Question 4 a cattle trader...

[Deleted]

I can rent a very good pasture on a 5 year contract. It will cost me $48,000/year......May 1 to October 15. Capacity is 240 650# steers going in May 1. They should weigh 950# coming out. Land owner will check cattle weekly on horse back and doctor all sick cattle...I pay meds. Land owner will fix and maintain fences. Water is plentifull. This deal interests me because it is top ground, within 15 miles and in time i would replace purchased steers with cows....it wwill allow me to expand my cow herd over time. If I am gonna go out and buy those 240 steers, then what are my breakevens and my methods of locking in a financially positive outcome?

P.S. I have known some very smart people who have lost their tails in this business....hedges are required.

[Glenn]

I have spreadsheets that I use to calculate costs and income. Some expenses to consider are:
1. Order buyer cost
2. Freight In
3. Preconditioning costs (especially on calves)
4. Any supplement (cubes)(salt)
5. Freight Out
6. Selling Commission
7. Beef Check-Off
8. Selling Shrink

I try to hedge by keeping my buys/sells very closely spaced. For example I watch the video market real close and know what my profit points are on buying cattle. If I can buy em where I need to then I do. Once I get the cattle bought I put them on the video auction for future delivery.

I have made orders of magnitude more money on stockers than cows. The secret is don't let your feet get cold (sell as soon as you buy) and MOST IMPORTANT do not buy if the "NUMBERS" do not work.

The thing that would scare me about your deal would be: 1. Being locked in to do it even if the numbers did not support it (5 year lease) 2. Buying at a seasonal high (April-May)

I can email you a spreadsheet if you like.

[Glenn]

Oh and it is pretty important that the pasture be good enough to provide the gain you need. Coming off too heavy and having to deal with slide is a lot better than selling lights.

[Deleted]

1) the 5 year lease...its optional. Maybe I should seek a lease option or something like that, that would allow me to get out of it. 2)The seasonal high.....this ground wouldn't be for rent if theprevious renter hadn't run for cover from these calf prices. For this year....the seasonal high is where I am at and I would have to deal with it as such.

"I have made orders of magnitude more money on stockers than cows."...I am not understanding that statement too well, could you clarify please?

Yes if you can email me something I would appreciate it. I am just heading out the door now and won't have internet access again until after 5 am Friday morning.
Thanks.
John
[e-mail]

[Glenn]

Sounds like you might have the upper hand in negotiating a lower pasture cost. He is behind the 8-Ball and needs to get something worked out ASAP.

>>"I have made orders of magnitude more money on stockers than cows."...I am not understanding that statement too well, could you clarify please? <<

I have made much more money on stockers than on cow-calves. Lots. I typically don't go into a deal unless it looks like there should be around $150 profit per head. The key is to have discipline in actually doing deals and in buying the cattle. Buying cattle in smaller lots that are not the very front end is more profitable as you get a sort of arbitrage effect. You can seldom make very good money buying pot load lots of the high sellers.

[Deleted]

The landowner tried to call me this morning, but I missed the call. Every way I look at it, his rent is just too high for putting cattle together at current prices.

[Glenn]

Also, don't be afraid to negotiate the price because with current cattle numbers the land owners are chasing cattle. The cattle numbers are lower than they have been in half a century. They'll lower their price rather than let the land sit their idle earning ZERO. Or they can "man up" and put a half million of their own money on the line and buy their own cattle.

[Glenn]

Got a couple of loads selling tomorrow. Lots 5722 and 5713

www.cattleusa.com/onDemandLots.php?myChosenLots=10415%2C10424%2C10432%2C&mySelections=&SaleBarnID=12&orderBy=DateOfSale&checkedLots_10415=1&checkedLots_10424=1&checkedLots_10432=1