How Do You Expect Me to Expand My Cow Herd?

I am hearing major frustration from some of the younger cow calf producers regarding the difficulty of trying to expand their cow herd in this crazy market. Prices for pairs has shot higher at the same time when banks may be less than eager to lend to the cattle industry.  Add on top of that possibly dad saying, “hey lets cash out, these prices are unbelieveable.”

Unfortunately when prices are poor expansion takes real guts and when prices turn quickly it feels like you are constantly chasing the top of the market.  When cow calf pairs were $1700 people said this is crazy, well now they are pulling there hair out.  Now that some pairs have traded above $2300 one has to wonder what is a good decision anymore.

In my discussions with Brian Perillat, Canfax he told me,

“these are big decisions, access to grass and credit are also a factor.  From the cow calf side, paying these prices for cows requires five years of very good prices to make them work.  If you can get pairs for $1800, and look at the $900 calf plus the salvageable value of the cow at $900 it be could be doable.  For example in this scenario, if the bred cow market in the fall is $1500, you will make money on the $1800 – $2000 pair purchase this spring.  The supply numbers have shrunk so far, the price has been bound to swing higher.  However you look at it, its a lot of money invested.

The other issue facing producers is that why not keep selling off the herd when prices are this high.  I have heard from two producers that said to me, “why the hell would I retain a heifer with the prices that feeder cattle will go for this fall?  My banker is encouraging me to pay off some debt.”

Hard to argue with that if you are not that enamoured with the ranching business long term but for some this is when you buck up and start retaining heifers or step out on some expensive pairs to begin to expand the  cow calf operation.  This is going to be a very intersting fall.

3 thoughts on “How Do You Expect Me to Expand My Cow Herd?

  1. It’s really great to see young producers doing the math and considering a decision to expand the cow herd at a point in time when allot of us grey haired folks are having trouble getting motivated. The reluctance of the older generation combined with lender resistance makes the prices that Brian talks about even more likely to occur. It appears that the new supply and demand balance is shifting prices to a higher trading range which has the potential to become the new normal. Because these prices are so much higher, typical seasonal moves like May grass-fever excitement may appear even more pronounced. For some folks, the pain of drought and BSE is just too big a barrier to even think about expanding or even maintaining the herd. Youthful energy and positive attitudes are needed to overcome this barrier. Undoubtedly there will be downside risks that will stress future profitability and cash flow but if young producers can find the equity to buffer those short term potential challenges, the long run future looks amazing. Bruce

  2. I AM INVOLVED IN A STUDY THIS PAST WINTER, NOW ALL RESULTS ARE NOT ALL IN BUT EVEN IN 2011 WITH LOW HAY COSTS AND GREAT CALF PRICES THE AVERAGE 200 HD OPERATION STILL LOSSED MONEY. IT WILL BE SOMETHING TO SEE WHEN THE FINAL REPORT COMES OUT FOR CANADA ON HOW IT WORKED OUT. SITTING IN A ROOM WITH OTHERS TALKING ABOUT COSTS WE LOOK AT COWS AND MACHINERY BUT IT IS MANY OTHER LITTLE COSTS HERE AND THERE THAT ADD UP AND DO MAKE A DIFFERENCE. IT IS A GREAT EXPERIENCE MORE SHOULD DO, SOMETHING THE YOUNGER PRODUCERS FOR SURE SHOULD LOOK INTO. ITS NICE TO RUN YOUR OWN BUSINESS BUT HARD WHEN EVEN IN GOOD TIMES YOU STILL DON’T MAKE MONEY. AND YET HAY AND PASTURE LAND IS ALSO GOING UP IN MY AREA, GOOD LUCK TO THE BUYERS IS ALL I CAN SAY.

  3. Tough to expand…as you stated your pretty close to my numbers when it comes to buying that bred cow or heifer. Plus you need feed all year for them. Working both off farm and on is the real kicker. I own 20 purebred simmentals and lease another 70. All the land is rented as my dad just had a 1/4 and some of that is rented to my uncle. Now provided i could find the feed (pasture, Hay) i can only seem to get 2 year leases on land. So theres no guarantees. Makes it tough on a young farmer never mind trying to get funding from a financial institute…id rather have my finger stitched. Such positiveness in the livestock industry and yet a young farmer could not get by fulltime farming. Somehow this industry is going to have to change or there are going to be major issues down the road. The big farms seem to keep going but i know several that have gone bankrupt several times and yet they somehow start up the next year? I go to the bank and they say show us this that and the next thing and how much do i make off the farm…With all this im still going to try and make it. It’s in my blood and i love every minute i get to spend with my cows

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