High Cattle Prices, Smart Investments, and Getting Started in the Cattle Business

0:00Hi, welcome to BCI Catalyst, I'm Brad White, happy to have you with us and happy to have our crew here in the studio. Morning, Philip. Good morning, guys. Good morning, Brad. Dustin. Good morning. So we're glad to have you guys here because I've got a couple questions for you, which I did not prepare you for, so I'll just hit you with those as we go through and we're going to have some discussion and it's going to be cattle based. I'll give that as a spoiler. But I did want to remind you, if you have a listener question for us or you have a topic you'd like us to discuss, you can reach out to us on Facebook or you can send us an email at BCI at ksu.edu. We sure like getting those, especially as everybody's getting back to school. It's back to school time. The kids are going back and I'm probably the aberration for sure in our family, I'm the aberration because not only did I not mind a school lunch, I actually enjoyed it.

1:04I'm going to say I enjoyed just the school lunch, the school lunch food, the lunch is right there. Pizza, when they had pizza today. I like, and I know it was a frozen pizza that they just put a slice of it on your plate and I'm like, this is fantastic. Was there a school lunch that you would go back and you'd be like, oh yeah, I don't have that again today. Oh, that's easy. The chili and cinnamon roll day. Chili and cinnamon roll day. Good day. That was a good day. I don't remember what grade I was in, I think. But at some point, they started doing like a salad bar and they had like a baked potato bar sometimes and stuff like that. Those where you got to like really load it up. You got to load it up yourself. Oh yeah. That was the only thing that they let us load up ourselves at school was Mandarin oranges and to this day and I think I over consumed because this day I can't eat a Mandarin

2:05orange. For me, it was pizza. I mean, I like the pizza, most of it, the pizza. So in my aberration, would you guys go back and have a school lunch today or are you like, now I've moved on with life? I don't know. I would eat one for me, but the way I would say it is, I actually kind of liked my school lunches then, but my standards were lower. And my standards have increased a little bit. I don't think I'd be as happy now. Okay. Yeah. My palace a little more. From those days of carrots and spinach and the spinach. The spinach advocate, that's all. Yeah, just. I didn't know it came a different way for a long time. But those all spinach. Well you all annoy guys. No where pop-ies from. The chicken place? No, pop-ies.

3:06Let's see. Oh, spinach. Yeah, where is- Oh. It's from Illinois. Yeah, it is. But where- Chester. Okay. Yeah, he's from Chester, Illinois. That was not what I wanted to talk about today. I did want to visit about, so cattle prices are high, not a surprise. That's been that way for a little bit. They're really high this year, and I want to go a couple different directions with this. The first is if you have a cattle operation with the high sale prices, and we could think about on the cow calf side or any stage of production, but let's say, let's stay on cow calf. This might be a time that you can reinvest in an area, or- and I'm going to take this- I don't necessarily want to grow the operation. But what would you do if you could reinvest where are some areas that you might see the biggest return on investment on your operation if you had a little bit to put back into it? I'm trying to think about- the first thing that comes to mind is things that maybe have

4:12a long time horizon for a return on investment, because those may be more difficult to get, you know, operating loans or whatever from the banks. So now I've got my own cash to invest in that, but it's something that I see can have real value for my operation down the road. But it's going to take a while before I can recoup those costs, those investment costs. Are you saying land? It could be land, or land improvements. So like water development and cross-vensing. Maybe I need some terraces or some other things like that. You know, we don't generally think about those on pasture too much, but if I've got areas that are steep and erosion prone, things like that, maybe it's where I need to do some conservation type of work in riparian areas or wetland areas or other things like that,

5:19or maybe it's clearing off some timber or clearing off-brush that I can't burn particular pasture. So okay, so now I've got some extra money. I can invest in some land cluttering to get rid of some cedars and other overgrown stuff because I've got areas too close to houses that I can't burn and it's overgrown for the last five, ten years. Goats, that's what you're interested in. Yeah, I was not thinking about goats, but I was thinking more like- I'm going to tell the best. Yeah, those are really good. And I'm kind of going down the same pathway of things that have value, but not necessarily pay back in a year or two. So go back to think about some of our challenges. You know, good-caving areas. Well, what do I need to do? Maybe some cross-vensing, some create some additional-caving pastures. Do a few things like that that have- once I get established, could provide many, many

