i 82 May I 95 7 Q‘ ' inancing a Beef Cattle Enterprise on Blac/eland Farm: I TEXAS AGRICULTURAL EXPERIMENT STATION " R. D. LEWIS, DIRECTOR, COLLEGE STATION, TEXAS I IN COOPERATION WITH THE U. S. DEPARTMENT OF AGRICULTURE SUMMARY Results of a study conducted cooperatively by the Texas Agricultural Experiment Station and -‘ Department of Agriculture indicate that. at 1956 costs and market prices. a well-managed beef prospects of being a good investment on Blackland farms. With 1953 prices. lZ beef cows on typical Blackland farms would pay for themselves in 4 to 71/2 At 1956 prices. 4 to 9 years wo-uld be necessary. the variation in time required depending on the me feeding calves. " On farms where calves were sold without grain feeding, beef earnings at 1953 prices for 71/2 years be required to pay the cost of the breeding herd. With 1956 prices, 9 years would be required. 1' When calves are creep-fed. 1953 prices would return the breeding herd investment in 4 years drylot feeding in 41/2 years. With 1956 prices. 4 and 5 years. respectively. would be required. 1 Beef earnings for an additional 2 to 31/2 years would be needed at 1953 prices to pay back the investment cost for extra fencing. shelter. feed storage and water supplies needed to keep cows- farms studied. With 1956 prices. 3 or 4 years. instead of 2 to 31/2 years. would be required for re of the extra improvements. Total investment repayment periods. therefore. under 1953 and 1956 price relationships respil would be: calves fed no grain. ll and l3 years.‘ calves creep-fed. 6 and 7 years; calves fed 61/2 and 8 years. » Some Blackland farmers prefer handling steers rather than cows because of the flexibility of -. enterprise. An increasing number of farmers in the area have found it profitable to buy a few steer in the fall to utilize grazing that otherwise would largely be wasted. Grazing of this kind includ fields after corn or grain sorghum harvest. oat fields during winter. and the fall. winter and spring i available from waterways and other small acreages of permanent grassland. - ‘ With this type of grazing program. earnings from 30 to 50 steer calves would make the en self-liquidating in 2 to 4 years at 1953 prices. depending on the grazing period. Feeders in drylot“ pay off in 4 years. including the investment cost for needed improvements for the enterprise. At 1956’ repayment time would be 2 to 6 years under a grazing program. and 8 years for drylot feeding. ' ACKNOWLEDGMENTS The authors acknowledge the assistance of H. O. Hill. superintendent of Substation No. 23. at MC and Richard M. Smith. superintendent of Substation No. 5 at Temple. who gave helpful suggestions “A the preparation of the manuscript. ‘A Appreciation also is expressed to Donald S. Moore of the Department of Agricultural Economi’ Sociology for help in arranging the data presented in the tables. l This study was made possible by the cooperation of the farmers who furnished basic info ’ here reported and analyzed. l l The cover picture is used through the courtesy of The Progressive farmer. THE COVER PICTURE AIt was profitable to creep-feed calves on Blackland farms during the time of the study rev this bulletin. The creep-feeder is on skids and can be moved easily to take full advantage of ‘the w types of grazing that may be available. " ~ SING NUMBER OF BLACKLAND FARMERS added beef cattle to their farming recent years to utilize grazing and hay to increase farm earnings. Cash crop particularly cotton, has been pre- in this area. However, adjustments of ‘gsystems to include more close-seeded l: mes and grasses; sodding of water- removal of low-yield cropland from have increased forage supplies. Mean- shift from horse to tractor power took important outlet for both hay and grain. ages have increased farmer interest in 5 0 bulletin reports the results of a study i determine the amount of capital “to finance various types of beef enter- ‘Blackland farms, the resulting increase expenses and the time needed for the ilGXlZTEI earnings to “pay out” the added t. Qiwere obtained for 23 farms in Bell and counties during 1952-54 (Figure 1). p e cooperating farmers obtained the rt of their farm income from cash crops. cattle enterprise was a relatively recent to the farm business. Cattle utilized from stalk fields and from small grain irwise would not have been used. Most fbor required for the cattle Was during season-in winter when unused labor was cattle enterprise consisted of a small brood cows on 15 of the farms studied. maining 8 farms, stocker and feeder cat- f used in a grazing program or were put in drylot. itting mother cows in