An interesting query

[cswilson]

This is an endless argument-is ranching profitable-of course it is-in our country there are lots of outfits that do nothing but run cows-their bills are paid-they have a lifestyle-so no matter how they are getting it done it is working. As for investing my equity offfarm in this so called garanteed return-I have much more confidence in my own abilities to manage my money and generate a return then I do in leaving it in a broker's hands. Lets face it were all smart enough here to make the numbers support any argument we chose to put forth.

[jmillang]

There are many ways to skin a cat, Alberta Agriculture has just posted an online web calculator that is one way to analyze this decision? It is posted at this web address http://www1.agric.gov.ab.ca/app19/calc/beef/beefcalculator.jsp

[cowman]

Somehow I can't get into that site Jeff.
The basic point wasn't that the bills aren't getting paid or that someone never had a lifestyle. I have a neighbor who bought a "ranch" and he has a very good "lifestyle". Now a days he is a full time "rancher". But the money to finance his little adventure came from the construction business!
Or for example look at most of the heritage ranches south of Calgary? These are the cream of the crop for ranching. Owned by all the oilmen...turned rancher.
A hobby and a business are two completely seperate things. Now it would be difficult to label someone like Doc Seamans (the Rio Alta) a "hobby" rancher or Greg Noval(Turner Valley ranch)? After all they have thousands and thousands of acres and probably thousands of cows? And yet that is exactly what they are...their money came out of the ground, not from a cow.

[rsomer]

Jeff: I was able to get into the site, no problem. It is interesting and worth the look. I did a spreadsheet up several years ago which was similar.

Based on a very quick look at the on line calculator I couldn't see if there a provision for death loss on the cow or the bull. The online calculator does a before tax calculation of the value of a cow when I think producers can only consider the after tax value of any investment. I liked the expense worksheet which was good for benchmarking. The on line calculator allows the producer to input returns over time but averages expenses. This might cause some distortion as pasture and forage costs may be influenced over time by producer returns from cattle production. I note the line item for capital interest. When I get a chance I will give you a call about including capital interest in a NPV calculation.

The calculator seems to offer enough flexibility for each producer to come up with information relevant for his/her operation. When seeding is over or we get a rain I look forward to comparing the value of a cow done through the online calculator or my spreadsheet. My spreadsheet suggests the value of breeding heifer tends to be approximately beef price, maybe even less, if the investment is to return a positive NPV.

[cswilson]

Thats the difference between Alta and Sask.-there's isn't much help here from the Kremlin in Regina so our ranches here were bought,built and paid for by cows as I'm sure lots were in Alta. What I'm saying is you can spin numbers till they come out your wazoo and the fact still remains is that there are people making moneey off cows. As for cost of production it can vary by literally $100's of dollars. We had evidance of that here ourselves having to calve in March again instead of May. If my bulls were to get out in June I think I'd just shoot them and still be money ahead. Ranchers calve on grass-end of story.

[cowman]

Well cswilson: If you are still making money in cows all the power to you. I wonder why we even care if the darned border ever opens if guys like you are content with 85 cent calves and 10 cent cows? Obviously my "high cost" operation really needs to go...or maybe it is just my "high expectations"?
We definitely need more guys like you to buy out us old dinosaurs who have these atiquated ideas about raising cattle! We obviously are not very efficient.
So far I've never sold a calf for less than $1.12...or at least that's what I got last year...and they weren't no 500 lb. May calves either! Haven't sold any 10 cent or twenty cent or thirty cent cows either! However That definitely might change soon.
The longer I hear people drivel about how they are making money in this market the more sure I am about getting out. I figure let the "progressive efficient guys" have it.

[Horse]

I would be interested in how many of the optomists have welfare cows on gov grass I know my bottom line would look a lot better if I didnt have mortages and could write off 100 % of lease fees and then share in 40 or 50 mill in oil revenue. Yes you never own the lease but you can sell it just the same
Think about it for a minute say 35,000 mortage at 8% 30 yr totals something like 110,000$ to pay off if you were not making those payments look at the $ freed up for other things so those with leases and no mortage get a fair advantage

[cswilson]

Cowman if you'd open your eyes and read you might get my drift-you moan on and on about a historical lack of profitability-I never said we make money every year but there are ranches that progress with time through good times and bad. Tough times don't last tough people do-and expecting the markewtplace to cover everyones cost of production is plain silly. Your leaving the business I understand if so that is your decision-that doesn't make those of us still ranching overoptomistic idiots.

[cowman]

cswilson: Perhaps you are right. Sometimes I forget that people don't all do this thing for a profit. I suppose I'm just biased that way, in that I refuse to work for nothing.
I do wonder though about your statement that we can't expect the marketplace to cover our cost of production? I find that statement a bit strange, although once again that may just be my biased perception?
Tough times don't last, tough people do. Well I guess me and mine have been pretty tough in this country for the last 103 years so I guess its up to me to become a softy?

