How to Make Money Buying & Selling Cattle

by Ronald Kimmons; Reviewed by Michelle Seidel, B.Sc., LL.B., MBA; Updated February 04, 2019

The business of buying and selling cattle can be a considerably lucrative one. A cattle buyer looks only
for the healthiest cattle, while a seller wants to make sure that he gets the best prices for the cows
he's selling. To make money buying and selling cattle, you must not only focus on the buying and
selling process but also on how you treat the cattle. If you try to sell unhealthy or poor-quality cattle,
you may not profit from your buying and selling endeavors.

Set Business Goals and Create a Business Plan

By defining your business goals, you can determine how much potential profit you can expect. Your
business plan must define the cattle industry, as well as your niche market. Give information about the
ranchers you'll be purchasing cattle from and the operations you'll be selling cattle to, as you'll
probably be operating in a limited geographical area with clearly identifiable business contacts.
Lenders and investors may require you to present this business plan before they agree to fund your
business. Your business plan should include a mission statement, marketing plan, financial
management analysis, type of business ownership, and duties and responsibilities of key personnel.

Choose Profitable Breeds

Choosing profitable breeds is essential to making money in any cattle enterprise. Certain breeds, such
as Angus and Hereford, tend to fetch a higher price due to their robust physiology and tendency to
produce high-quality meat. However, even though a particular cow or bull may be of a good breed, that
doesn't mean that the individual animal is of high quality.
To check whether the cow you buy is of high quality, you might consider its annual milk production if
it's a dairy cow, for instance. Cow sellers usually keep a record of the milk a cow produces, as well as
its weight. You may find cows that produce as much as 500 or 1,000 gallons a year, while others
produce only 200 or 300 gallons. Cows that produce more milk are of higher quality.

Determining Operating Costs

You have several operating costs to consider before you buy your first bovine, such as the expense of
buying or renting a place to keep the cattle while you're looking for profitable buyers; costs required
to keep the cattle healthy; costs of hiring employees with the necessary knowledge to take care of the
cattle; and costs of providing food and other items to make it an ideal home for the cattle.
For example, if you want to provide your cows with sufficient levels of nutrients, you have to consider
the costs of buying supplements such as vitamin E, selenium, zinc and copper. These nutrients boost an
animal's resistance to diseases like mastitis, grass tetany and bloat. Consider the costs required to hire
enough people to control how these supplements are administered.

Care and Maintenance

Keep your pasture area fertile so it produces a variety of grasses and grains. Luxuriant soil and
abundant pastures keep animals healthy, which produces higher profits for you. Monitor your livestock
regularly. Contact a proficient veterinarian who takes care of immunization needs in accordance with
federal guidelines.
If you have your cattle in a specific region or state where winters are particularly cold, transfer the herd
to a warmer site during those seasons. You must also provide the cattle with appropriate shelter during
hot months.

Seasonal Workers for Busy Times

Expect to hire a few extra hands around springtime. This is the season in which animals typically give
birth, so you need more employees to take care of your cattle. During this time, you may also be able to
reap large profits from selling calves.

Marketing and Auctioning

With fall comes the sale season, when buyers observe the market, study trade publications, view sales
videos and generally try to get the most for their money when buying heifers and bred females. Public
sales constitute small-scale selling, while bulk selling consists of trading hundreds of cattle all at once.
To be successful, you must check the current price in the market so you can get a grasp on what your
buying offers should be and what you can expect to get when you sell your cattle.
At the beginning of the auction, prices are always different from the market price, but this is the way
through which buyers and sellers bargain down to a mutually agreeable price. Become knowledgeable
about how to play with prices when bargaining. It also pays to invest in milking equipment so you
can sell cow’s milk on the market, even while you're waiting to sell the animals.
Tip
 Save on veterinary fees by purchasing basic equipment for vaccines, sprays and simple
procedures such as castration and dehorning. Learn about the functions of cattle breeding
equipment to reduce overhead. Certain breeding supplies include pregnancy detection,
ovulation and infusion pipes.

