Thinking...?

[cowman]

A couple of months ago Randy said he was getting his cows custom fed for $1.50/day. Now at the time I thought, well that is pricey...but I wonder if it is?
A lot of guys on here say they are feeding for 65 cents or 75 cents with swath grazing or bale grazing or whatever and that may be very accurate. This is a mild winter and maybe you can swath graze all winter without supplemental feeding, bedding etc.
However consider this: In a conventional type feeding situation can you feed cows for less than a $1/day? Add up labor, cost of machinery(both capital cost and operating cost) utilities, facilities. I think you would find $1/day even with cheap feed is a pretty good deal?
Also consider this: With swath grazing you still have some costs? Still some labor, still some machinery costs, definitely some lost opportunity costs?
Of course how you crunch the numbers makes all the difference? But consider that you lay out no big dollars for tractors, bale shredders, feed wagons? You don't have to lay down the feed money in the fall(I assume)but get to spread it out monthly?
I'm still not sure if Randy is doing the right thing but I'm starting to think he might be on to something? And hey when that old southeast wind is a blowin....?

[rkaiser]

Don't forget the extra cost of about $1.00 a day that Randy is paying to the local Gym because he doesn't have any cows to feed this winter.

Bin doing some figuring myself cowman, and although our move forced me into the custom feeding situation this year, we might have to think twice about what goes on with the cow herd next year. Sure would like that manure on my land however.

[rookie]

So you are thinking of....? (Cowman)

Maybe its too early for me today to focus... enjoy your your day

[farmers_son]

The issue is not having your cows custom fed versus swath grazing or conventional feeding and whether or not 50 cents per day can be saved on any given year. The issue is do you produce the feed for your cows in house or do you outsource your feed.

Cows are, for most of us, a long term investment. How you winter your cows is a strategic decision that will affect the long term viability of your cow investment. For a cow calf producer maximizing farm profitability is achieved by maximizing the number of cows that can be carried on the available land and equity resources. Outsourcing winter feed, whether by custom feeding or some other method, should increase profitability assuming the land and machinery resources that would have been allocated to winter feed production are reallocated to increasing the size of the cow herd. However the exposure to cash markets is increased along with the associated risk.

Outsourcing winter feed for cows leaves you vulnerable to a cash feed market while growing your own feed insulates you from the fluctuations of the cash winter feed market. While outsourcing feed will increase your profitability most years your cash market risk is also increased and your ability to stay in the business long term will be determined your ability to cash flow your operation when a year comes along like 2002. If you cannot cash flow your way through a feed crisis you will be forced to leave the business, at least temporarily.

Various provincial ag departments have encouraged us to always think of winter feed in terms of a cash value. I clearly recall my father pooh hooing that. And he was right. Our farms strategy for survival if not profit was to produce our own feed for the cows, even to keep a reserve of feed on hand from year to year. My father never calculated the cost to winter a cow and he was right not to (given our strategy). For us the stability that came from growing our own feed was what counted and outsourcing winter feed was a cash flow trap that we did not want to fall into.

[farmers_son]

geez randy, without all those frozen cowpies around the place you could take up cross country skiing if you get any snow, or you could go hiking across the field everyday and not worry about going to the Gym.

[cswilson]

Farmers_son in 2002 everybody had to buy feed-those guys who normally buy it and the guys who had to make equipment payments on top of their feed cost. You can be pretty creative in your rations when you buy your feedstuffs and I'd gladly feed a few hundred cows for 1.50 a day-but hey keep those iron peddlers happy because I'm sure not.

[cowman]

farmers son: 2002 will be a year I don't think many will forget. I know it sure woke me up! I never knew this country could be that ugly and a person got a whole new perspective real quick! The sane solution would have been to sell the cows and get back in when costs made sense? The only problem is usually a tax one!
However I wonder if a person averaged out all the good years and the bad does growing feed really pay? Considering the cost of high machinery costs, high fuel/fertilizer, and high repair costs(you just can't be surprized anymore when you visit the parts counter)?
Also consider the lost opportunity cost? The land you have in feed production could be supporting more summer pasture/more cows?
If summer pasture is equivalent to $1/day/cow and winter feeding costs are about the same, then doesn't it make sense to let the cow do the work of processing the grass?
Also note by buying feed you are actually getting some outside bio mass onto your land? A point Randy makes as a disadvantage of having your cows custom fed away from home? Perhaps cswilson has the right idea? Have someone else basically bring the feed onto your land? You get the benifit of someone else providing feed, bio mass, and most of the labor/equipment?

[farmers_son]

Cswilson: I am not keeping the iron peddlers happy either. And I managed to get through 2002 without buying feed or selling cows but it wasn’t easy. I gather you buy your winter feed which must be what works best for you. And from having spoken with you in the past I am pretty sure you know how to run a pencil pretty good and you know what you are doing. So this is just something to think about.

Being a wild and crazy kind of guy, I am suggesting that the farming game should not be played on a calculator. Now don’t get me wrong I spend plenty of time in front of the computer. I checked and see I have more than 1000 spreadsheet files on my computer calculating one thing or another. While knowing costs is important and costs can be reduced somewhat there can be no denying that long term we cannot calculate which of most decisions is the best down the road. While a cost benefit analysis could be done such an analysis looses its relevancy as we try to look ahead even a view years. Long term the success of the farm will come down to strategic decisions. The decision to outsource an essential supply like winter feed on an ongoing basis is a critical strategic decision.

