Being a low cost producer

[PureCountry]

Kato, I agree with you about the importance of management, and cswilson pointed out the points you made yourself whether you realized it or not. Cows with prolapse troubles need to be culled no matter what, and daughters should not be kept out of them either...management. The quicker you eliminate problematic genes from the herd, the easier management becomes.

Of course cows and calves are going to die sometimes whether you calve in January or July, but if management is well-executed on both counts, apples to apples, Summer calving will be less stressful and MUCH less costly 9 times out of 10.

And I can't believe how often we all argue these same topics over and over and over and over.....

[rookie]

so what else would you all chat about then ,purecountry ?

[farmers_son]

On being a low cost producer… I do not want to be a low cost producer.

When people talk about being a low cost producer what they really mean is they strive to be a lower cost producer than their neighbour. The industry thinking is that each of us can best influence our profitability by finding ways to raise weaned calves for even less money. If that were true then we all should be very profitable as we have been reducing costs for generations in this country yet we continue to seek ways to reduce costs even more as the carrot of profitability is ever out of reach.

Why do I not want to be a low cost producer? The main reason is as we reduce costs the marketplace i.e. the packers reduce the real price of the live cattle they purchase from us. Now one might say that even so it is necessary to reduce costs in order to stay in business as others are forced to leave the business. Yet continually reducing costs will drive me out of business at some point, it is just a matter of when.

If we consider that the farms and ranches that are in the best positions today have been around for generations then we realize that farming/ranching is a long term investment. To maintain and build on that investment means incurring costs. I have to incur costs today to if I expect our farm to be around 20 or more years from now. As margins continue to decrease and the need to reduce costs becomes more irresistible then there is no choice but to cannibalize our farms future by reducing investments in the next generation. Seriously reducing costs can only be done for a limited amount of time before a choice has to be made to either spend some money on a future or get out.

Some would point out that South America is a low cost producer of live cattle. True they are a lower cost producer then we are and the production of live cattle will shift towards them. Yet they have no monopoly on reducing costs and within another generation the production of live cattle will shift to Africa who potentially could have lower costs still.

How much longer can we reduce our costs. Ten years, fifteen years….The focus of the North American cattle producer has to shift from reducing costs to obtaining fair returns from the marketplace as we rapidly approach the point where we can no longer reduce our costs any further.

[smcgrath76]

Amen to that one FS. That is the problem with commodity agriculture, being disconnected from the end consumer (or vice versa), and few players in the endgame for live cattle.
In my mind a healthy agriculture sector is going to depend an awful lot on producers getting closer to consumers and adding value to their products. Easier said than done though.

[olhoss]

<quote>Why do I not want to be a low cost producer? The main reason is as we reduce costs the marketplace i.e. the packers reduce the real price of the live cattle they purchase from us. Now one might say that even so it is necessary to reduce costs in order to stay in business as others are forced to leave the business. Yet continually reducing costs will drive me out of business at some point, it is just a matter of when.</quote>

Yeah, competition is a bitch, let's all go on welfare.

[farmers_son]

Actually it is a lack of competition that is the bitch. And some would say we are already on welfare with CAIS payments and set asides.

[cowman]

farmers son: You make a very good point about either investing more money or continuing reducing costs and eventually coming to a point where you can't afford to continue? This isn't just happening in livestock but in all agriculture?
How many grainfarmers have delayed purchasing new machinery because the money just wasn't there...and then one day wake up and everything needs replacing! At that time they say to hell with this and pack it in!
Isn't that where a lot of livestock producers are at today?
How many farmers have basically decided "when the tractor gives up the ghost, thats it?"
How old is the average farmer? If you are a few years from retiring does it make sense to buy that new tractor? How many have this mindset? Does it not make more sense to put the "tractor money" into a secure money bearing investment?
No body farms forever. Sooner or later we all quit...one way or the other! We might be passing it down or we might be selling out and that might influence how we operate at the moment? I think everyone should have a long term plan about where they are going? A lot of municipalities offer seminars on estate planning and farm transfers. A good place to start?

[kato]

Low cost, high cost, what really matters is finding a way to become a high profit producer!

I think that comes in bits and pieces over the years. I think we've all looked back at a certain move we made somewhere along the line and said "That was brilliant!". The trick is to follow it up with more brilliant moves.

One of our most brilliant moves happened back when the market crashed in 96/97. We went out and bought a bunch of extremely cheap top of the line heifers and doubled the cow herd for next to nothing.

Anyone else like to share a brilliant move they've made? I bet there are some good ones out there we could all learn from.

[kato]

Remember ..... brilliant! LOL

[olhoss]

"Actually it is a lack of competition that is the bitch."

Then get busy and make some. Stop complaining.

When Weyburn area farmers needed an inland terminal, they built one. Of course the leftists complained about that too.