One day, I looked at some possible feeder cattle, and walked away. My buddy with me knew I was looking for more calves. “Gabe,” he said, “You need more calves. Why aren’t you buying those? You can sell them.”
I did need more calves. I could sell them. But I wouldn’t buy the young stock that was being offered because they wouldn’t make me my ultimate production goal: a profit. Much as I love farming, I’m not just in it for the early mornings, long days, and satisfaction of moving my cattle to a fresh piece of grass. I chose farming to make a living that would help support me and my family while I do something I love.
On Cold Springs Ranch, in New Portland, Maine we produce 100% grass-fed beef. We are part of the larger niche market of grass fed, or organic, or local products. That niche market has grown, with many new and experienced farmers selling locally, or just trying to get out of the commodity market. To be successful in the niche market, be it beef or lamb, or anything else, you have to know three basic things:
- Where is your product going to end up? In other words: Where is it going to be sold and for how much?
Part of this is developing relationships with our buyers who might be local stores, restaurants, buying clubs or CSAs, or farmers markets.
- What is the cost of production?
This means the total cost of production, from land to feed to materials and labor. We don’t leave anything out that was part of raising that animal.
- How do you produce a product that commands a premium price?
Making sure you have the market demand at the price you need to receive is part of farming successfully. Farming without knowing these things is like starting a hot dog stand with a ballpark price in mind, but no idea how much the dogs, buns, kraut and mustard will cost you. How can you know how much you will net? Will it even be worth your time?
It’s all part of a process.
When you have an animal born on your farm, or you buy an animal, you have to know where you are going to market that animal, how much to market it for, and how much it will cost to get it to market. Part of my business plan is to buy feeder cattle. When I do that, I know the cost of raising/finishing them, I know the market value, what I can sell them for, and I have the developed relationships and orders to provide the demand. In essence, I’m buying feeder cattle to fill existing orders.
So, in answer to my buddy’s question, I don’t buy calves that won’t meet this equation. They wouldn’t make me any money. The ones we were looking at were too small, and would take too long and too much money to raise. That would decrease profitability to the point where it’s no longer worth it to raise the animals.
If you are trying to extract the highest profit margin from each sale, take some time to sit down and figure out the maximum amount you can spend on your production costs and what you can realistically sell your product for. The more you know your numbers, the easier it is to make decisions to control input costs, and to make sure you’re working for the profit you’d like to make.
Like this article? Want to learn more? We’ll be publishing more from Gabe about the ins and outs of knowing your numbers. If you have particular questions, share them below in comments so we can be sure to target articles to fit your needs.