with cash crop‘ 7n, calves were handled in different ways. tjlves were sold at weaning time, with or fcreep feeding. Other calves were weaned gin the feedlot for more weight and finish, priwintered as stockers and sold off pasture ing spring or early summer. T Central Texas farmers prefer steers han cows because of the flexibility of ,ely, professor, Department of Agricultural Eco- and Sociology, Texas Agricultural Experiment and agricultural‘ economist, Farm Economics P Division, Agricultural Rese-arch Service, U. S. of Agriculture. Financing a Beef Cattle Enterprise on Blackland Farms A. c. MAGEE and RALPH H. ROGERS* Figure 1. The heavy black lines show the approximate boundaries of the Blackland area of Texas. The shaded part shows the Blackland portions of Bell and McLennan counties in which the study was made. the steer enterprise. Feed supplies can determine the number of stockers purchased and, in case of drouth, the number kept can be adjusted readily with minimum danger of loss. Farmers whose main interest is in cash crops prefer to spend very little time with livestock CONTENTS Summary . . . . . . . . . . . . . . . . . .7 . . . . . . . . . . . . 2 Acknowledgments . . . . . . . . . . ' . . . . . . . . . . . . 2 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . .. 3 Added Investment for the Beef Enterprise . . . . . . . . . . . . . . . . . . . . . . . 4 Added Costs and Returns with Beet Cows . . . . . . . . . . . . . . . . . . . . . . 7 Added Costsand Returns with Steers . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Financing the Beef Enterprise . . . . . . . . . . .10 TABLE 1. ADDITIONAL INVESTMENT PER FARM RESULT- ING FROM ADDITION OF BEEF COWS TO THE FARMING SYSTEM Farms where calves were: Sold oft the cows Item Zed! i1: - ry o Fiéazzzzism ‘irzzsiz? <3 mm» — — — Number — — — Cows per farm p 12 ' 13 11 — — — Dollars — — — Investment in cattle and teed: Cattle 1.465 1.575 1.360 Average feed inventory 300 300 600 Total 1.765 1.875 1.960 » Investment in improvements: Barns. sheds. corrals 130 130 352 Water facilities 187 187 185 Fencing 195 195 165 Racks and troughs 15 81‘ 40 Subtotal 527 593 742 Seeding grassland’ 192 192 160 Total 7193 7853 902 Summary Investment in improvements 719 785 902 Investment in cattle 1.465 1.575 1.360 Total cash investment 2.184 2.360 2.262 Feed inventory 300 300 600 Total investment 2.484 2.660 2.862 ‘Includes $66 for a creep feeder. zAverage cost. $16 per acre. “Averages used for all 12 farms. except when crop work is not urgent. For this Mreason, such farmers prefer to handle stocker cattle which can be kept for any desired time. Stocker and feeder calves were bought to utilize pasture for a short (90 days), an intermediate (155 days) or a long grazing period (324 days), or t0 go into the feedlot. The Blackland farms included in the study averaged approximately 200 acres of cropland and all except one had less than 50 acres of permanent grassland. In general, cropland was productive andfairly level. On the average, 12 acres of permanent grassland had been seeded, the rest were sloping and low-lying or overflow land in native grasses. Cotton was the chief cash crop on all farms. Other crops grown for cash or for feed included corn,_grain sorghum, oats (seeded alone or in combination with clover) and some wheat. Sudangrass was grown for summer grazing. Qrdinarily, hay was not grown as a cash crop. Except for cotton hoeing and extra labor at harvest time, the operator, with the help of other members of the family, did practically all the farm work. 4 ADDEDINVESTMENT FOR THE BEEF Adding a beef enterprise increased the ~ ment in the farm business materially. F study, these added “capital items are 1, under four headings: ’ 1.. The cost of farm facilities and i provements added begatiise of the ca enterprise. ‘ " The cost of seeding and the establ ment of permanent grass on W diverted from cultivated crops for ' with beef animals. . ‘[0 3. The investment in cattle. 4. The increased investment in feed I plies kept for beef production. As a rule, these items involved cash e ture. Some inventory items, however, s homegrown hay and grain fed to cattle 5 of being sold, required no cash outlay but r, in postponing income. r Some additional facilities were added 0, of the farms studied to maintain a cattle prise. A summary of investment costs f0 . improvements for cow herds is shown inl 1, and for stocker cattle in Table 2. l TABLE 2. ADDITIONAL INVESTMENT PER FARM if ING FROM ADDITION OF FEEDER CA, " THE FARMING SYSTEM i‘ Farms where steers we i a Grazed only (5 farms) Item _ Short Intermediate Long ( period period period — — — — Number — — i Feeders purchased 42 30 48 Y‘ — —- — — Dollars — -.,) Investment in cattle F and teed: Cattle. 