6:20years of benefit, particularly looking at bottlenecks, is it calf health, is it getting cows pregnant, is it moving cattle from one area to another? So even just gates and just anything that's kind of a bottleneck. And this might be a time to really look at improving those in such a way that I don't have to worry about it for a long time. So the first thing came to mind is, you know, do you have debt? Maybe you're paying off the debt. I mean, that's just one thing that came to mind. And it depends on the lifespan of that debt, because if you've got older debt with low interest rates, it would be different than if you've got relatively recent debt with high interest rates. Exactly. The other thing that came to mind was, I was thinking health, like soil health. I don't know if that's- but if somehow you can improve the soil health, then that translates to maybe higher forgealds. And then the other thing I was thinking was automatic waters.

7:22I remember when we went from me having to go break ice it in January to the automatic water that was heated or, you know, used the ground. Which was about the time you graduated high school. Yeah. I mean, that was a game changer. That's not what you're doing. So I would think automatic waters, but I don't- it was soil health, I guess, is one thing that I was- what about diversification? And maybe just if you're thinking about, okay, well, yes, all those things good, but maybe my operation pretty good shape and we're doing pretty good. And Dustin, I'd ask you, maybe define what diversification might look like on a cow calf operation. Goats. You know. The diversification could be a lot of things, right? You've got a herd, a spring, having her. Now you purchase some more. That's a fall, having her. So I mean, that itself could be a diversification, right? Because you've got more of a cash flow throughout the year. That's a possibility. You know, had a former student who was in Canada and they had the facilities where they

8:29had a- I guess, a February. But then she bought another bigger herd and then they'd started doing like late April early May. So there was- I mean, that could be another kind of diversification. Or you could diversify, I don't know, I guess, and maybe send to some other kind of- One of the things that popped into my head was maybe hunting or other stuff like that, where now you've got some cash to build that- some infrastructure for hunters to be able to come onto the property. Maybe you're going to do some- maybe you're going to do guided hunts or, you know, we know somebody that they do, uh, pheasant and quail and things like that where they raise those and then- and then do hunts on their property. So if you've got this extra cash where you can invest in a new enterprise that on the land and you don't have up front loan to get that going, could be a very beneficial decision.

9:34Well, and the nice thing about that is compared to like the spring and fall cabin herd, yes, diversifies my income stream, gives me a little bit different cash flow. But if the cattle market goes up or down, all of it's there. Whereas the hunting, maybe a little bit different. So if the cattle market drops off in a few years, that doesn't necessarily mean my hunting business would drop off. Just using that as an example of- They're not tied together. So you- yeah. That could be a lot of- I mean, you don't have to have a hunting lodge. In fact, you could just have, hey, I'm going to sell you the right to come hunt it and then you've got an outfit that does everything else. So you- Yeah. ...minimal amount of labor and then- Yeah, or you maybe develop a location or so with electric and whatever where the hunters can just pull in their own camper and, you know, whatever and they're off way from you. But then- but they have a spot where they can stay for a few days to hunt. You could build a lodge and host weddings, Bob.

10:35You could get your license and officiate weddings. There you go, that's right. I know this is right up your alley. Right up my alley. So well, you guys are leaving me with- so, you know, just be honest, the goats isn't a horrible idea. It doesn't fit everybody because it is a whole other enterprise, a whole different species. Fencing. Fencing is different for them than for cattle. But we know of producers who have- and again, a lot of times it ties back into your earlier comment about cedar trees and things like that, that they will use rotational grazing, you know, rotating between cattle and goats to get some benefits there. You have to do a lot of, you know, market development. It's not an easy addition to an operation. We know of some people who are that has turned into a good business for them. A joke about goats, but two days ago somebody sent me a picture and was like, this is what just moved in next door. They put up a temporary and they were clearing out all the brush from-

11:35Yeah. To be honest, I know- in my experience goats haven't done as much as I wanted them to. I wanted them to just turn this into a beautiful pasture and they didn't do that. But again, the guys I know that have done it are happy with the results, but they will talk about a lot of work. A lot of work. So, as you guys have said, you may want to reinvest in long-term plays for the business. How to make it better, how to make life a little bit easier each day and or diversification. Any other places that you think about Dustin, that you should do if you had a chance to reinvest or grow? I don't know. I have to think more about it. I mean, you talk about different kinds of diversification, whether it's from a risk perspective or from a production perspective, diversification. I think that's what you guys are talking about, but you can think about it from maybe a risk price perspective. Yeah. Lots of different options there.

