Cattle Profits (or at least our model)
Start up cost was $1200 per bred heifer and we purchased 3
First year feed costs were about $400
Lost rent per month $210
Semen (30 Units) $300
English: Murray Grey cows and calves, Walcha, NSW (Photo credit: Wikipedia)
So our net cost at one year is $6820
Our costs at the two year point are $9340
At the two year point, we expect to receive approximately $2400 in revenue (two bull calves at $1 per pound and 1200 pound finishing weight). We also will have a fourth heifer to breed at that point and hopefully 3 more calves on the ground. If we reverse this year and have two heifers and one bull calve next year, we will have one more to sell at the three year point and 4 calves on the ground. We will also have another $1200 in revenue at that point (which is actually a net loss for that year). At this point we are continuing to build the breeding herd, so these loses are actually captured in the value of the cows themselves. Perhaps I will get this into some sort of graph form, as I should organize this better.
Year one Costs (Rounded) $7000
Year one assets: 3 calves on the ground and three cows bred back.
Year One revenue : $0
Year two total costs $9500 (rounded)
Year two assets: Three brood cows (bred back) One heifer calve (bred) and three more calves on the ground
Year two profits (sell two finished bull calves at 1200 pounds for $1 per pound) $2400 ($3600) (beef price is $1.30 per pound and possibly headed higher) We also sold $1500 worth of hay in the Spring due to our low stocking density.
So year two net loss in cash is $5600 ($4400) (but we have assets of approximately $6600): Four bred cows at $1200 each, plus the 3 additional calves on the ground.
Year three costs add $2520 (lost rent) to get to roughly $8200
Year three assets four cows (bred back) two heifers bred and four calves.
Year three profit $1200 ($1800) (I assumed two heifers and one bull in the second calf crop since the first calf crop was 2 bulls and one heifer).
So our net loses are now at $7000 ($5200) in hard cash. But our assets are improving at $7200 in bred cattle and the four calves on the ground of about $2400. This makes our total assets above our loses at this point. Also keep in mind that I am figuring in no feed costs since we grass feed and do our hay on the half. I am also not figuring in any loses.
Year four is where I truly think we are getting ahead, but it may be year five.
Year four costs add another $2520 in lost farm rent that takes us close to $9500 ($7700) in costs or losses.
Year four we sell two bull calves and keep two heifers so profit is once again $2400. ($3600)
This makes our losses, which are perceived losses, around $7100 ($3500)
Assets would include 6 broodcows, two more bred heifers, two more bull calves to finish and 6 calves. Our assets will be more than losses at this point. If needed, we can start to sell cows to capture back some of our losses. Assets total about $9800 in bred animals and perhaps $2400 in the calves.
So at the end of year four, we are -$7100……..hmm this seems hard to swallow. I guess the encouraging thing here is that we are only calculating the price per pound of beef to be $1.00. I believe that current market price is actually $1.30/ lb. If we can get the value to $1.50 per pound due to the grassfed aspect, we can recapture more of this loss at a faster rate. I am going to edit above by putting the $1.50 per pound figure alongside the $1.00/lb figures to emphasize this point. Looking inside the parenthesis above, increasing the value of beef from $1.00/lb to $1.50/lb cuts our loses in half at year four.
Year 5: Another $2520 in lost rent. Selling 2 more calves for beef nets $2400 ($3600). So our overall loses are now either $7200 or ($2400). Assets: 8 broodcows, 3 bred heifers, 8 calves and 3 yearling calves to finish. This totals around $18,000 in assets.
Year 6: Another $2520 in lost rent. Able to sell 3 calves at $3600 ($5400). Loses overall are now $6100 or $600. Assets are increasing rapidly now. These include 11 bred cows, 4 bred heifers, 4 yearling steers to sell and 11 calves.
Year 7: Another $2520 in lost rent. Selling 4 calves this year at $4800 ($7200). Overall losses are coming down quickly now at $4800 (gains of $6600). Assests are 15 brood cows, 5 bred heifers, 6 yearling steers to market and 15 calves.
I would keep up the illustration, but it is likely boring at this point.
I will do another post looking at the value to be added to this be purchasing an additional cow to produce calves quicker.
I also noted that I have failed to include the cost of purchasing additional semen. I purposely did not figure other costs simply to keep it simple.
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