Intensive capital requirements relative to cash flows available inhibit the entry of beginning producers into the cattle industry. Here, we propose and analyze a strategy for beginning ranchers to build a herd. Over a three-year cycle, new producers borrow cash needed to purchase 450- pound heifers in the first year, breed heifers, sell open heifers and bull calves, retain heifer replacements, rebreed the two- year-old cows, and eventually sell bred two-turning-three cows 27 months after the initial heifer purchase. The goal is to retain a group of debt-free heifers. Analyses conducted over 14 cycles of 27 months each across three cattle markets, Oklahoma, Nebraska, and North Dakota, indicate that this herd- building strategy appears to be financially feasible for new producers, in most cycles. Positive net cash flows occurred for producers in Oklahoma for 13 of 14 cycles, 11 of 14 cycles in North Dakota, and 10 of 14 cycles in Nebraska. Positive net returns were realized in at least 12 cycles in each location. Sensitivity analyses were conducted on revenues and costs to evaluate the robustness of the strategy.
ShalekBriski, Abby; DeVuyst, Eric A.; DeVuyst, Cheryl S.; Sahs, Roger; Stockton, Matt; and Ramy, Katlin
"Financing Beef Cow Herd Building for Beginning Ranchers,"
Journal of Applied Farm Economics: Vol. 4
Available at: https://docs.lib.purdue.edu/jafe/vol4/iss1/2