Price of calves need to double!

[15444]

15444 how did your introduction to Cost Of Production go?
I have reviewed my numbers and have found a way to get my cost of production down. It's a good news bad news story . The good news, I dropped my cow - calf cost of production to $300 / cow, the bad news my wife's grocery bill went up to $14000 a month.

$14k a month? Your wife must be buying her own restaurant at those prices.

COP wasn't as indepth as I expected it would be. They told us it would be 3 to 4 months before they would have the data tabulated and return results to us.

There were 3 of us for Ontario. Annual cash costs were all fairly similar on a per cow basis. Not surprisingly, it's the capital costs that determines the winners and the losers. Land cost here for pasture land at $1500 per acre, versus $10,000 and $14,000 from the other two participants.

$12.50 to $20 an acre to lease hay land, versus over $100 an acre for them, $75 just for pasture.

Total equipment value, mine pretty meager at $78k. Both of the other participants in the hundreds of thousands, for fewer cows than I.

The first meeting was all about sharing numbers, 2nd meeting was sharing ideas for future.

Question they asked in 2nd meeting: How would you mentor a kid getting started in the industry? Others said buy good stock, retain ownership, selling direct to consumer.

Then they came to me. Buy good 2nd calf ranch cows using breeder co-op financing over 5 years, lease pasture, buy hay, keep land and equipment costs low.

Kind of shocked the other participants as if that's not what a farmer does..you need land and equipment to make hay.

I said my fuel cost to make hay in 2022 was $19.77 per acre of hay. Fertilizer was $37 per acre. Repair and parts cost was about $80 an acre. These costs alone give me a cost per ton of hay at $55. I can buy premium hay in this area for $80 a ton, my biggest issue is logistical in having to source from several producers and the entire lack of supply avaliable in a drought year like 2021.

[The Don]

The 14 k bill for groceries was my attempt at humor.
$37 for fertilizer is not a lot, nitrogen prices here last year were $1500 / ton. You got good results from the fertilizer investment.
The prices you show for hay @ $55 / ton = .0275 / pound is very low. You have other costs that are not in that number, what is your final landed in the yard cost
Even the good quality hay @ $80 / ton is only .04 / pound. You would not be buying quality hay near me for that price. You would not rent pasture or hay land for what you are paying. Here it's more like the $100/ acre pricing.
You still have to add transportation costs to the $80 / ton hay, my rule of thumb is $20 / bale for about a 50 km ride.
There is some risk in renting land. It is character forming to be counting on the continued use of a rented parcel of land and lose it to someone with deeper pockets. Been there, done that, it wasn't fun.
Once you have finished your cost of production number, try running the numbers for someone new taking over your operation. Use market values / prices. That may be enlightening.

[15444]

The 14 k bill for groceries was my attempt at humor.
$37 for fertilizer is not a lot, nitrogen prices here last year were $1500 / ton. You got good results from the fertilizer investment.
The prices you show for hay @ $55 / ton = .0275 / pound is very low. You have other costs that are not in that number, what is your final landed in the yard cost
Even the good quality hay @ $80 / ton is only .04 / pound. You would not be buying quality hay near me for that price. You would not rent pasture or hay land for what you are paying. Here it's more like the $100/ acre pricing.
You still have to add transportation costs to the $80 / ton hay, my rule of thumb is $20 / bale for about a 50 km ride.
There is some risk in renting land. It is character forming to be counting on the continued use of a rented parcel of land and lose it to someone with deeper pockets. Been there, done that, it wasn't fun.
Once you have finished your cost of production number, try running the numbers for someone new taking over your operation. Use market values / prices. That may be enlightening.

My blend last year was $1105/tonne.

If I add labor and a small percentage for any additional costs forgotten, I get a hay value of $120.00/ton or 6 cents/lb.

I know most would not be renting land for what we pay around here. That's why agriculture is on life support in most areas of this country. Pull the rug out on commodity prices and you have full blown collapse.

At $25/bale here, I can hire a contractor with lowbed to haul hay from 50 miles away, so my own costs are much less. I even hired a hot shot trucker to haul hay from 40 miles in 2021 for $10 a bale. I did the math that year and I didn't see how there was any value left in it for him, but he said he was doing fine.

Have done and still do the renting deal. Only ever lost once and that was because the landowner wanted the quarter to go vacant a couple years ago and it will stay that way until he decides to sell. I guess I don't worry about renting because my landlords know I will either pony up more to compete with another renter, or just buy the property outright.

As far as someone taking over the operation, provided their standard of life expectations are not too high, they should be ok. Problem nowadays is everyone wants to have the white collar lifestyle on a blue collar budget and all before they turn 25.

I look forward to sharing the COP numbers once they are tabulated.

