One way to improve a farmer’s chances of remaining in the business includes diversifying the operation with livestock.
In 2020, due to financial stresses grain farmers are feeling from continued low market prices, adding livestock could help.
Recently, I was asked how much it would cost to become a full-time independent rancher – someone who makes a living solely raising beef cattle. I’m always up for a challenge, but this was a tough one.
The first problem to solve is determining what kind of cattle operation to run. There are at least four kinds: cow-calf, seed stock, backgrounding-stocker, and feedlot. I’m told by cattle experts that the stocker operation is the simplest, so I’ll assume a hypothetical stocker operation for the purpose of determining the cost to get started.
In this operation a rancher acquires newly weaned calves that weigh 500 to 550 lbs. Then they are set out to graze on grasses and possibly grain forages until they weigh 750 to 800 lbs. This normally takes six to seven months according to W. Travis Meteer (a cattle educator at the University of Illinois). At that point the cattle are sold to a feedlot for finishing, where the cows will put on several hundred more pounds before processing.
I’m going to assume that we’re trying to net $75,000 a year after expenses with this feeder operation. So, we can back into how many stockers we need to feed and sell each year. According to the experts I talked to, you’ll pay about $1.65 per pound for a feeder and eventually sell that cow for about $1.45 per pound to the feedlot. If you pay $866 for a 525-pound cow and then sell it for $1,124 at 775 pounds, you can net a little over $250 per animal. However, that’s before any expenses, which we’ll get into now.
We need land that grows grass – a bunch of it. Cattle are raised all over the U.S., including Hawaii, but the number you can feed per acre varies widely, depending on grass productivity and the size of the cattle. For this hypothetical situation, let’s assume we'll ranch in a fairly normal place, like Kansas, which has over 6.3 million cattle and ranks third behind Texas and Nebraska. In Kansas, a feeder calf will need about 3.3 acres of grass in a normal year.
We’ll need to sell at least 600 grass-fed cows per year in order to achieve a gross profit of $150,000. This means we need about 2,000 acres, either owned or rented. Decent acres of grassland in Kansas can run you $2,000+ per acre to buy or $20 per acre to lease. Paying rent of $20 an acre likely blows up our $75,000 net income goal, so I think owning is the way to get there. Fertilizer costs, power bills, real estate taxes, insurance, and part-time labor is going to burn up about half of the gross profit.
I found a nice 2,000-acre ranch for sale online with a house, barn, water wells, creeks, ponds, and perimeter fencing for only $3.8 million. So, there's the real estate portion.
Jacob Howdeshell, a livestock production specialist with Purina, educated me about the machinery and equipment one needs to operate a stocker operation. The components include temporary corrals – $15K, some feed troughs (in case the grass runs low) – $5K, a 10-ton feed storage bin – $5K, a utility tractor –$35K, a fertilizer spreader – $20K, a grain drill – $40K, a brush hog attachment – $5K, a side-by-side for people transportation – $10K, and a semi and trailer for cattle transportation – $80K. That adds up to $215,000.
Let’s not forget that we have to buy the feeder calves, as well. That’s 600 head at $866 per head, $519,600 – no small number. So, if you add it all up, between land, buildings, equipment, and stocker cattle, we’re at $4,534,600 to get a cattle operation started that is large enough to support a family.