New enterprise

trg

Folks,

I will have land for approx 25-30 cattle next year. The land is an open hilly region with a river flowing through it.

I work full time but I would like to use the land for farming purposes as much as possible, that said I would not be able to devote much time daily to the land.

I am thinking of investing in a stocking loan next April and purchasing yearling heifers with a view selling in October/November of the same year.

In terms of cost I can identify meal (approx a month before selling), testing, fertiliser, loan interest and fencing as definite costs. I have use of a tractor/fert. spreader/transport box. Vets bills would be a varaible that should be considered too.

I dont really want them hanging around over winter as I wouldnt have the time and cashflow will be tightening up as there will be no income until sale.

Basically wondering what do people think? is the potential for profit there? I understand it would be pretty small if at all.
Are there big costs I am missing?
Any other ideas for the type of set up I describe? Tillage/Dairy are non-starters!

Look forward to your thoughts!

T

reilig

I don't know if there is a whole lot of money to be made when you have to buy in stock, but it will help you to keep money together.

Buying in heifers wouldn't be my thing. (But others may favour it).
You risk buying a heifer that is bulled and all the hassle that comes with returning the heifer to the original owner or birthing the calf on your own farm. Also, i hate the idea of a load of heifers together. If you buy 25 to 30, chances are that there will be one of them in heat nearly every day of the week. With this you risk your heifers breaking out to a neighbouring bull or a neighbour's cattle breaking into yours. Hassle all the way.

A big cost that you might be missing is fencing if you don't already have really good stock proof fences.

To be honest, when you buy in 25 heifers in april, dose them, feed them,give them meal, buy fertilizer, test and vet treat them, etc etc. etc. and then sell them after 7 months, you don't stand to make a lot of money. An on farm death from red water or the likes could wipe out your profit and see you in the loss making category. You also have to be weary of cattle prices - currently high, but you know what they say "what goes up must come down".

Sorry for being negative. But its important that you consider all angles before you take out a loan to buy stock!!

towzer2010

Totally agree with reilig on this. Prices are quite high at the moment so any downward pressure next year could quickly see you in loss making territory.

If you lose one or if you get a disease outbreak it could be a costly exercise.

Cost wise I sold some average yearling heifers for an around €850 each so assuming you can get a bank loan you would be looking for €20,000 or up.

If you do go down that route good luck but after my past experience with the late celtic tiger I'd be unwilling to put that much on the line.

Could you buy 10 - 15 and rent the rest of the land until you see how you get on the first year?

Muckit

Again, I would agree with the above posters.

Is this merely an idea swirling around in your head at the moment, or have you seen if you can actually get the money? It might be for the best if you were refused (sorry for being so negative aswell).

Buying cattle and selling them on after a few months.... how do you expect their value to go up? Even without factoring in the worse case scenarios and all remain healthy and thrive, you'd want to be well on top of your game to turn a few pound on borrowed money. If you bought them €50 too dear and sold them €50 too cheap... see what I'm saying. You are the one that's still left with paying back interest on a loan that has returned you nothing but hardship and stress after already working your weeks work off farm:rolleyes:

I wouldn't advise anyone to buy stock with money they don't have. Your potential problems would be exacerbated this year also with the way the cattle market has gone. Like the celtic tiger, it can't last.

If you are not in it for the money, keep the numbers low and build them up year on year with money that has been made from the previous batch.

I wish you the very best of luck with whatever you decide.

trg

Well,

Twas an idea that was floating around in my head alright.

I had thought of the fencing costs, fencing is ok in fairness. Also thought of reducing numbers, buying older ones and putting a bull with them and sell them incalf. But the potential for cost there put me off as the bull could be poor and the heifers might not go in calf + all the other ideas you mention above.

Basically I dont want it to go to waste. I was thinking heifers due to the fact that you would get more quantity for the investment and the acreage would be utilised. The amount to borrow would be restricted by me but the bank will restrict it anyway no doubt! But i take on board the housekeeping issues 30 bulling heifers bring!