[The Don]

15444
How many cows do you run? Where are you located approximately?
Your $78 k dollars for equipment would not buy a round baler now. Looking at the local used equipment sales flyer, used lower hour tractors of sufficient size to feed cattle seem to start at about $150K. I know a person who bought a used tractor and got about 30 hours of use from it before it threw a rod through the block. No fixing that. No warranty. A reality check.
I'm sorry to say that I think that the current review of Cost of Production is interesting, but has little real value. A person that is going to be entering the cattle business would have to develop costs based on current costs and values. What you and I do and have done would be of interest, but would not be the information needed to develop a business plan for someone entering the business.
If they look at the real, actual unfiltered historical numbers they won't be entering the cattle business.
The $1800 income from a 6 weight steer @$3.00/ pound. Which becomes a $1500 dollar average income when you sell your heifers. The holy grail $3.00 a pound steer, does not cover the costs for a startup cattle producer.
I have not seen the $3 dollar 6 weight steer income yet. The "big dollar" pay out could disappear before the fall sale of my calves, like it did in 2015.

[DaneG]

For anyone who is getting market jitters there is livestock price Insurance available @3.14/lb.

[15444]

15444
How many cows do you run? Where are you located approximately?
Your $78 k dollars for equipment would not buy a round baler now. Looking at the local used equipment sales flyer, used lower hour tractors of sufficient size to feed cattle seem to start at about $150K. I know a person who bought a used tractor and got about 30 hours of use from it before it threw a rod through the block. No fixing that. No warranty. A reality check.
I'm sorry to say that I think that the current review of Cost of Production is interesting, but has little real value. A person that is going to be entering the cattle business would have to develop costs based on current costs and values. What you and I do and have done would be of interest, but would not be the information needed to develop a business plan for someone entering the business.
If they look at the real, actual unfiltered historical numbers they won't be entering the cattle business.
The $1800 income from a 6 weight steer @$3.00/ pound. Which becomes a $1500 dollar average income when you sell your heifers. The holy grail $3.00 a pound steer, does not cover the costs for a startup cattle producer.
I have not seen the $3 dollar 6 weight steer income yet. The "big dollar" pay out could disappear before the fall sale of my calves, like it did in 2015.

Run 100 cows, South side of Lake of the Woods.

The guys that make a living on cows here don't have a lot invested in iron. Got a neighbor that has run cattle all his life, early 60's bachelor. 70 cows. 900 square foot house from 1940s. Up until 2014, he jokes his total equipment value was less than 20k with equipment from early 70s. 2014 he bought a new JD tractor, deluxe baler and used discbine for $130k. Figured it would be his only chance to ever own a new piece of farm equipment in his life. He told me he was glad that he paid such a large amount, 60% in cash, because the downturn in prices in later years would have hurt him if he had financed the whole thing.

All I can say is that there is money to be made in cattle out there. It might not be your dream operation in the location you want and you might have to humble yourself in terms of lifestyle and equipment, but it can be done.

Problem is most farm kids nowadays feel just as entitled as their peers in the city. No matter, the industry eats those type up and spits them out on regular basis for decades.

[The Don]

There are many ways to look at things.
If the cattle operation is a business then you should look at it for a return on investment. There are many years that a cow calf operation barely pays for the feed they consume. If expecting to be paid for the hours of labour, all the inputs and capital investment, makes a person entitled. Then I'm in that group.
You can have a really cheap cost of production, but that is not transferrable. That line of 1970 equipment is only worth $20K to the person who owns it. When it comes time to sell the market determines the price. The current pattern is, the farm is sold for the land that can be cropped. The cattle are sold off right away because there is no ROI on that part of the operation. As an investment, a cow calf operation is a losing proposition.
There are no trickle down returns in a zero sum industry. The cost to ship calves to the backgrounder goes up, they take that money from the cow calf operation.
The problem for the Cattle Industry is they are running out of cow calf producers. Right now they are trying to figure out how to pay less than the cow calf cost of production, but make that look like a lot of money.

[DaneG]

If an outfit is not making money now likely it never will. The cow/calf sector is a beer budget venture, when that is Realized things start to fall into place.

[bucket]

If an outfit is not making money now likely it never will. The cow/calf sector is a beer budget venture, when that is Realized things start to fall into place.

Young guys starting out on their own would have a tough time due to rising input costs.

People that have been in it for a few years are actually looking at it as a opportunity to exit.

Either way it is bad for the industry.

Interestingly , government supports dairy because with no cows - no milk.

I guess no cows - no beef isn't in their vocabulary until the governor general can't order beef wellington on a flight.

Decades ago , a 50 cow herd would raise a family. Now it is an expensive hobby.

[shtferbrains]

The never ending expansion in hopes of achieving a profitable level eats all your cash.

Recent 18000 cows burn up in one barn in Texas.

Used to be able to phone 10 guys if you needed a newborn magpie to foster.

Nobody left in dairy here. Zero.

All the dairy moved to Saskatoon.