12:38And I want to flip it and I'm going to start with the same premise, but I want a little different question. Cattle prices are high. Let's take it from the standpoint of a relatively young person that wants to get in the industry and it's cost prohibitive and capital intensive to get in. What are some options there? What are some things that somebody could do to maybe work their way in without a large capital outlay? Oh, I think there's probably a few things. Number one, could you lease some cows, start off with maybe leasing some cows, pack and rent some pasture? That might be one way to enter into the business. Another one is, you know, is there somebody who's looking to get out? I mean, we've talked about this before and is there a way to maybe you start learning the business, working with them with the intention of eventually over time you're buying

13:38the herd, buying the facilities, buying land or whatever that looks like? And so there's probably several different options. Yeah, I really think along the same lines it's not a crime to start small and grow. In fact, there's a lot of businesses, you know, stories, you know, these tech giants that started in the garage. And in the cattle business, the starting in the garage is a few leased cows trading my labor for access to pastures, those types of things. So you look for win-win situations because there are people out there that are needing labor and maybe a younger person has that to offer. A young person may be needing access to capital and some experience. And so look for win-win situations. Again, it's probably not just going to fall on your lap. Maybe it will. Maybe you've got a relative or something that this opportunity just falls on your lap. But you may need to really get out and find some contacts, talk to other people.

14:40And just say, yeah, I'm wanting to get into the cattle business. All in the other thing that I just thought of was I can think of a couple of younger people that got into the cattle business more on the stalker side. You know, honestly, their interest was cows, but there were some barriers to entry that they could actually turn a business a little bit quicker by starting on the stalker cattle side. And again, you're building skill, you're building access to some rental property, some land. You can rent different things like that. So look for success stories in your community. Maybe people that are just a little bit older that have figured out a way to get their foot into the cattle industry. Don't forget about compounding, right? I mean, just like if you were investing, you expect that to compound over time or grow with percentages. So even if you got in with a few cows or a small number, don't worry about the number as much early. Once you start growing that and you grow your herd over time, which is how a lot of

15:43herds have grown. Philip? Well, I was just going to kind of add on to Bob's comments there. My brother did this for a couple years, but he had some grass that wasn't being used because the fence was horrible. And so he talked to the landowner and he patched up the fence and then talked to a neighbor who had grass calves. You always bought grass calves. So then he would take some of those grass calves on and get paid on the pound again. And he took care of them over the summer there on that piece of ground that he rented. And he rented it really cheap because it wasn't landowner, it wasn't doing anything with it. And he had to fix up some fence and stuff and play kind of traded his labor for what somebody else needed, which was access to grass and access to cattle. So Bob, you said you got to make contacts. Can you expand on that? So if somebody's wanting to get into this, where do you start?

16:45How do you make those contacts? So and different people are different, but I'm picturing someone that's kind of an introvert that doesn't really just go to the bad hand everybody. You still, again, goes back to work. Sometimes work is different for different people and for someone who it isn't easy and for them to just go out and talk to people. You kind of have to do it a little bit, but start with people you're comfortable with. You know, people you go to church with, you know, relatives, you know, different people in your community that you do feel comfortable with. When you start the conversation, maybe with I want to get into the cattle industry, I need to find some way to kind of leverage my interest and labor with somebody that's got either land or cattle or both. And you just start talking to people, this is what I want. And again, because there are people you're talking to, there are your friends, they want you to succeed. They might say, well, you know, six months ago, I talked to somebody else. And so in a way, you just have to start having those conversations, but it can be a

17:48pretty simple conversation. This is what I want. I, you know, I'm currently working here. I'd love to get started in the cattle industry, but I'm going to need some access to, again, land, capital, cattle, those types of things and just let it be known. In your circle of friends, you don't have to, you know, yeah, it can be your circle of friends. One place I would reach out beyond that is there are people in the communities that are, I'll say natural connectors because they impact, talk to, work with a lot of cattle. Extension agent, extension veterinarians, some ag lenders, ag lenders, ag lenders, the co-op. I mean, you can talk to some of those folks and say, hey, I have this interest. And the beauty is at least I think that interest would be reciprocated by some. Yes. Right. You have a relatively small proportion, even in our rural communities. It's still a relatively small proportion that is in the cattle business and doing cattle stuff. Trying to figure out how do I find those folks and I would look for who are some connectors