1953-54 basis 1.880 1.630 2.245 Average feed inventory 58 25 150 Total 1.93s 1.65s 2.39s Investment in improvements: Barns. sheds. corrals 140 140 140 Water facilities 167 167 I67 Fencing 225 225 225 Racks and troughs 25 25 25 Subtotal 557 - 557 557 Seeding grassland‘ 208 - 208 208 Total 765“ 7653 765’ Summary Investment in improvements » 765 765 765 Investment in cattle 1.880 1.630 2.245 Total cash investment 2.645 2.395 3.010 Feed inventory 58 ' 25 150 Total investment 2.70s ' 2.420 3.160 ‘Average cost. $16 per acre. “Grassland not used. “Average oi all 5 farms. and corrals left over from the recent jrhorsepower farming were remodeled t0 gfeed storage and shelter for beef cattle. $17 farms on which no drylot feeding was I odeling of sheds and barns cost about ‘farm. Hayracks, feed troughs and creep- Were constructed largely from used ‘already on hand and at little added cost. six farmers who fed, calves in drylot 50 to nearly $600 in improving corrals ter and for hayracks and feed troughs. rage was approximately $435. facilities in the Blackland often are 5* and in some places it is difficult to a dependable supply of stockwater. ample Water, any livestock enterprise caus. Although the cooperating farmers g had some water for livestock, most of iproved their water systems or enlarged ly to provide adequately for the cattle S8. arms with a good supply of Well water, ments made were mainly in the use of id materials to increase storage and to ock Water more readily available. The practice was to increase the water supply ~11 ing one or more earthen tanks in which runoff water. In either case, the cost Moving the water supply averaged about i_r farm. Government assistance helped q the cost of earthen tanks low. In most ittle drank Water directly from earthen p tead of Water piped to a drinking trough. were equipped with running water or 1e had access to water in earthen tanks. of the farms had been fenced before the terprise was added, but much of the r. fencing needed repairs badly. New was added in a few instances. Improve- sts for fencing shown in Tables 1 and 2 aged cow-calf enterprise. e 2. With good management. a small beef cow herd will soon pay for itself. There is relatively little risk in a include cash expenditures for repairs of old fencing and for building new fencing. Most farmers used electric fencing partic- ularly when small grain fields were used to graze cattle. Electric fencing was economical. It turned the cattle except when the soil was so dry it grounded very little current when animals came in contact with the hot wire. In most instances, some cropland was shifted to permanent grass cover when the beef enter- prise was added. This required expenditures for land preparation and planting and sometimes for cultivation. Materials such as seed, sprigs and in some instances fertilizers, also were used. Seldom was a solid turf obtained the first year, and on some farms drouth made resodding necessary. While grass was being established, little income was obtained from the acreage. Cooperating farmers were successful in establishing stands of Bermudagrass and K. R. bluestem. Most of the acreage sodded was to Bermudagrass. K. R. Bluestem seedings were limited almost entirely to thin, eroded or high and relatively sloping areas where Bermudagrass would not thrive. A few farmers planted some seed of other grasses, but the results obtained during the study were disappointing. The usual practice was to prepare a good seedbed during the winter and sod Bermudagrass in the spring. Sprigs were spaced 1 to 3 feet apart in 8-foot rows. Bermuda sprigs cost 15 cents per cubic foot; 20 cubic feet usually were put down per acre. Much of the sprigging was done by machines rented from the Soil Conserva- tion Service at $6 a day. Ordinarily, the cost of using the machine averaged about $1.50 per acre. Some farmers used no fertilizer; other farmers. used 100 to 200 pounds of 16-20-0 or 15-15-O per acre. Costs of fertilizer ranged up to $7 per acre. A few farmers used a crop or two 5 of sweetclover as a soil conditioner before setting out Bermuda. Farmers who used fertilizer or clover got a solid turf 1 to 2 years sooner and had to do much less replanting than those who used neither. Without fertilizer or soil conditioner, about half of the acreage had to be resodded. The extra cost of resodding just about equaled the cost of the fertilizer. Some farmers obtained a good turf the first year; others took as long as 5 years. Most of the farmers were