Thanks folks

Pharaoh1

OP
I've posted here before that I have run the exact system that you are thinking about for the last six years except I buy bullocks not heifers.
I chose not to go for heifers for the reasons mentioned although the downside to bullocks is that it is very hard to buy bullocks as nearly all weanlings are now bulls.
Can you make profit doing it? Tricky question.
I invested heavily in a fairly run down 25 acres reseeding the whole lot, paddock electric fencing, soil testing and fertilising, water infrastructure, good pen, refurbishing machinery etc... in that time so I didn't expect to make a profit.
But I had SFP/REPS/DAS during that time.
I started with nothing in terms of cash but I'm now in a situation that all the above was paid for as I went along and I have nearly enough cash that I only borrow maybe 25% of the stocking cost.
I expect to be able to make a modest profit from now on but the key is performance.
If you buy cattle and sell them after 200 - 230 days with a weight gain of say 140kg you are really wasting your time.
I am now at a stage where I would achieve 200 to 240kg weight gain on average. Bringing a 300kg weanling to a 500-530kg store.

But it takes a lot of work - buying the right type of cattle insofar as you can, 20 cattle at grass by early to mid-March, Paddock grazing, topping, dosing etc..
I sold for avg 280 euro margin (mart selling price - buying price) last year and I also sold 100 silage bales of excess grass.
I'll probably do a bit better this year given the strong prices but I would be concerned about high prices next spring falling away as the year goes on.
Finally there are always costs that will arise that you havent thought about.
For example the trading of cattle is one of my biggest costs. I get an agent to buy cattle for me and he charges 25 euro add say 9 euro buying commission, 9 euro selling commission and I pay 10 euro transport to the selling mart. 53 euro for 30 cattle adds up to nearly 1600 euro.
But I don't really have an alternative as I don't have time to be going around marts trying to buy cattle, nor do I have a jeep or trailer and in any case early turnout is important for me so I need the quantity of cattle out early and the agent is buying hundreds every week.

Best of luck with whatever you decide.

Highland

Hard to make money buying and selling in the same year - cattle prices usually high in spring and low in autumn. If you can winter a few you would be better to buy a small no. and let them grow into money. Excess grass is most profitable if sold as hay.

I usually buy weanling heifers in autumn and sell the following year did very well this year as prices were not crazy last autumn but now haven't the stomach to buy at current prices - a year is a long time in farming

Good loser

trg How many acres are available? Is the land dry and/or sheltered?

Tipp Man

Highland wrote: »

Hard to make money buying and selling in the same year - cattle prices usually high in spring and low in autumn. If you can winter a few you would be better to buy a small no. and let them grow into money. Excess grass is most profitable if sold as hay.

I usually buy weanling heifers in autumn and sell the following year did very well this year as prices were not crazy last autumn but now haven't the stomach to buy at current prices - a year is a long time in farming

Your profit is between what you sell the animal for and what you pay to replace the animal

It is not between what you buy and sell the same animal for

Muckit

Tipp Man wrote: »

Your profit is between what you sell the animal for and what you pay to replace the animal

It is not between what you buy and sell the same animal for

An interesting take on things. Good to look at things from another angle

Highland

Tipp Man wrote: »

Your profit is between what you sell the animal for and what you pay to replace the animal

It is not between what you buy and sell the same animal for

Your profit is the difference between buying and selling the same animal minus your costs. Thinking that you have to do the same thing ever year by replacing cattle when you haven't a hope of making a margin is just simply mad. Your land can be used for lots of things - trading cattle systems are flexible not like suckler or dairy herds, this flexibility should be used.

Tipp Man

Highland wrote: »

Tipp Man wrote: »

Your profit is between what you sell the animal for and what you pay to replace the animal

It is not between what you buy and sell the same animal for

Your profit is the difference between buying and selling the same animal minus your costs. Thinking that you have to do the same thing ever year by replacing cattle when you haven't a hope of making a margin is just simply mad. Your land can be used for lots of things - trading cattle systems are flexible not like suckler or dairy herds, this flexibility should be used.

