to farm or not to farm?

[johnson]

i pose a question to those with wisdom and experience. if you had a mortgage of say $1600 a month on 160 acres, could one profit enough in cattle to pay the mortgage. i realize there are many different ways to profit in raising cattle, so those answers or comments would be appreciated. or if it is insane to consider such a venture feel free to speak your mind. thanks in advance. i enjoy and have learned much from those here. p.s. i'm a follower of agman and am a believer in MiG.

[springvalley]

I would strongly urge you to keep your day job for awhile and get your debt down more. I don`t know how old you are, maybe it doesn`t matter, but you sure can get more done when your younger than when you get older. Good luck to you and maybe I`ll chime in later. > Thanks Marc

[Tom in TN]

Johnson,

You would be well served to develop a business plan for your farm before making any commitments. You should determine what you hope to market and how you are going to market it. Then forecast expenses that you will incur to produce and market your product.

For example, I have a small cow/calf operation in Middle Tennessee. There are no packing plants in the area, so the commodity market is for calves that are 6 to 8 months old. I raise black Angus calves and I receive around $450.00 to $500.00 per calf. I have 30 momma cows so I only gross around $14,000.00 to $15,000 per year.

There are many other ways to make money on a farm, so if you would need to gross more than that, you'd want to look into diversification of your operation.

I raise my own hay for winter feeding, but I feed some 12% cattle feed every day of the year. I have maintenance and operation costs for my equipment and facilities. I have no mortgage and I don't depreciate anything. My profit each year is in the $1,000 to $2,000 range.

Why do I do this? Because I want to. I also work a part-time job in the evenings to support my bad habit of farming.

You either have to be very diversified or very big to make it farming.

Good luck,

Tom in TN

[johnson]

thanks for the comments, i guess what my question is, is if u were able and wanted to expand would you buy? could the land sustain its own mortgage?

[agmantoo]

johnson

I do not know what growing zone you are in and that would help. If you live in zone 7 or south of that in an area that typically gets more than 34 inches of rain per year I would say that in 3 years the cattle operation on 160 acres could service the $1600/month mortgage twice over provided the market remains stable.

[Gabriel]

Originally Posted by johnson

thanks for the comments, i guess what my question is, is if u were able and wanted to expand would you buy? could the land sustain its own mortgage?

Do you already have the cattle? As Agmantoo alluded, it typically takes 3 years to see a return on cattle. How much capital do you have to start? Can you live on savings/other income while the herd is building? What's your commitment level, are you willing to live like a pauper for a while? What's your experience level, how long have you been raising cattle and employing the MIG program? Who will you market to? If it's direct to consumer, do you already have a customer base?

[AverageJo]

You really don't give enough information to help you out much. Is the 100 acres all timber? Is it all pasture? Combination? Will you need to grow corn on it as well as hay? Can they graze all year or will they be dry lotted during winter? Etc.

What you need to do is a business plan to make your determination. Your mortgage is $1600 a month, so how many calves would you have to raise to make this amount? Remember that this is your net, not your gross (what you get for the sale of the animal). You have to subtract the expenses involved, such as grain, hay, fuel, fencing, feed, etc. Once you figure out how many calves you would need to raise, you need to determine how many acres you would need to support the cows and calves, and then add more as you will have lean years where you don't have the rain for the pastures to grow.

You've gotten some great advice from others, too. Think it through, put it on paper, and then buffer it a bit. Lower the income and raise the expenses and determine if it's still feasable.

Good luck.

[oregon woodsmok]

My cattle usually made enough to pay the property taxes, but not the irrigation water bill.

Make a $1600 a month payment? Not any cattle I ever owned. Maybe a dairy or top of the line show cattle. Maybe.

There are going to be a lot of other expenses for the cattle besides the mortgage payment.

[trbizwiz]

The big problem/risk is you will likely be buying breeding stock at the top of the market, assuming you are breeding and raising feeders. If you are buying feeders to sell you are definitely buying at the top of the market. With high grain, and the economy slowing a bit this spring prices will likely decline this fall. The hike seems artificial right now. I am curious where the demand is coming from to cause beef to be so high right now. I am glad it's high, and I hope it stays that way. But those arent good philosophies for a business plan.
That being said, if you can independantly afford the debt service, and love farming, I say go for it. I have a few acres, adn if I did not have a hudge mortgage (bad past descisions) I would be buying land right now. Unlike beef land is more affordable than it has been in the past. Just like beef, I assume land prices will soon change.
My wife and I are Dave Ramsey'ing it. SO we are on the debt free plan. BUying land doesnt figure in to that. I have been negotiating with some outside the box thinking on leasing land that is currently and for the last 5 years unused. IF that works out well, I'll increase breeding stock. Hopefully by the time I am debt free, my herd will be built, adn I can buy land and grow that way.
To each their own. But I will second the mention above about multiple revenue streams to hedge price fluctuation and double the productivity of dollars spent on improvements equipment and maintenence.