What you need to know about costs, loans & making money

In 2000, a group of “ranchers” herding 10,000 cats was the class of that year’s Super Bowl ads.

“Anybody can herd cattle…” they said. “Holding together 10,000 half-wild short-hairs? That’s another thing altogether.”

Of course, no one actually herds 10,000 cats. And not just anyone can herd cattle. But if you’re prepared with these bullet-proof tips about how to start a cattle ranch, we’d bet you could successfully herd cattle and 10,000 cats better than anyone. 

Here’s what you need to know to start a cattle ranch – specifically, what you need to know about costs, loans and making money.

Costs

The costs associated with Cattle Ranching are not only different from regular urban real estate investments, they also differ from other types of farm and ranch investments. 

Consider this breakdown of what an example Farm/Ranch Balance Sheet looks like:

The upkeep of a Cattle Ranch should be handled like a business, with a balance sheet, profit and loss statement, and other relevant financial data. Most notable on your list of expenses is the costs for livestock itself, feed you will grow on your own and feed you will purchase externally. The latter is an expense that ranchers in heavy snow areas in particular pay for when they don’t have sufficient feed growing on their own land. 

Loans

Getting your land loan from someone who specializes in Agricultural loans is recommended. In some US states, you may be able to qualify for a U.S. Department of Agriculture Loan which gives you lower interest rates.

What’s very important to consider here is that you may need additional financing for on-farm equipment later on. So go with a lender who can give you the financing you need for all your operations – from land purchase to equipment management. Programs like American AgCredit provide great resources for exploring those financing options.

Making Money

Here’s the big question:

Once you’ve got a ranch, how do you make money on it?

The answer is you execute well on the big three profit drivers of ranching: Production, Margins & Marketing.

Production: 

Production standards may vary for your area, but there are a few key rules to follow regardless of where you are:

  1. Reduce overhead as much as possible. Don’t be shy about purchasing used equipment. After all, as soon as you buy something new, the value drops.
  2. Increase your cow to person ratio. This means redirecting manpower to non-cattle activities where possible. Things like managing equipment, taking care of finances, or marketing.
  3. Decrease your acre to cow ratio. BeefMagazine.com shares this: “When a larger number of cows are run on the same acres, there is usually no need for additional manpower. You are going to wean more pounds per acre with a greater number of smaller cows giving less milk and with the calves being slightly smaller.”

Margins:

Pricing your cattle in a way that is attractive to customers and profitable for you is a challenge. The first step in succeeding here is to do your homework. Explore the market. What prices do other ranchers sell for? Are they auctioning their cows? For how much? What’s the price per pound of their cattle? 

Price competitively but also strategically for what will sustain you.

Marketing:

There are four questions you need to answer to pull off great revenue-boosting marketing:

  1. What do we sell? Calves? Yearlings? Bred Heifers? Bred Cows?
  2. Who’s it for? Are you selling to consumers? Businesses? Or perhaps you’re looking for an exclusive contract? There are some ranchers who sign exclusive deals with bigger dairy and meat packing plants; those dairies and plants have sole rights to all of the production from those ranches.
  3. Where are they? Where are your customers? This determines how you go to market. If they are consumers, you might be successful using video online (something that’s a growing option in the wake of COVID-19) or doing an auction. If it’s businesses, you might commission salespeople to go into those businesses personally and generate interest.
  4. How can we be unique? Look at what everyone around you is doing to market their cattle products. How can you be different from them? It’s tempting to think of farming and ranching as commodities, but if you look at it from the right angle, every individual ranch has a compelling and unique story to tell.

Though abbreviated, this article should serve as a launching pad to your cattle ranching dreams. Take advantage of this knowledge and implement it. 

If you do, not only will you be a successful cattle rancher… you might even make a great cat herder.

Be sure to see our listings of available ranches at https://farmandranch.com/

F&R Partners