successful in 3 years or less. Adverse moisture conditions prevailed during much of the study. The average cost of establishing Bermuda- "grass was approximately $16 per acre. This figure is used in arriving at the costs shown in Tables 1 and 2 because of the predominance of this grass. K. R. Bluestem pastures were established at costs which averaged $2 to $3 per acre higher than Bermudagrass. Four pounds of K. R. Bluestem seed per acre were planted at a cost of $2 per pound. On the average, about half the acreage was resodded. The usual practice was to disk the seedbed twice before planting and cultivate at least once the first year. The production of cultivated crops was reduced when cropland was shifted to permanent grass, with the farmer foregoing whatever profits might have occurred had cash crops been grown. Since only low-producing land was shifted to permanent grass on the farms studied, possible profits from crops grown on such land were considered to be low, and were not included as costs of the adjustment on these farms. Based on findings at Substation No. 5, Temple, Superintendent R. M. Smith states that, “Con- verting low-producing cropland to grass is sound land-use which adds to the permanence and value of the land and the farm. Increased acreages of close-growing annual grazing crops provide conservation benefits.” The crops grown and utilized through beef cattle did not require the purchase of additional machinery or power. Although hay was put up on all farms with beef cattle, the size of the hay crop did not justify owning hay-baling ma- chinery. Instead, raking, baling and frequently mowing were hired on a custom basis. Twelve farmers had added an average of 12 beef cows per farm, and had sold calves directly from the mother cow at weaning time. Cows on the farms studied were grade animals of good quality. The capital expenditure required to remodel improvements already on these farms, and to add additional improvements, averaged $719 per farm. This includes the cost of establishing 1.2 acres of permanent grassland. 6 Three farmers in this group creep-f calves before weaning them. The extra , the creep-feeder averaged $66 per farm. Three other farmers finished calves in. before marketing. On these farms, the inv, in farm improvements (including seedil manent grassland) averaged}: $902 peri because of extra expenses inburred in :- equipped for drylot feeding. ~i Blackland farmers acquired beef ca a time when prices were relatively high; after World War II, the purchase of even y number of beef animals required consi_ capital. They usually went into the cattle i‘ by buying a few cows and then let the b “grow” by keeping heifer calves. - The average investment in cattle for a h 12 cows in 1953 was calculated to be if including one bull and normal heifer , ments (Table 1). Cattle prices have d somewhat since 1953, and the current inv for a herd of this size would be slightly l0 The investment for stocker or feeder , varied with the number, weight and marke of the animals purchased. These cattle bought through local livestock auctions an not sorted according to market grades. Ho, the animals were thrifty and made good i _ On the farms studied, the investment in s and feeder cattle ranged from $1,630 to ,3 in 1953. At current prices, their cost Woul to 2 cents lower per pound. ‘- included in the system of farming. If the , expended on longtime investments—such provements and equipment—is to remain added earnings from the beef enterprise} provide for maintenance and depreciation. . used to purchase breeding animals also is a time investment, but once the cow he established, returns from the sale of cull largely offset the investment in repla f heifers. Since steers are bought and sold; year, the investment in them is an annual; Even so, the farmer must provide his borrowed capital each year. a Without a livestock enterprise, all grai, hay produced could have been sold at h” With cattle, however, the farmer’s mone tied up in the feed marketed through the ant For those who kept cows, the average’. inventory ranged from $300 to $600 (Tar On farms where stocker cattle were main primarily to utilize grazing, the feed inven ranged from $25 to $150 (Table 2). The and hay used to feed 33 calves in drylot inc ‘ the average feed inventory to about $600. f An outlay of cash was not necessary fora of the feed used since it was grown on the g In this study, the feed used is treated as )1 ARY or ADDED ANNUAL costs PER I. REQUIRED FOR BEEF cow HERDS. CKLAND. 195s Method of handling calves No grain ted" Creep-fed Fed in drylot Costs per tarm Cash Noncash Cash Noncash Cash Noncash _.._.