Get out your crystal ball

[cowman]

How do you see this year shaping up? What will happen pricewise? Say we get a normal year in regards to weather. Will calf prices be up? What will bred cows and heifers be worth this fall?
This last year was a high cost year no matter how you figure it. If pasture and feed stay high and cattle don't go up would it be sensible to get out? Just trying to figure out if I'm the only one who is thinking of leaving the business?

[Muttley]

I'm sure your not the only one thinking of getting out. With still much of the praire's facing a drought and with expencese high from last year it may be the only thing many can do.
I feel many will want out while they still can receive something for their land. Not just the value's going down but those greedy bankers will want your equity thats left.

Our gov't has failed us again, and I would not want to bet anymore of our future that it will change.
People can only diversify so much, there is a point when one is not able to do what others have found success at. We can only sell so much meat and vegitables to our neighbors and tourists. Taxes are going up, fuel, chemical, fertilizer, all increasing.
Maybe it's time to leave "the good life" behind. Go get a job where your life begins at 5:00.

[smcgrath76]

Interesting to note your comments Muttley. I thought I would fire in a stick of dynamite here. In New Zealand they had many of the same problems. Competition with highly subsidized industries, declining farm incomes and increasing farm debt and a declining public support for farm programs.
They went the opposite way of the world (kind of a dangerous experiment) and cut the farmers loose from all government support. By all counts they had an adaptation period (they expected to lose 8000 farmers and instead lost only 800) and now have one of the most cost effective, and vibrant agricultural industries in the world.
Just as fodder, maybe we are tackling the issue Bassackwards so to speak. Maybe we should be asking the government to leave us alone instead of helping out?
I am not saying this is the solution, but it is an interesting quandary.

[cowman]

Our governments are basically a waste of time. They don't have any money to help us so why even bother with them. The worst thing is even though they have cut back more and more they still expect to call the shots.
I always have trouble when people talk up New Zealand as some sort of shining model. It isn't! The average person there went way back in terms of living standards. They had no other option as they were broke because of their spendthrift socialist government! Our future???
The cow/calf business(if you can even call it that!) is really a joke. What is the profit on a cow this year? After a brutally expensive feeding period how much can we make? Let's say $2/day for 200 days=$400.How about another $20 for tractor/fuel/feeding cost. $10/salt, $15 vet, $10 fencing and corrals, $30 breeding, pasture $125, some sort of return on your cow investment $72 and depreciate her $50. Maybe some Macdonalds type wages...say 4 hrs $30. A little operating interest $20. We won't even talk about utilities, yardage, or taxes! Comes to $782! Now this assumes 100% calf crop and no old cow up and croaks or the motor goes out of the tractor or we need a tire! So this is wonderful! Say we raise 600 lb. calves 50% hfrs. and 50% strs. we need to average $1.30/lb. to break even! So the steers better be up close to $1.40 as they will discount the hfrs. big time.
Now maybe we'll get that or even more! Say we have a good year and make $50/calf profit!!! I mean 200 cows@$50= $10,000! Wow! That will go a long way won't it? Why we are making $27/day!! Or $3.65/hr.!!We could double our income by selling the cows and going to work at MacDonalds!!!
In the mean time you need around 800 acres to keep 200 cows so your return per acre is actually $12.50/acre! On land that is worth $2500/acre? Even at 6% the return would be $150!!! Now we're getting $125 for 4 acres(pasture rent) or $31.25/acre. So you only lose $106.25 on every acre! I sometimes wonder why there is one damned cow raised in Canada? I think people in the cow/calf business must be some kind of retards...and that includes me!!

[pandiana]

Interesting to see someone else is getting the same kind of figures that I am.

I remember looking at Alberta Agriculture Cow/Calf budgets ten years ago. They showed even then that you didn't make a profit with cow/calf. So...how come so many can make a living?

[cakadu]

Not all of the land is worth $2500 per acre, so that's likely how some can make a go of it. If you get off the highway #2 corridor and away from places like Edmonton, Calgary or Red Deer I would hazard a guess that land isn't that expensive.

Even out where I live I wonder how guys were buying up land at $1600/acre when barley was about $2.30/bu. Doesn't really pencil out, does it?

