Loan or grow?

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Brute 23
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Re: Loan or grow?

Postby Brute 23 » Tue Jan 30, 2018 10:58 am

I honestly don't see how you can service a loan for the full amount on cattle. That 4 or 5% may be your profit in a good year and in a bad year it may put you in the red. Add in any kind off loss on calves or cows and you are done.
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Re: Loan or grow?

Postby Allenw » Tue Jan 30, 2018 1:52 pm

Dave wrote:
ddd75 wrote:
Allenw wrote:
Preg checked, solid mouth or broken mouth, or just buying kill cows on speculation they were bred or had teeth?


preg checked cows.


I have bought 100's of bred cows from the sale. Lots of those cows were broken mouth old girls out of the high desert country. I can't remember ever having one that didn't calf. I always weaned over 90%. Don't buy bottom of the barrel old cows. Those real thin old cows aren't a good investment. Just sound middle of the road cows with some flesh on their bones. Don't get carried away buying too cheap or too expensive.


I've bought a few bred cows, sometimes pairs, along from the sale and always got along all right with them. You have to use some judgement on what you buy and what you are going to feed them. I usually am trying to get rid of some hard to sell hay so I prefer a solid set of teeth, local experience will take precedence over any general advice.

The only time things were a little off involved a set of cows I believe were the sale barn owner's trader cows he had brought in.
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Re: Loan or grow?

Postby ddd75 » Tue Jan 30, 2018 2:32 pm

Mine had calves as well, I count what I take in.
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Re: Loan or grow?

Postby RanchMan90 » Tue Jan 30, 2018 3:01 pm

Keep in mind that 90% of guys here are retired or have a job (myself included), won't have to borrow it all. Those that ranch for a living are either highly leveraged or inherited :2cents:
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ddd75
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Re: Loan or grow?

Postby ddd75 » Tue Jan 30, 2018 7:16 pm

Brute 23 wrote:I honestly don't see how you can service a loan for the full amount on cattle. That 4 or 5% may be your profit in a good year and in a bad year it may put you in the red. Add in any kind off loss on calves or cows and you are done.


i don't see how you can have the equipment and land to handle cattle and not have cattle.
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Re: Loan or grow?

Postby talltimber » Wed Jan 31, 2018 7:29 am

I chose a line of credit to start up. Nothing down, no collateral other than cows. If things get bad, I'll sell out, and if that aint enough, set it up as a regular loan. As it is, as bad as writing the interest check is every year, it's going pretty good. Just try to plan as best you can, you are charged interest on what you have drawn, but the remainder of the LOC is there if you see something you can't live without. I think this type of deal works best with someone who leans toward being a little tight. I put all checks straight back onto the principal of the LOC. This LOC is for cattle, and operating expenses. Equipment purchases, when there is one, I'll call them and tell them how much it is and go in and sign a note that's separate.
I bought running age cows, average age 5.5 years old approx., off Dad when he got out. These cows were doing it, and have baby sitted me for the most part when I started. I would highly recommend trying to find some through a dispersal of an owner you know. The flubs I've had, mostly, were of bred hfrs I've bought. Some worked out, some are long gone. Took my lumps, try to remember the lesson, and kept moving forward.
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Re: Loan or grow?

Postby Jrebyank » Wed Jan 31, 2018 8:35 pm

I’m not depending on this income at the moment. I don’t care if I make a single dime for 4 or 5 years. Just looking to build my head to about 45-50 momas. I started with 5 open heifers 3 years ago and a bull. I’ve since picked up 5 more cows from local farmers. To date I have one of my home grown heifer that is due in March. One or two heifers a year grown and another 2 years for them to have calves just seems like 10 years or so to get to capacity.
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Re: Loan or grow?

Postby ddd75 » Thu Feb 01, 2018 7:56 am

Jrebyank wrote:I’m not depending on this income at the moment. I don’t care if I make a single dime for 4 or 5 years. Just looking to build my head to about 45-50 momas. I started with 5 open heifers 3 years ago and a bull. I’ve since picked up 5 more cows from local farmers. To date I have one of my home grown heifer that is due in March. One or two heifers a year grown and another 2 years for them to have calves just seems like 10 years or so to get to capacity.


i guess if you weren't very good with cattle the slow grow approach would work. if you don't have all your money into feeds / minerals / special tubs, then you should be fine with a loan. I know I was.
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Re: Loan or grow?