--—Do11ars--———-—— 1:19 25s 13s sss 1se s51 a . 23 15 51 15 55 12 12 1s 1s 27 20 so p93’ 102 102 so so 55 - so 4s 42 _ s54 ssa sao 45a sea 155 11¢ 712 ass 1.15s rental for permanent grassland. ' studied. interest was not always a cash cost Dal cattle expenses and as part of the ‘vestment because the farmer had to ylling his feed for cash at harvest time. fosrs AND RETURNS WITH BEEF cows mary of the extra expenses incurred “as a result of adding a cow herd to a 3,1 farm is shown in Table 3, with cash cash items listed separately. A more Fdiscussion of requirements for maintain- Q5 herd or a feeder enterprise on Black- s is presented in Bulletin 840, “Beef n Central Texas Farms.” This bulletin ies a discussion of production and sales ‘rious types of beef cattle enterprises. 1' he farms studied, there was relatively fference in the average cash expenses, i. of how the calves were handled. For ', the cost of feed bought for wintering '9 and expenses for such items as veteri- f ices and marketing did not vary greatly .the three size-groups. The main dif- ,»-- (sales minus added costs) per iarm 771 866 2.210 821 purchased (18.36) (28.87) (46.04) (24.88) ' hinvestment for: ents alone 765 765 _ 765 755 V‘ the enterprise (See Table 2) 2.645 2.420 3.016 3,452 j time tor beef earnings to repay: — — — — — — Years — -— — — — - iadded improvements 1 l 1 l A- ed cash investment for steer enterprise 4 3 2 4 i . 1956 prices‘ — — — — — — Dollars — - — — - _ T annual beef earnings 462 590 1.650 422 time tor beet earnings to repay: — — — — — -—. Years — —- - — _ _ padded improvements 2 2 . 1 2 -- - investment for steer enterprise 6 4 2 8 I ' days. “Grazed 155 days. “Grazed 324 days. Considerable risk is involved in handling stocker and feeder cattle unless the animals are “well-bought” and “well-sold.” Cooperating farm- ers reduced llhlSr-flSk by buying animals in September, October and November when prices generally are at or near the year’s low. They expected to profit by the gain in live weight of the cattle, and through an increase in the price per pound of the weight originally purchased. FINANCING THE BEEF ENTERPRISE A few of the cooperating farmers financed the shift to beef production entirely with their own money, but most of them borrowed at least part of the funds needed. A few men borrowed all or most of the funds used. A wide range of credit institutions and some individuals provided the capital used. Cattle loans were not par- ticularly difficult-to obtain when many of the cooperators made this adjustment. Ordinarily, a man with ample unencumbered collateral has no difficulty in borrowing money to add beef cattle to his system of farming. However, many farm- ers who would like to run cattle are not so favorably situated. In financing any farm adjustment, the follow- ing points should be considered: cost of making the adjustment, collateral provided by the added investment and repayment prospects of the added investment. A total cash investment averaging $2,200 to $2,400 (Table 1) was needed in the cow-calf system for improvements and for 12 or 13 cows. A large part of this expenditure was necessary just to put the farmer in the cow business. Of the total investment for the cow-calf system, the cattle investment averaged $1,400 to “$1,600. Cattle are considered acceptable collateral by most lending agencies, but some may not lend the full value of the animals needed. Figure 3. Blackland iarmers get good gains with stocker steers grazed on Sudangrass. rather than cows because of the flexibility of the steer enterprise. ’ 10 To many lending agencies, improv made to keep cattle, such as the rebuilt f the new earthen tank or the remodeled sh not represent sufficient additional collate” which to make a loan for the beef ente despite the fact that these improvemen ~ necessary (particularly an adequate Watt ply) for the success of thelfgznterpirisei. . the beef cattle enterprise increased the fa collateral by only about two-thirds of penditure required to get in the cow b This study has shown (Table 4) that results were obtained with cows by selling; fed in a creep or drylot rather than by p grass-fat animals. Handled in this way duction from the herds studied, even a prices, would pay all annual costs, includ interest charge. It also would return 12 to cent on the investment. Consequently, thi of beef enterprise would be self-liquidatin or 8 years. } Of this time, about 3 years would be to repay the investment in improvements. ~ cattle were accepted at full value, the would provide collateral for the rest of th required for self-liquidation of the