Selling the cows?

[cowman]

I have pretty well decided to get out of the cow/calf business. Mostly due to health reasons but also the lack of a decent return on my investment for the amount of work involved. Now I think I will sell some this fall in the bred cow sales. Keep my calves and feed them out. sell the remaining cows in early 2003. Sell this years calves probably in April 2003. Now because I have some fairly rough pasture land I will buy some grassers for 2003 with the intention of feeding them out so I can avoid not getting completely screwed by the government. I will break up the hay and pasture this year and in 2003. I'm trying to liquidate out of this business in a way so I pay as little tax as possible. Any suggestions?

[countryguy]

Cowman wasn't your boy going to take over the cow calf business?If so I believe FCC has some interesting programs for family transfers that would be well suited to your situation.You know you will have to change your name in here if you quit cows you know.What will it be?Oilman!Now THAT has a ring to it!!

[surespendalot]

I suspect that when sale day comes, you will see a much better return if you sell them all at one sale. Complete dispersals always do better than partial ones, because on partial ones, everyone that doesn't know the total reason behind your selling, just figures that you are getting rid of your troubles and your junk.

[cowman]

The reason I wanted to split them up was to avoid some tax or spread it out over two years, but maybe if I'm buying feeders I can avoid that. I'll have to run that past my accountant after his "insane" season is over.
My son knows very well what pays the bills and what doesn't and because he likes to live well we basically are in agreement. I am having some problems health wise and need to cut back. Lately I have gotten very sour on the cow/calf business. I do like feeding steers and it is something that is more flexible. Still it will be a sad day when they go.

[dusodan]

Cowman, why don't you pay your son to take care of the cows, say 2 or 3 days a week to take the pressure off also pay him a decent wage for his effort or a percentage of the profits. I personally don't like to break up pastures, in fact I hope that I never have to ever do it again. I'd rather do rotational grazing.

[surespendalot]

How many cows are we talking about??
One way of defering the income is to buy other liquid inputs such as fencing material,(if you are ever going to need more fences)fertilizer,grain, hay or prepared feed before the end or the year. This is on the assumption that you either will either have a future use or them or will be able to resell them. One has to be careful as to the inital cost tho, as one has to consider interest paid, and weigh it against income tax that would have been paid. Also how keen on running cows is your son?? A large part of your decision should hinge on that answer and also on how much money you need to retire on every year. There are several very good ways to transfer the cows to the son over a number of years, if in fact the son is really keen on taking over. Will duscuss further depending on your response.

[pandiana]

A very tough decision to make, cowman. I can say I haven't thought about it as well as I am not sure how much longer I will be able to farm, either physically or financially. I know my son would like to farm but have to ask whether I am willing to forego my future income on a business that is marginal to say the least. But then there is that lifestyle thing! Can I imagine myself anywhere else doing anything else?

These past few days the news is full of how important physical fitness is to our health. I often think that maybe farming would be more profitable if you factored in the savings of the cost of a personal trainer and gym and some medical bills.

[surespendalot]

Tis comforting (not sure if that is the right word or not) to know that others are wondering, thinking, and feeling similar things about cows and farming as I am. I have spent almost 40 years building what I consider a very nice herd of cows. It hurts when I have to sell some of them, even when they aren't really paying their way any more. My son really isn't that keen on farming, (as near as I can figure out, he really hasn't decided what he wants to do) (he is 23)I hate to sell out as it will be tough to buy back as good a herd if he decided he really wanted to go raising cows. I am getting tired of working all the time just to say that I raised a certain # of calves. I do a good job, and raise excellent calves, but there are other things that I also want to do with my life. My wife and I really enjoy travelling, and I can see that in another 15 years or so that I will probably not be able to do much of it due to health concerns that usually happen to someone that is 70. Why shouldn't we do it now while we are still young enough to enjoy it. Economically, I think that we would be further ahead to quit spending money on improving the farm, sell the cows, rent out the grass, sell whatever hay we do put up,(or sell it standing as either hay or pasture) and invest the money and live off the interest. One can put money into "trust units" that pay a monthly or 1/4ly distribution that amount to 10 % to 15 %. (providing that there is still a demand for natural gas and oil at the current prices) But I feel guilty that I might be letting my son down if he does decide to return to the farm, and also change is scarry as is the unknown!! I don't think that one should sell the land, as it is going up in price every year, and it does provide us with a place to call home. Any thoughts on the above???