Postby Tbrake » Sat Feb 03, 2018 9:23 pm

ddd75 wrote:well.. you can wait 8.. 10.. 15 years to build up your herd.. or if you are like me.. don't see that ever penciling out.. then just get the loan, go buy your cattle, and then make your payment. most cattle loans for brood cows are 7 years.

50k loan for around 25 hd. will run around 8850/yr. with 36 calves to take in you should be able to easily make your payment.


I agree with this. I have bought close to 150 cows in the past 3 years after getting out of high school. Money has been pretty tight, but they are making their payment, paying their expenses, and giving me enough cash to get by. To me, that is a pretty good investment. About half of them will be completely paid off next spring, that will help tremendously. It has taken some very strict managment, and budgeting. last year I retained 40 of my best heifers to go on some new ground, so things are going to be tight this year. As long as things go half way smoothly, I have it penciled out where it should work out.
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Brute 23
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Re: Loan or grow?

Postby Brute 23 » Sun Feb 04, 2018 7:19 am

Jrebyank wrote:I’m not depending on this income at the moment. I don’t care if I make a single dime for 4 or 5 years. Just looking to build my head to about 45-50 momas. I started with 5 open heifers 3 years ago and a bull. I’ve since picked up 5 more cows from local farmers. To date I have one of my home grown heifer that is due in March. One or two heifers a year grown and another 2 years for them to have calves just seems like 10 years or so to get to capacity.


It won't be 10 years. Your up to 10 or 11 right now correct?

Need to make a plan to either put X amount in a bank account every month for cattle or cash flow the expenses and say when I sell calves I'm putting that money to buying more cows.

It will seem slow the first couple years, like any investment, but will gain momentum later on.

I think you are on the right track growing slowly. You will learn more and should have the opportunity to buy better quality animals 2, 3, 5 at a time.
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Re: Loan or grow?

Postby Stocker Steve » Sun Feb 04, 2018 9:34 am

Brute 23 wrote:I enjoy cattle but the money is not good enough to be stressing over paying a loan back.
I would take out a loan and invest it in the stock market before cattle. It has the same risk and WAY more reward.


The bank will finance you because you cash flow. Often in production ag this means a big down payment, or outside income, or both. But cash flowing does not mean you are profitable. Profitability is your problem, not the banks. :(

The good news is that there is a very very wide variation of profitability in cow/calf operations. So you need to find some profitable examples, and then copy them, if the risks and rewards are acceptable to you. :cowboy:
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Stocker Steve

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Re: Loan or grow?

Postby Stocker Steve » Sun Feb 04, 2018 9:58 am

RanchMan90 wrote:Keep in mind that 90% of guys here are retired or have a job (myself included), won't have to borrow it all. Those that ranch for a living are either highly leveraged or inherited :2cents:


Does the Gordon Hazzard model still work today?
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Re: Loan or grow?

Postby RanchMan90 » Sun Feb 04, 2018 10:31 am

https://youtu.be/F6pgsttuTBA Maybe this will help clear things up. I highly recommend Gordon's book also.
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Brute 23
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Re: Loan or grow?

Postby Brute 23 » Sun Feb 04, 2018 11:08 am

I just watched some of his videos and he makes good points and I admire him for getting people to think about calculating profit but his "all or none allocation cost is bs".
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Brute 23
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Re: Loan or grow?

Postby Brute 23 » Sun Feb 04, 2018 11:11 am

Stocker Steve wrote:
Brute 23 wrote:I enjoy cattle but the money is not good enough to be stressing over paying a loan back.
I would take out a loan and invest it in the stock market before cattle. It has the same risk and WAY more reward.


The bank will finance you because you cash flow. Often in production ag this means a big down payment, or outside income, or both. But cash flowing does not mean you are profitable. Profitability is your problem, not the banks. :(

The good news is that there is a very very wide variation of profitability in cow/calf operations. So you need to find some profitable examples, and then copy them, if the risks and rewards are acceptable to you. :cowboy:


Ya... those that factor in their labor costs and those that don't. :lol:
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