adju cost. Normally, self-liquidation of the inv for a cow-calf system was a gradual year-b process. With stocker and feeder cattle, the of the total investment varied largely ac ‘ g - to the investment in cattle. For the farms s, the total investment in 1953 ranged from to nearly $3,500. Seventy to nearly 80 t: of this amount was spent for cattle. Abo only way the capital expenditure could hav reduced would have been to buy fewer‘ which would have reduced potential profits. Farmers who handled steers had a initial investment than those who kept l’ Some iarmers prefer; _e total investment for improvements the cattle‘ enterprise averaged about _0r both groups. Consequently, of the lsystems, farmers with steers had a portion (about 75 percent compared limately 66 percent) of their invest- e. a . (farmer had plenty of feed, young, icattle that were readily marketable considered satisfactory collateral. f four kinds of the steer enterprises mings from beef production in 1953 (picientt to repay the total costs of im- ; made to care for steers. As cattle f. were included among the annual ex- igse steer enterprises Were self-liquidat- iear (Table 6). r; steer purchases had to be financed ear if these operators Were to continue le business. Additional operations Were (at 1953 prices for 1 to 3 years for “ings to provide funds with which to ‘ital purchases of cattle. ted on the basis of 1956 prices, beef rom a steer enterprise of the sizes used < short, intermediate, and long-grazing (would be self-liquidating, (including annual cattle purchases) in 6, 4 and 2 Qp-pectively. Eight years would be siélifor the same level of accomplishment 1 s fed in drylot. Figure 4. These high-quality steer calves are going into the feedlot in the tall. Most Blackland farmers have ample time to care for a cattle-feeding enterprise during the slack winter season. Following the year’snormal low for stocker and feeder cattle prices during September, Octo- ber and November, the market trend is upward for several months. Farmers can help safeguard their investment in stockers and feeders by buy- ing on the 10W market and selling during the upward trend. During the fall, heifers often can be bought for 2 or 3 cents less per pound than steers of similar grade. Heifers fatten more rapidly than do steers, and with a price spread such as this, they may offer opportunities for profits equal to or greater than those offered by steers. 11 _, RESEARCH BY THE TEXAS STATION is organized by programs and projects. A program of resear ti“ State-wide Resear A A ‘k The Texas Agricultural Experiment St is the public agricultural research age! Location of field research units in Texas main- oi the State oi Texas‘ and is one oi, ta'ned by the Texas Agricultural Experiment ' Stbtion and cooperating agencies part5 Cf th-G TGXUS COI-lege S l‘ IN THE MAIN STATION, with headquarters at College Station, are 16 subject-matter departments, departments, 3 regulatory services and the administrative staff. Located out in the major agricul A of Texas are 21 substations and 9 field laboratories. In addition, there are 14 cooperating statiow by other agencies. Cooperating agencies include the Texas Forest Service, Game and Fish C0 u' Texas, Texas Prison System, U. S. Department of Agriculture, University of Texas, Texas Technolo lege, Texas College of Arts and Industries and the King Ranch. Some experiments are conducted t 1 and ranches and in rural homes.‘ j sents a coordinated effort to solve the many problems relating to a common objective or situation} Search project represents the procedures for attacking a specific problem within a program. THE TEXAS STATION is conducting about 550 active research projects, grouped in 25 programs clude all phases of agriculture in Texas. Among these are: conservation and improvement of s; servation and use of water in agriculture; grasses and legumes for pastures, ranges, hay, conserva improvement of soils; grain crops-; cotton and other fiber crops; vegetable crops; citrus and other cal fruits; fruits and nuts; oil seed crops——other than cotton; ornamental plants—including turf; b _ weeds; insects; plant diseases; beef cattle; dairy cattle; sheep and goats; swine; chickens and turk mal diseases and parasites; fish and game on farms and ranches; farrn and ranch engineering; f!‘ ranch business; marketing agricultural products; rural home economics; and rural agricultural Two additional programs are maintenance and upkeep, and central services. RESEARCH RESULTS are carried to Texas farm and ranch owners and homemakers by specialists an agents of the Texas Agricultural Extension Service. A