You'll never make money if you look at it like that, think about it. I buy bullock 1 for 500 and sell him for 700. You replace him with bullock 2 who cost 600 due to rise in price. Ignoring costs my profit is 100 and not 200

And stick relief/tax reduces your flexibility quite a bit

agcons

Buying and selling in the one year leaves you open to the vagaries of the market, if it goes against you you can be wiped out. the old adage 'when you sell-buy back' is very true. I know it may not suit you in some ways to winter cattle but you need to give it serious consideration.

Longback

Tipp Man wrote: »

Highland wrote: »

Tipp Man wrote: »

Your profit is between what you sell the animal for and what you pay to replace the animal

It is not between what you buy and sell the same animal for

Your profit is the difference between buying and selling the same animal minus your costs. Thinking that you have to do the same thing ever year by replacing cattle when you haven't a hope of making a margin is just simply mad. Your land can be used for lots of things - trading cattle systems are flexible not like suckler or dairy herds, this flexibility should be used.

You'll never make money if you look at it like that, think about it. I buy bullock 1 for 500 and sell him for 700. You replace him with bullock 2 who cost 600 due to rise in price. Ignoring costs my profit is 100 and not 200

And stick relief/tax reduces your flexibility quite a bit

Not so sure I'd look at it like that. Profit is the return on an investment that you don't re-invest in the next enterprise,restocking for the next season is a new investment of funds either owned or borrowed. Bullock no1 cost 500 that's seed capital wherever you get it from and you can re-invest the seed cap,enterprise after enterprise but the profit is what you take out on completion of each cycle and stick in the back pocket however small it is.

redzerologhlen

Longback wrote: »

Not so sure I'd look at it like that. Profit is the return on an investment that you don't re-invest in the next enterprise,restocking for the next season is a new investment of funds either owned or borrowed. Bullock no1 cost 500 that's seed capital wherever you get it from and you can re-invest the seed cap,enterprise after enterprise but the profit is what you take out on completion of each cycle and stick in the back pocket however small it is.

Cattle are a commodity and like stocks and shares there value goes up and down often quite erraticlly over a short period of time. A farmer needs to have stock every year to have the potential to make a profit. If you bought a 300kg charlaois heifer last october for 550 yoyos and sold her this week for 1000 your profit is not 450 because it would cost you 700 to buy the same heifer at the moment so your margin is 300. If you were to keep all the profit as you say you wouldnt be able to half stock your farm so dont be silly. If you dont look at it this way then your in the wrong business. The price of cattle is outside the farmers control. Its in the hands of the processers and the global markets.

Tipp Man

redzerologhlen wrote: »

A farmer needs to have stock every year to have the potential to make a profit. If you bought a 300kg charlaois heifer last october for 550 yoyos and sold her this week for 1000 your profit is not 450 because it would cost you 700 to buy the same heifer at the moment so your margin is 300.

This is it in a nutshell

Highland

redzerologhlen wrote: »

Cattle are a commodity and like stocks and shares there value goes up and down often quite erraticlly over a short period of time. A farmer needs to have stock every year to have the potential to make a profit. If you bought a 300kg charlaois heifer last october for 550 yoyos and sold her this week for 1000 your profit is not 450 because it would cost you 700 to buy the same heifer at the moment so your margin is 300. If you were to keep all the profit as you say you wouldnt be able to half stock your farm so dont be silly. If you dont look at it this way then your in the wrong business. The price of cattle is outside the farmers control. Its in the hands of the processers and the global markets.

Ye are missing the point. If I buy a car for 2grand and sell it for 3 grand the profit is 1 grand. now if i turn around and buy a second car for 3 grand i still have made 1 grand on the first car not zero - you are right that cattle are commodities just like shares etc. same holds true - buy BOI shares at 7 cent selll at 9 cent - profit is 2 cent - if i turn around and subsequently buy AIB shares and they fold and i loose my investment i will still have made 2 cent on BOI, but subsequently lost my shorts on AIB.

