Friday, March 22, 2013

The 2013 plan: Change the beef herd

Here's what I said in July of 2012

"I'm buying cattle right now. I've got land to graze, and I'm putting cows on it. I'm betting that between the drought and herd reduction there will be a good return on beef, and since it takes a year for the market to come up with another cow. I expect beef prices to get lower in the near term (2-6 months) as the US herd is further reduced due to high feed prices, and then I'm expecting the prices to rise in 2013. I'm buying now so that I can sell into those higher prices I'm expecting in 12-18 months."

I did buy a bunch of cattle, and I did put them out on pasture; as with the little dairy cow (she weighs 1,000+lbs now - not so little!), they've been steadily gaining weight, and the prices for finished beef continue to rise.   So I'll be selling the steers I've been feeding this year, and replacing them with calves that I can feed out to sell next year.   

I've had the best luck with 400-600lb steers, either beef or beef-dairy crosses.  They're big enough that they can fend for themselves on pasture, and with a good fence I can turn them out and then check on them every few days to make sure that they're all ok.  Pretty painless livestock.  A good fence is worth building. 

   I'm stocking my land at 1.5 units/acre -- or 1500lbs of cows per acre of graze.  That seems to be a good level that keeps the cows well fed and keeps the grass from going to seed.   I'll be selling 15 steers and buying 20 calves this year.

Why am I increasing cows and decreasing sheep?   There's a ready market for beef, wholesale or retail, and when I sell a cow I clear $500 profit per cow.  The labor is much smaller with cows -- I can turn them out on pastures and don't really have to worry about them being eaten by coyotes.    They are much less labor intensive than alternative crops are

I'll watch prices; if the drought in the midwest continues, it may make sense to drive back there with a big trailer and buy a trailerload of calves there at drought prices; auction prices for calves are down in the center of the country -- down enough that I may be able to buy them there, sell half of them back here, and have my cow herd paid for with the difference.   Cow arbitrage!

The only way feeding steers makes sense is to have good pasture and relatively cheap hay;  I own the acreage outright, having purchased it at a series of tax foreclosure auctions for cash, at an average cost of $2700 an acre.  Most of the land that I purchased is river-bottom land, flood plain land, which is fertile and rock-free and does not need to be irrigated.  With a good fence it's pretty much trouble-free grazing land, and the taxes on it are only about $10/acre/year.  I've also been able to lease land in return for beef; a half-steer for grazing a 20 acre parcel, for instance.  The steer costs me $300 at the auction, the feed is free, and so the effective rent for that land is about $10/acre/year -- cheap. 

Part of the reason that this land goes for so little is that the Department of Ecology has consistently held that land that is not worked for 5 or more years is "abandoned" and will revert to wetland.  The service that my cows are providing for the property owner is to keep the land out of wetland status, and they get some free beef in addition.    Look, if you can't beat the green mafia, you might as well join then.  "Hey, you got some nice grazing land there... shame if some regulatory agency decided it was a wetland..."

I'm kidding.  Sort of. 

No I'm not.

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