[pandiana]

cswilson "-and expecting the markewtplace to cover everyones cost of production is plain silly"

If livestock is your business, just what is one supposed to live on if you have no expectation of covering your cost of production? For those years where markets peak, do you expect a windfall that pays off all the debt accumulated over the lean years in preparation for the next down cycle. What about the loss of equity?

[pandiana]

rsomer, in the above scenarios where 'business' is contrasted with 'investment' it seems to me there is obviously an element of each. I business would infer that you generate an income from which you draw living expenses. This must come first, unless of course, you won a lottery or an inheritance. On the other hand, investments for most of us are funded from discretionary income. This implies that you must make a profit over and above your living expense before you invest in more land, cattle etc..

I agree that for many farms, equity has increased substantially because of very high appreciation in land values. But I can't think of too many other assets that appreciate over time. Buildings, machinery, vehicles, fences, cattle all depreciate.

You said "And although it is important to know your costs, if done improperly the information can lead the producer to incorrect conclusions, for instance that there is no money in cattle production when in fact I see a large number of producers who have done quite well, thank you very much."

And then you contrast this by saying "Cowman and I have both pointed out the low profitability associated with raising cattle. But lets take that a step further. What would happen if raising cattle suddenly became profitable"

From the above, it would seem that you agree that cattle production over time is either not profitable or marginally so most years. So where does the money come from to invest?

Another paradox I see is that farm land that is appreciating substantially contributing to increase in net worth is, like cowmen's experience, often found in more densely populated areas where we expect a concomitant rise in cost the of production thereby making the investment portion of his business more attractive than the business part.

[cswilson]

People you are missing my piint what I'm saying is that it is unrealistic for the marketplace to cover your everybodies costs no matter what they are. Ranching is definately not cost plus-if your particular operations costs are too high it is up to you to find ways to trim them. I know for a fact there are outfits that spend more than double what we do in wintering cows. We both sell our finished cattle on the same grid and we receive a premium over theirs. You can be a lowcost producer and still receive premiums for your production. Case in point my next door neighbor and I winter right around a 1,000 head between us-last time we had enough snow to run a sleigh we burned 20 gallons of diesel by the end of Feb. between us feeding those cows Took us two hours a day with two teams. Those two mares replaced themselves when they foaled in May. My point is that there are people who spend too much money not just in ranching-the best way to double your money is to fold it in half and put it back in your pocket.

[whiteface]

Very well put pandiana. I for one definatly feel that if more "farmers" were actually "business owners" there would be a whole lot different of a picture out there. Unfortunatly for this "area of expertise" there are in fact no barriers for entry...no special education, no permits for livestock handeling or husbandry, not even the ability to "buy in" having made smart decisions and wads of cash elsewhere in smart "business ventures" when kids parents are handing over their farms to their children who never really had to earn it. Nor do many of them have the sense like cowman said to factor in the costs of what that land is worth to rent out, sell or maximizing its productive ability because they don't have to pay for it. Wilson, I don't walk in your shoes or know your situation and have always made a point of not judgeing people however, I have wondered on several occasions reading your comments why the tone of defensiveness and just generally pissy when another writer makes a farily simple observation of what they see that doesn't necessarily agree with yours. Are they hitting nerves, what the hell do you care unless the negative comments carry a shread of truth and you feel a need to defend? What the hell does it matter that cowman wants out or rsomer is a hopeless optimistic, that's their choice and all the way along everyone has worthwhile opinions to contribute. I think there are far too many farmers out there surviving on subsidies having no idea what their costs of production is and really not caring, it was given to them, they can waste whatever they want, they swear they're making money because they're hopeing they are and its a "way of life" (which incidentally, I find to be bullshit, living for six months out of a year in Costa Rica is a pretty good way of life also for those that actually make the coin to afford it.) Anyway my reason for writing was more that I really do appreciate people that recognize their costs and have the ability to organize their inventory versus their market and wanted to acknowlege all the writers on agri-ville that I think really have a grasp on these.

[whiteface]

It occured to me as I was turning off my computer that I must confirm that at no point was I accusing you, cswilson of not having a viable opperation, or that I have any disrespect for you rsomer for being a hopeless optimistic. Had to say this so nobody gets overly excited in these tense times to sounding off at each other. I have great admiration for the ideas and opinions that everyone brings to the table and maybe even more so for the ones brave enough to bring a little less than accepted opinions to this forum. We're all friends here and need each other that's why we come, to have a place to express these opinions and feel like we're heard. Have a good day! :-)

[cswilson]

Carefully read what I said-There is no way the marketplace will cover 'EVERYONE's cost of production all of the time-that's a fact of life no matter what business you are in. Whether you are selling shoes or raising steers some people just spend too much money to be profitable. By the way i'm the overoptomistic idiot according to some of you. My operation is on deeded land which I bought-no oil wells-no big offfarm job. You can run your cows however you see fit that's the beauty of the cattle business. VIve la differance!!!!!!!!!