There are lots of options for cattle farmers - you do not have to go out and buy cattle when the probability of making anything on them is low. Contract heifer rearing, sheep, Conacre, Sell hay, B&B .......

Just cos you do the same thing year in year out does not mean it is the right thing to do! As for tax/stock relief - in my experience this is not a major issue for drystock famers, unless scale is very big. For a start up enterprise it wont be an issue at all.

agriking101

redzerologhlen wrote: »

Cattle are a commodity and like stocks and shares there value goes up and down often quite erraticlly over a short period of time. A farmer needs to have stock every year to have the potential to make a profit. If you bought a 300kg charlaois heifer last october for 550 yoyos and sold her this week for 1000 your profit is not 450 because it would cost you 700 to buy the same heifer at the moment so your margin is 300. If you were to keep all the profit as you say you wouldnt be able to half stock your farm so dont be silly. If you dont look at it this way then your in the wrong business. The price of cattle is outside the farmers control. Its in the hands of the processers and the global markets.

If you buy for 550 and sell for 1000, you have 450 profit over the grazing period. If you choose to turn around and buy for 700, you have a cash flow on that day of €300. Thus you might have a good profit but a lousy cash flow.

redzerologhlen

Highland wrote: »

Ye are missing the point. If I buy a car for 2grand and sell it for 3 grand the profit is 1 grand. now if i turn around and buy a second car for 3 grand i still have made 1 grand on the first car not zero - you are right that cattle are commodities just like shares etc. same holds true - buy BOI shares at 7 cent selll at 9 cent - profit is 2 cent - if i turn around and subsequently buy AIB shares and they fold and i loose my investment i will still have made 2 cent on BOI, but subsequently lost my shorts on AIB.

There are lots of options for cattle farmers - you do not have to go out and buy cattle when the probability of making anything on them is low. Contract heifer rearing, sheep, Conacre, Sell hay, B&B .......

Just cos you do the same thing year in year out does not mean it is the right thing to do! As for tax/stock relief - in my experience this is not a major issue for drystock famers, unless scale is very big. For a start up enterprise it wont be an issue at all.

Thats all ok in theory and I do understand what your saying but you cant farm if you dont have any livestock be it sheep, cattle, even donkeys or whatever your into. To be honest if your anyway sharp buying and selling cattle and you know how to farm your bit of ground properly theres more to be made out cattle then any of those options. Theres no trade for hay or silage this year because the country is flooded with it. In my opinion profit is not whats on paper, Its whats in your pocket.

redzerologhlen

agriking101 wrote: »

If you buy for 550 and sell for 1000, you have 450 profit over the grazing period. If you choose to turn around and buy for 700, you have a cash flow on that day of €300. Thus you might have a good profit but a lousy cash flow.

Im no genius by any means so maybe my terminology is wrong more so then what I am trying to say IYKWIM. I think you understand anyway.

Joe the Plumber

trg wrote: »

Folks,

I will have land for approx 25-30 cattle next year. The land is an open hilly region with a river flowing through it.

I work full time but I would like to use the land for farming purposes as much as possible, that said I would not be able to devote much time daily to the land.

I am thinking of investing in a stocking loan next April and purchasing yearling heifers with a view selling in October/November of the same year.

In terms of cost I can identify meal (approx a month before selling), testing, fertiliser, loan interest and fencing as definite costs. I have use of a tractor/fert. spreader/transport box. Vets bills would be a varaible that should be considered too.

I dont really want them hanging around over winter as I wouldnt have the time and cashflow will be tightening up as there will be no income until sale.

Basically wondering what do people think? is the potential for profit there? I understand it would be pretty small if at all.
Are there big costs I am missing?
Any other ideas for the type of set up I describe? Tillage/Dairy are non-starters!

Look forward to your thoughts!

T

A lot of good advice for you above trg, but in the end of the day the only way you will know is to try it for yourself and learn. The worst thing is might lose a few bob or maybe break even.