Warning
 Cattle theft, or cattle rustling, is one of the major problems that cattle businesspeople may
encounter. Prevention efforts include security precautions such as securing the perimeter of the
ranch, counting the herd frequently, branding and participation in neighborhood crime-watch
activities.

Profitable cattle trading?

posted by Sentinel-Times On the land

With cattle price remaining high, making a profit from buying stores is tricky business. D063416
By John Bowman, Livestock Extension Officer, Leongatha
PRIME market prices and store market prices are at an all-time high. So can you make a profit from a
cattle trading enterprise?
Let’s look at some of the components of a cattle trading business and consider some of the options.
Over recent years steer traders have had the advantage where there was a slow constant climb in the
prime market price.
They were then in a position to take advantage of the store market price easing during mid-winter or
the end of summer.
However this hasn’t been the case this year as the prices have remained high.
Currently any kilogram of live weight that you are able to put onto an animal will attain a high price in
the current prime market; the difficulty is replacing that animal once it is sold.
The old adage of buying in the same market as you have recently sold in is often spoken about to
ensure you have a margin between the finished animal sold and the new lighter animal purchased.
Purchasing stock that are in forward store condition that will finish earlier than backward store animals
gives a quicker turnaround time and is recommended by some traders.
Others prefer buying a younger, smaller animal which has the potential to grow out and gain more
weight over a longer period.
Heifers may be a good buying option due to a shortage of breeding females resulting from the extra
slaughter numbers in recent months.
There is also the option of joining heifers and offering them as springing heifers or cows with calves at
foot next spring, but this is a longer term option.
A shorter term option is to purchase light weight cull beef cows from the “chopper market” and
add extra kilograms of live weight, then return these cows to the prime market pre-Christmas or
early next year.
It is surprising how quickly these beef culls freshen up on good spring pastures.
Light weight cows bought in at $2.20/kg of live weight and finished beef cows at $2.60/kg of live
weight based on current day prices, presents a possible margin opportunity.
You could do the same sums on well-bred steers yourself and compare the two options.
Other options are:
• to fully feed the cattle you already have at home and grow them out at a higher weight gain.
• cut some silage and hay to utilise excess feed.
• shorn store lambs will be coming on the market soon and they could finish in six to 10 weeks
depending on purchase weight and will give a quick turn around and the conversion of excess spring
pasture into saleable lamb live weight will be quite efficient.
Key tips to consider:
• do your sums to make sure there is a proper margin.
• seek sound market advice, and keep your local stock agent in the loop.
• cost out the options to ensure you have a margin from the transaction.
• keep the stocking rate low to gain more kilograms per animal in the shortest possible time.
How to Make Money Buying & Selling Cattle

By: Stephanie Faris

Reviewed by: Michelle Seidel, B.Sc., LL.B., MBA
Updated November 21, 2018
Gerd Thomas / EyeEm/EyeEm/GettyImages

Trading cattle is nothing new. In fact, at one time consumers regularly used livestock as currency, long
before coins and cash became the way to pay. But for today’s farmers, cattle have become a much-
needed income source as it becomes increasingly difficult to survive on crop sales alone. Even if
you’ve never operated a farm, cattle sales could be a way to make money, provided you have the
knowledge and resources necessary to transport and care for the animals.

Arrange for Care

Before you even think about purchasing your first cow, make sure you’re equipped to care for farm
animals. Not only is it the humane thing to do, but it’s a good business move, since your buyers will be
looking for the healthiest livestock they can find at that price point. It’s important to start small and
grow your herd slowly, making sure you have sufficient pasture space to keep your cattle well fed.
Over time, the quality of grass can degrade, so always keep an eye on your grazing areas to make sure
your existing cattle have the nourishment they need.

