Lease or buy cattle??

[mbfarmer]

What is you opinion on leasing cattle or is a person better off purchasing the cow instead of giving most of the profit to the investor??? What cattle lease arrangements are out there?

[cowman]

I do believe if you have access to credit at a decent rate buying is preferable to leasing. With cheap credit available your lease rate would have to be fairly small. Example: A $1400 cow the interest rate at 6.5% would be $91. The depreciation on that cow would depend on the length of the lease and the age of the cow, but say it was for 8 yrs. and in the end she was beef. Worth say $800. Therefore she went down in value $600 over 8 yrs. or $75/yr.
So how much should you pay to lease a cow? $91 $75= $174.
Now this assumes that you the producer are paying for everything else. Which can be pretty high. So say it costs you $300 to winter her(maybe too high most years...too low this year!) $125 to grass her. salt and mineral $10 fence $10 vet $15 Breeding $30 utilities,taxes,operating interest $40 and a bit of labor for yourself $50. $580! Now add on the $174 and you get $754. Throw in some death loss(which you both share)..say1.5%...adds another $11.31 to a total of $765.31! So if the calves average 600 lbs. you need $127.55/lb. to break even. Or your steers need to be pushing $1.40/lb. to break even.
A better way to do it might be to buy young cows and figure on turning them over in a couple of years. That way you avoid the depreciation. In Alberta they have some pretty good programs for buying cows. I think the % rate is .5% over prime and the term is 5 yrs. with 15% down. If you have access to some sort of program like that I would think you would be way ahead to buy your cows.

[surespendalot]

I have done it both ways, and in hindsight, if a guy can get the money at a reasonable rate, which he can right now, then he is far better off to own the cows outright and then there is only one person to decide what, when, and how things should be done. I had a fantastic fellow for a partner, but sill I am glad that we were finally able to buy him out.