own cows!!!!!!!!! They were so thin,
that some didn't make the trip. That was terrible!! So even if you have
a good place for them, things can and do change.

When someone leases your cows, you basically have lost control of
them. And taking calves in, you better have good fences. Running yearlings was my idea, but Mr. FH has no interest in that, because our
fences are old...and the yearlngs will be everywhere...so he says...and he doesn't need the excercise...so he says... :lol: :lol:

We have decided to keep all the heifer calves, breed them and sell
them next fall. That way, if he misses the cows too much, he still has
some. And we have a young fellow that we wanted to help get started
and he is going to lease our place, I hope he doesn't regret the day
we 'helped' him. Someone helped us get started in 1965 and we
always thought it would be nice to do that for someone. This young
man and his family very much deserve the opportunity. He's sharp and
ambitious and we have a lot of respect for him.
 

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