Whining again!

[smcgrath76]

FS...
I agree with your logic. I noted that this referred to the primary producer, not the processor.
As there is limited competition in the Canadian marketplace for feeder cattle (LOL), and there are thousands of producers, and some are even willing to sell below cost, how these buyers source cattle has now become a perfectly competitive situation amongst sellers. If I offer X $ someone will sell (or will have to sell), so I have no need to offer more. I know that they do not have the luxury of shopping around for a better deal, so therefore the lowest cost wins as being the most profitable (or smallest loser).

I know it is not an easy sell, but we are currently working through a variety of options to pull our operation out of this cycle, and go around the captive market. It is easier said than done, but for us it is a path we think we need to take.

I think several posters on this board have some great ideas (and implementations) of how to do this as well.

[cowman]

The problem with assuming the lowest cost producer will win is this: Cattle are raised for a variety of reasons...not all of them make sense from a purely business perspective?
Sometimes I wonder if it isn't more like raising tropical fish or something! LOL
The absolute best, low cost producer, may not be able to compete with the guy who is using the ranch as a tax writeoff against other business interests?
How many people will live like dogs so they can play "cowboy"?
I applaud the people who are innovative enough to get into the value chain and become butchers, wholesalers, retailers? I guess I have to ask though...when do they no longer become farmers?

[BFW]

Cowman, I understand the intent of your statement on the effects of outside money on ranching and on agriculture in general. However, to qualify for the tax exemptions or the ability to defer agricultural income from one year to the next ones main source of income needs to be made from agriculture. If this is indeed occurring as you suggest, I would like to know how so as to take advantage of it myself.

[cswilson]

BFW I'm biting my tongue here-just ranch till you need glasses I guess.

[BFW]

Cswilson, I guess I'm a little thick as I don't know what you are getting at with that statement. All I'm saying is that I don't know of a legal way for someone outside of the agricultural industry to reduce their tax position by buying a few cows or yearlings. It is more likely a case of these people dabbling in the cattle industry for a hobby or show than as an actual investment. I think you may have misunderstood my comment.

[cowman]

Well I think a very large portion of the custom feeder business is built on the premise of tax deferral? My local custom feedlot owner tells me his biggest customer is a surgeon...and he feeds cattle whether he loses money or makes it? How many grain farmers feed cattle in custom lots to take advantage of deferring taxes...this is what they are talking about every fall when "the tax money comes to town"?
Now I don't know about all accountants but the outfit I use...about 3/4 of them also own farms and cattle! You write off the pickup, the quad, the fuel to run them, the dogfood,the horses and the household utilities against the farm...as well of a portion of losses against the "Accounting income"? I guess if a $300,000 accountant sees it as an advantage...it just might be?
Ever notice how all the Old "heritage ranches" south of Calgary are being bought up by big oilmen? Now without a doubt they want a playground, but sincerely doubt they do it so they can pay big taxes on these enterprizes?
Do the likes of Cargill/IBP feed cattle out so they can pay big taxes? I would suggest they feed cattle so they can control supply and don't really care if they make any money on them? So in reality taxes on feeding cattle are not a concern at all for them? Or in other words no profit/no taxes on cattle feeding works for them?
And here you are trying to make a buck, and paying taxes? ...How do you compete?

[BFW]

Cowman, the accountant making 300k/year can't buy cattle and use them as an expense to bring his income to zero thereby deferring the tax owed from the income from his accounting practice. The same for the surgeon feeding cattle. He is feeding cattle with tax paid dollars from his day job and hoping to make a return on his investment in the cattle. At the end of the day a guess the rancher should be happy about this because without this speculative money in the system the price of feeder cattle would likely be some lower.