[cowman]

The main reason besides my health is to concentrate on the oil lease contract work. Unfortunately as I get sicker I become more useless. And it only makes sense to go with the most profitable enterprize. I will not be selling the land. My cousin rents part of it now to grow grain and in reality I make more per acre renting it than I do running cows! This year even though it was dry the barley went 90 bu. and it sold for 3.45/bu with a 8 cent premium for plumpness thus $3.53/ bu. I get 1/3 of the crop and I pay 1/3 of the spray and anhydrous. I got a check for about $86/acre this year which I think is pretty good. Some years when my cousin has grown canola it has topped $100. My cousin is an excellent farmer and we get along really well. So what I break up he will farm.
My son likes the cows but also wants all the toys! He's got a degree in business and understands that cow/calf is a pretty sorry business. And you know I don't think I'll miss calving cows all that much. I actually think I enjoy feeding steers more than messing around with cows. Calving season used to be the best time of my life...now it is just a struggle!

[surespendalot]

The older we get, hopefully the smarter we get. It is too bad that we didn't start out knowing as much as hopefully we do now. (Granted when we were teenagers we knew it all, but the older we get, the more Dad knew, and we realize the less that we really knew.) I spent quite awhile looking at a hospital ceiling a few years ago with the knowledge that maybe I might never walk again. I did a lot of thinking during that time and when I got out I set about changing my life to enable me to do those things that I really wanted to do. It has taken me a number of years, but life is so much better now that I wonder what took me so long to make the changes. The ideal way to live would be to live each year like it is one's last, But I know that it is very hard to do. Sounds to me that you have pretty much made your decision to quit the cow-calf business. Now it is just how to go about doing it without paying the tax man. I really agree with your last statement... I also really enjoy calving cows. But I am also getting so that I can hardly wait till it is done so I can get back to doing more enjoyable things. I predict that I will also quit in another couple of years.

[mbfarmer]

I give you guys alot of credit...it is a tough decision...I am looking at it from the other end but can see the troubles you are having. My parents (mother in particular) did not force me to come farming. So I went to College and got an education, worked off farm, but something was always missing. Calving is tough, cold weather, scours,etc...however going out at about 5 pm and watching all the calves run as fast as they can...you can not beat it. As you know cowman...health is everything. Lately there has been alot of young people going down with cancer, around here. It sure makes you sit back and want to get you priorities straight. My new outlook in life is...stop and smell the flowers because you are never too sure when your walk in the pasture will be over.

Cowman: Here are some food for thought.

Find someone you can trust and lease some of your cows out...depending on the lease it could give you a stable source of income as let you sell your cows a few each year.

I also agree that selling your whole herd would give you the most return. What if you sold your cows in 2002, kept your steers until 2003, bred the heifers and sold them in early part of 2004. You would still have the flexibility of purchasing additional feeders if Mr. Martin comes calling.

It is almost impossible to avoid taxes...the government will out live all of us. The best method is to level the amount of taxes paid each year through feeder purchases or what ever will work for you.

[surespendalot]

Mbfarmer.. Your thoughts agree much with mine. If cowman could find someone that really can look after the cows , you could lease him the cows on a share basis and each year he gets a percentage of the heifers as all his and each year you get to sell a similar percentage of the cows . eventually you will be out and the tax man will not have gotten rich.
I sure agree also that it sure is rewarding to see a crop of good calves running and playing in the early morning sun and to know that they are able to do that because you have done a whole bunch of things the correct way.

[cowman]

I've actually only got 60 cows left on paper. My son has 90. I sold them to him last year in the drought(farming the government!!) so I could defer the money and trigger a big AIDA payout!!! This will add to my problems. My accountant is pretty good! We have a little joke about how someday we'll share a cell together!! I spent a little bit of time with him yesterday and he gave me some pretty good advice on how to sell out the cows. There is a new little scam he has come up with involving NISA that looks good!