18:52and how do I reach out to them or maybe get started in those areas where I naturally as a part of my day to day course have interaction with many different cattlemen and you have to have some patience. And the people you mentioned, the co-op, the vet, veterinarians, the banker, lenders, those are all in extension. They are all everybody that wants to see that rural community thrive and succeed. And so they're, you want somebody to come in here. And so they're out looking out, especially if it's somebody young that's wanting to get into it, that they figure they'll be around there for a long, long time. I mean, that's exactly what they want. Which brings up the other thing I wanted to talk about on this is, and it ties into the first question I ask as well, is you really need to have some sort of strategy, some sort of plan. And if you want to get started in the industry, we kind of talked about winging it, right? You might lease some cows, you might do this, you might do the stock or stuff. Where's value in actually trying to put your plan on paper? How do I do that with so much uncertainty? Because I don't know what I would be able to do or not.

19:54And would you plan out several things, or would you just take it as we said? And I'm going to take whatever opportunity I can. No, you got to have a plan. I mean, you've got to have something at least rough idea, right? Because I mean, you're not going to want to take on 150 cows right off the bat. I'm assuming. You've got to have a plan in place. If maybe if you're thinking start small, 5, 10, 15, 20, all of a sudden, there's 40, do you have the capital to that? Well, you better have talked with your banker to get a note. So you better have a relationship with the lender. So that's part of the plan. And then you better have talked, no, okay, here's the vet, here's the local veterinarian that I can work with when I need various things. Here's the, you know, the extension agent in the area that if I've got some or here's a nutritionist. So you better have a list of people and you better at least maybe start at some of those kind of conversations. Kind of move beyond just that dream. I want, I want to be in the cattle industry. I'm willing to start with stock or cattle or cows.

20:56But then even simple things like, well, if I, if I did the labor for a group of stock or cattle, what would I need money wise per head, per pound of gain, whatever, to make this work? You start with turning what I want into really a plan. What do I need? What are the costs that I'm going to have? What kind of income will I need to justify, you know, moving maybe I currently have a different job where I'm spending my time doing something else. So I like the idea. First of all, just letting it be known that, hey, this is something I want, but doesn't you're exactly right wanting something to accomplish that? There's going to, there's a couple of important steps between wanting and accomplishing. Visiting with a ag lender or a banker and taking a plan in, even if I'm not asking for money, those folks have been through and seen a lot of business plans. They've seen a lot of ideas. They may be able to give you some feedback. And if you've got it written out to a level, and I've talked to people that have gone

21:58in and it's like, oh, they wouldn't fund me for this or they wouldn't fund me for that. Yes, they're looking out for the banker, the lender, as they go through the process. But inherently, that's looking out for you, too, because they don't want to take on unnecessary risk. So, talk to them, okay, well, how do I tweak that? How do I build into this over time? Yeah, I think you're pointing about, and what are my costs? You need to at least understand. So then if you're going to go lease some cows or go buy some cows, are you going to make money on them? I mean, so you've got to have an idea or plan a place of going into that, I think. And at some point, you can't give away your labor forever because that's your salary, right? You're going to get paid. So any other suggestions for somebody wanting to get started? You guys have had some good thoughts here. I'm going to just kind of key off of one of the things you said was get some other people, none of us are smart enough by ourselves. And in a rural community, there are people that are in the cattle industry all the time. So again, so people involved in marketing people, veterinarians, you know, develop those

23:00relationships. And again, it's just knowing people and looking for win-win opportunities. I want to hire you to help me do this so that I can make more money doing that. And occasionally you can find somebody that's willing to share their opinion. Occasionally? Occasionally. That may be another is sorting through opinions. Sorting through opinions is a whole different deal. So I appreciate you guys sharing that. I appreciate you guys talking through some of the, some of the different scenarios. And I know everybody faces a little bit different plan, but one of the things our overarching theme today was you probably should have a strategy that plans out more than a year in advance so that you're not making these decisions on the fly. And talk to other experts. There are many people that are willing to help you, whether it's the extension agent, the veterinarian, a local nutritionist, talk to several of them, get those different opinions. So if you have a question or comment or something you'd like us to discuss on a future episode,

24:06you can send us an email at bciksu.edu.