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The Cattle Connection

The cattlemen's connection to timely topics, current research, and profitable management strategies
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Land for Sale: $200/acre

On Tuesday, Dr. Ken Nimrick, retired WIU professor and cattleman, shared his secret to being profitable in the cow/calf business at the IL Forage Institute. His secret is simple..."Buy land for $200/acre." Of course, those of us in the audience all laughed. For good reason too, as most tillable farm ground has been setting records and all land prices have escalated. It is not uncommon to see good tillable ground selling for $12,000 - $15,000/acre and even some pasture acres for over $4,500/acre.

Dr. Nimrick pointed out that to be profitable, you must first know how to figure profit (Profit= Income – Expenses). Simple equation, but at times producers lose sight of this simple math. He stressed managing for profit, not production. He commented that reducing costs is vital in the current industry dynamic. There are two kinds of costs, fixed and variable. The only way to reduce fixed costs is to eliminate them or use them more efficiently by increasing numbers. Too many fixed costs can eat away at profit quickly. Examples of fixed costs would be tractors, trailers, barns, land, taxes, insurance, etc.

University of Illinois conducted a SPA report in 2005 that showed nearly 60% of the variation in profit for cow calf producers is due to feed costs. This is a variable cost. Reducing variable costs, especially feed, will have a large impact on profit.

The quickest way to reduce feed costs is to graze longer. Spend less time, money, and labor bringing feed to the cattle. Keeping cattle grazing longer requires one of two things, more land or more management. With land prices high, more management is the most economical.

Implementing a managed grazing system can increase grazing days and improve the financial efficiency of converting sunshine to beef. This requires planning, fencing, water, and some cost. So how much can you pay to implement a managed grazing system? If you invest $100/acre in developing a managed grazing system and improve carrying capacity by 50% (which are very realistic expectations), then you have bought land for $200/ acre.

Dr. Nimrick was not in fact joking when he talked about buying land at $200/acre. If you can manage your pastures for increased carrying capacity, you are in essence buying some very cheap land.

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