Keep the investment small, buy handy cheap cattle they can only improve, Try to buy in feb before the rush for the spring grass which always pushes the price up.

To be honest and anyone on this forum will agree, its the SFP, DAS, and REPS or AEOS that represents most part time farmers profit.

Can you avail of any of these?

Cause its really a non profit hobby otherwise.

Tipp Man

Highland wrote: »

Ye are missing the point. If I buy a car for 2grand and sell it for 3 grand the profit is 1 grand. now if i turn around and buy a second car for 3 grand i still have made 1 grand on the first car not zero - you are right that cattle are commodities just like shares etc. same holds true - buy BOI shares at 7 cent selll at 9 cent - profit is 2 cent - if i turn around and subsequently buy AIB shares and they fold and i loose my investment i will still have made 2 cent on BOI, but subsequently lost my shorts on AIB.

There are lots of options for cattle farmers - you do not have to go out and buy cattle when the probability of making anything on them is low. Contract heifer rearing, sheep, Conacre, Sell hay, B&B .......

Just cos you do the same thing year in year out does not mean it is the right thing to do! As for tax/stock relief - in my experience this is not a major issue for drystock famers, unless scale is very big. For a start up enterprise it wont be an issue at all.

Well lets look at your car analogy then

In year 2 your P&L looks like this:
Sales 3,000
Purchases 3,000
Profit

Tipp Man

Well lets look at your car analogy then

In year 2 your P&L looks like this:
Sales 3,000
Purchases 3,000
Profit 0
So at the end of year 2 the 1,000 profit from the 1st car isn't actually there, and it isn't in your cashflow either as you have 0 in the bank
Also you can't just ignore tax. The reason we are in business is to make profit and taxes must be paid on profits. So they have an effect on your business, and depending on scale can have a large effect.
If you sell 3,000 worth of cattle and don't buy back cattle then you will pay tax on the full sales price of 3,000 as you have no purchases to offset against it. It's all well and good saying be flexible but unfortunately the harsh reality is that the tax system severaly hampers this flexability - certainly once any scale is involved

Highland

I think we may be going away from the thread a bit here - but just a final point -

You do not pay tax on whats in you bank account - if you buy cattle for 3000 and subsequently sell them for 3,000 your profit and tax bills are both zero - you do not have to replace them! If you buy cattle for 10 years running and then get out of cattle you will have to pay tax on the difference in the book value of you cattle in you accounts (plus production costs) and what you sell them for - you do not have to pay tax on the factory/mart cheque for the cattle. Therefore if you value your cattle in your accounts at 60% of market value you will end up with a big tax bill if you disperse, but if you value them at market value on an ongoing basis you will pay higher tax annually but will not take a big hit when dispersing - bottom line is you have to pay the tax at some stage.

The car story
By car for 2,000
sell car for 3,000
Pofit 1,000
new car purchased 3,000 is shown as a purchase but is then again deducted in your closing stock - provided it is valued the same as a purchase and in closing stock it is not offset against you profit.

Now if you can get revenue to agree that by buying the second car for 3,000 you have no tax liability you can do my accounts for me!

trg

Well Folks,

I am more qualified to discuss the profit on sale of animals topic that the thread has diversed into. Profit is Sales less opening stock less purchases + closing stock. Your assets are the closing stock and the residual profit left after purchasing the stock. Clearly this will be a liability if I have borrowed.

Regaring all the posts thanks very much for the feedback, due to work commitments for the day job I would not wish to winter the animals for too long, the land is high and not sheltered at all. Growth would not be very strong but has always been sufficent for the numbers I mentioned. I would like to consider buying early in the year but in reality it will be late March/early April before they could go to this land.

I may take a longer term view as many of you suggest but with much lower borrowing, I'll think of something when it comes to wintering them!

Thanks all

edanto

Would it be worth renting the land to someone else a year at a time?

At least that way you don't have to borrow and the land is doing something for you.