An example of a strategic decision is this. Is it better to put your operation in a position where you have to cash flow winter feed purchases every year or is it better to acquire or maintain the resources to allow you to put up your winter feed your self. Even if you whip out the pencil and both costed the same there is a difference. Purchasing winter feed requires cash flow every year and assumes you can write that cheque every year no matter what. Maybe you can and if so that is to your advantage. However the decision to supply winter feed inhouse is different because that decision can be managed in a way that allows the needed resources to be acquired when cash is available and is less subject to market conditions year to year. Both decisions may cost the same but the risk is different and the cash flow is different.

I know the various provincial ag departments will provide farmers with tools that will calculate the cost of feeding a cow for us but really they tell us nothing. At best these tools offer a very narrow and short term insight. Even if it was cheaper to outsource winter feed I would suggest serious consideration needs to be given being able to grow your own feed if you wish to remain in the business long term.

There can be no doubt that a farmer who has made the necessary investments to be able to grow all his feed requirements, assuming he has paid for the necessary land and machinery, is in a much better position to survive periods of cash flow crisis than someone who much go into the cash market every year to buy feed. Even though the farmers costs of producing that feed may have been higher for the past twenty years and as he built up a line of machinery/extra land and even may pencil out to be higher today it may be wise to consider that extra cost an investment rather than an expense.

I said it in another thread, I do not want to be the low cost producer because to be lowest cost means I do not make investments that down the road will make the difference between being here or being gone.

[cowman]

Actually farmers son I can see some wisdom in what you say. You do tend to take a "long view" on a lot of subjects and hey who knows...maybe that makes more sense to be sustainable in the long term?
Perhaps a lot of us have taken the modern business approach of "6 months" or another way to put it "what have you done for me lately"?
I think I can understand where you are coming from and can see that as a viable way to look at things? I may have got too far away from my roots to agree with that way of thinking but I do think I can understand it.

[cswilson]

Well farmers_son being lowest cost doesn't mean you don't make investments it means you make wise ones-we were buying our feed long before it was trendy. I did the haying-machinery deal for a long time-I'll tie upmy money in cows not depreciating iron or overpriced land. When 'all the costs' are included taxes,rejuvenation,equipment investment,depreciation,fuel,insurance,repairs-growing hay is a crap shoot.There is no doubt about that lol. We doubled our cow numbers on the same land base and I for one will never go back

[cswilson]

cwilson, I got rid of the haying equipment when it was fairly new, and have bought feed ever since. Some years it was tough sledding but this year makes up for it.

[farmers_son]

All things being equal, the profitability of raising grain, hay, livestock should be comparable. Given the nearly pure competitive environment non supply managed agriculture operates in, comparable would just about be the same as saying no profit at all in either hay or livestock production. In a normally functioning market the producer of the hay should be making about the same return as the producer of the livestock. And the producer of both hay and livestock should enjoy benefits from the synergies of being self sufficient in feed.

There are benefits from being a single enterprise producer due to the economies of scale. Whether that benefit offsets the cash flow risk associated with giving up the ability to grow your own winter feed and being forced to routinely participate in a commodity cash market with unpredictable price fluctuations is a decision that is up to each farm operator.

In Canada, I see two things which could account for the production of forages being less profitable than the production of live cattle, at least in the short term. The loss of the Crow Rate and the U.S. Farm Bill. Both tend to drive down the price of our domestic barley. I would suggest that the price of forages work off the price of barley. This would tend to make the production of livestock more profitable than the production of forage and may explain the benefit Cswilson is realizing by focusing on livestock production and leaving the growing of hay to others.

If the production of forages is truly less profitable than the production of livestock I would wonder how long that can continue before the market adjusts. Either the price of forages would need to rise to counter increased livestock numbers or the profits from raising livestock should decrease due to tighter forage supplies. I would think the price of domestic forages cannot rise due to pressure from the U.S. Farm Bill. Worse case scenario, the domestic production of forages and grains decline due to competition from heavily subsidized U.S. corn. The domestic production of forage and grains is replaced by higher livestock numbers. At some point our industry would become dependent upon U.S. imports of corn limiting further growth in livestock numbers. The Canadian livestock industry would have lost the ability to grow at least some of its feed needs.

[cswilson]

Wow that was the longgggg and short of it-farmer's son you should meet one of the most successful ranchers in our neck of the woods. A management guru was giving him the business about how to improve his place-he looked him the eye and said'sometimes I just like to go moose hunting' lol. Ranching is like most businesses-pretty simple actually-make more than you spend-works in feast,famine or the in between years.

[farmers_son]

I probably would enjoy meeting your rancher friend. Heard the moose hunting story before but that is OK, it is a good story. If ranching is so simple why do we see problems in agriculture such as people leaving, fewer and fewer young people wanting to make their living from agriculture, increasing levels of debt, insufficient profitability for intergenerational transfers and so on. I think running an oil company is a simple business, just keep on cashing the cheques. Running a successful farm or ranch anymore involves a level of management sophistication that our fathers never had to deal with. While there is a time for hunting moose, time also must be made available for planning.

Something to think about...If you are finding it profitable to increase cow numbers and buy in hay, how long before your neighours clue in and do the same?

[rkaiser]

The thing is f-s, we all start from a different place on the racetrack. Sometimes the hardest woking, most efficient farmer never had a chance from the very beginning. I like Mr. Wilson's attitude about cost cutting but some of us simply don't want to live that way either.

Choices, fortune, and finally management sophistication is what I beleive it's all about.

Aside from that, those of us that choose to spew our views in public or semi public settings are those who are not afraid to change to make things work. Don't know of many agrivillers who have bit the big bankrupcy banana yet.

I truely hope that those readers that don't post are listening to bits and peices of cowman, farmerson, Mr. Wilson and others who are not only survivin, but changing and progressing every day.(all in their own way)

No Mr. Wilson, I ain't suckin up. I honestly beleive that you bring a lot to this board.