[cowman]

I think the breakeven figure on land would be $520/acre. Not too much land that cheap in Alberta unless in the "dessert" or way up north. The land in the "desert" is going to take a lot more than 4 acres/cow and therefore is probably even more expensive. But I guess it could work up north. I remember going to a grazing seminar where one of the speakers complained about how far out in the sticks you had to go to make things pencil out. His advice was if you want to raise kids don't get married or have a family!
Now this $520/acre thing just lets you break even on the land. So it doesn't change the fact that $50/cow would be a pretty good guess for a profit this year. Now 100 cows=$5000. 200 cows=$10,000 500 cows=$25,000! At what level of income would you be comfortable at? Do you realize a scholl teacher in Alberta would need to own 1260 cows to make the equivalent of their salary? Sort of makes that old six hours a day look pretty attractive doesn't it?
Pandiana raises a good question when she asks how do people do it? Most cow/calf operations were built at another time when land and capital were aquired quite cheaply. And what it amounts to is you are getting a very sub-par return on your assets. So if your assetts are a couple of million maybe you can afford to play "cowboy". Who do you see going into a cow/calf operation now? People with money who want to live the lifestyle. Sort of like the horsey set?
People who are serious about making a decent living from agriculture are into ILOs as this is the only way to get a return on your money. The grain guys are just "recreational farmers" too!

[smcgrath76]

Interesting to note the comments on land values. One of the things that has happened in New Zealand is that the price of marginal agricultural land (read places to raise cows) has declined to be more refective of its' production value, as subsidies were holding up the prices.
Couple of problems to think about though. If you built an operation in a subsidized era, your equity is being eroded, and the value of land in some of the urban corridors (Edmonton/Calgary) is not due to its' agricultural value or subsidies.
But no subsidies could make SK the greatest place to raise livestock in the world.
Just a thought?

[jmillang]

In this discussion we have talked about land being bought for its productive value. Long term assets have rarely been based on productive value. Especially down the populated corridor. We certainly see that with land values west of the corridor. Anything with a mountian view is 10% plus comparable productive land.

At the same time we throw in the capital gains exemption for farm property. I'm not saying this is not deserved but it does get factored in to the bid price of land.

What you need to consider is the investment part of the purchase price and what is the productive value. Then it all becomes more clear.

[countryguy]

It seems if you look at the whole picture it's the booming oil and gas industries that has killed agriculture in Alberta.This industry attracted people from everywhere to work and put alot of money in peoples pockets.Now these are the people that want a little chunk of land to play around on and are the ones that can afford to pay for it.It's looking like the future for Alberta is hobby farms and big houses while "the cattle capital of Canada" is going to be the two provinces to the east.

[cowman]

Of course you are correct Jeff. Land speculation and whether it rises or falls doesn't really have much to do with the productive value of the land.
And you are quite correct in saying the price of land in my area is not driven by it's productive value.
And countryguy you are 100% right. Sask. and Manitoba are the future in livestock production because as Sean says with no subsidies these provinces actually benefit in terms of the viability
of livestock production.
It is frustrating for guys like me because we know this land we have is probably the best agricultural land in the west, and yet it is going to end up pasturing nags and being a playground.

[pandiana]

jmillang: Yes, capital gains and appreciation of land value has kept many a marginal farmer on the land years after they would have called it quits. This was their retirement fund. If they are lucky they don't have kids that want a leg up to get into farming.
I suspect that most farmers don't have that many RRSPs, haven't paid into Canada Pension, don't have dental plans or extended medical. (Just as an aside, recent figures quoted on the news of $4000.00 just to get dentures replaced would certainly take a bit out of that $10,000 projected salary.)

The problem is that for many, years of going to the bank for operating loans to buy feed, finance machinery cost and repairs and in general to close the gap between income and expenses has resulted in the banks owning a large portion of this retirement fund.

I have the feeling many feel that they are working to keep financial institutions in business.

[mbfarmer]

I farm in southwest Manitoba...here, rumors of pasture land selling for $312.50/ac, which is unheard of in this area. My question to you people in Alberta is if your equity is being eaten away; little or no profit in cow/calf; high land prices; why are you still in the cow/calf operations. Why not take that high priced land and sell it to someone that wants to pay YOUR price? Just some more wood for the fire.

[cowman]

mbfarmer:Looking at it from a strictly business sense we are complete idiots to try to carry on. But it is hard to leave a place where you grew up, where your father grew up, where your grandfather grew up. Every hill, gully,creek have a lot of memories. A place that you have loved more than life itself. And quit a business and way of life that you've always known and that goes back generations and generations, way back to Scotland and England. It is hard to walk away from that with a handful of cash!
I like to consider myself a good businessman rather than a farmer. And in business there is no place for sentiment. So maybe I'm not a very good businessman.

[mbfarmer]

That is the thing with farming these days...it is not just a way of life..it is a business. I hear you, once farming gets into your blood... it is hard to get out. Is it that your land is highly productive or is it because of its location (it is worth so much)?? I mean, if it is productive, would going crops on it be more economically beneficial. Around here guys were trucking barley to Alberta and making money at it. In our area, it is not the most productive crop land and some have lots of pothole and bush on them...perfect cattle country as far as I am concerned. I guess I have an optimistic look on farming as I am just taking over our family farm. I worked off farm 12 years to support my habit and on have taken the big step.