Gather Funding
You’ll need to own cattle in order to sell cattle. That means having money in place to buy at least one
cow. If you’re lucky, you have the cash available to do this. But if you’re like most people, you may
need to take out a loan to get your business started. If you’re trying to buy farm property at the same
time, you probably will find this is a bit challenging, but fortunately, there are programs that can help.
The United States Department of Agriculture (USDA) offers farm loans for starting and strengthening
family farming and ranching operations. The USDA also has the Beginning Farmers and Ranchers
Loan program to help those just starting out.

Begin Buying and Selling

Buying and selling cattle is easier than ever, thanks to online marketplaces like Cattle-
Exchange.com. You can narrow your search to the most profitable cattle, then focus on setting up for
breeding so that your herd becomes self-sustaining. Angus cattle are popular with those who buy and
sell cattle for food purposes, since they’re known for their meat quality. However, you’ll also need to
consider the cost to sustain the particular breed you choose. Herefords are a good option for feed
efficiency. Look at market prices and the feed and maintenance costs for any breed before you make
your first purchase. Over time, you’ll likely find the best combination of breeds for your own buy-and-
sell cattle operation.

Trading for profit

Location: Warren, central New South Wales
Enterprise: Merino sheep totalling 50,000 and including stud and commercial animals; 1,200-1,500
cattle breeders (mixed breed), 500-700 trading cattle; 3,200ha wheat, 1,600ha oat and feed crops
Producer: Manager - Cam Munro
Property name: Egelabra Merino Stud
Property size: 55,000 ha
Pasture: Lucerne, clover, ryegrass, phalaris and native pastures

Egelabra Merino Stud covers 55,000 hectares of prime grazing country near Warren in central New
South Wales. The stud’s primary focus is a 50,000 head stud and commercial breeding flock with cattle
breeding, trading and cropping also important parts of the enterprise.
Cam Munro, General Manager, explains that while cattle trading decisions are largely influenced by
available feed, economics and the likely return from a trade also plays a major role with the goal being
to double the money outlaid in the transaction by the time the cattle are sold, generally in six to nine
months.

Doing the sums

Cattle are generally only purchased if the possibility of doubling money within a 12 month period
is predicted, regardless of the amount of feed available. Trading opportunities will be sought in good
and marginal seasons, with numbers traded being influenced by the season and buy-in prices.
Cattle are typically purchased in autumn following rain to take advantage of the seasonal increase in
feed and sold in late spring and early summer to meet market specifications and marketing
opportunities. Cow and calf units or weaner steers are preferred with the decision of which to purchase
being based on the potential to meet the above financial objectives.

What to buy
Cam explained that: “Over an average ten year period, cows and calves will be purchased in four of
those ten years as they offer the business more marketing alternatives and better value. In two of the ten
years, steers will be purchased. In the remaining four years, we won’t buy any trade cattle due to
prohibitive buy-in prices or a lack of feed and poor seasonal outlook.

Cows and calves

Queensland is the state of choice for purchasing cow and calf units, typically offering better value and
more cattle than even closer New South Wales markets. Cam explains that the cow and calf unit often
offers better value than weaner steers. When considering a purchase opportunity, the likelihood of
doubling the invested money remains an important indicator with the return averaged over the cow and
calf unit.
Cows and calves are purchased based on price and the ability to value-add by eventually splitting
the unit after weaning. No particular market is targeted and as such, Egelabra management does not
place as much importance on the breed and evenness of the line when buying cows and calves as they
do with steers. Rather, they utilise the flexibility that such a unit brings and market according to the
seasonal conditions. If good autumn and winter rains are received, the business aims to wean in spring
and the heifers are sold as the business model does not allow for the increased husbandry required with
heifer management.
The weaner steers from these cows are sold if feed availability is limited or if they are a breed , such as
Bos indicus, which is more constrained in its weight gain capacity within Egelabra’s production
environment. Feed and breed permitting, the weaner steer are grown out and sold through saleyards or
direct to feedlot. The likely marketing scenario will have been considered during the buying process.
Occasionally Egelabra introduces its own Angus or Shorthorn bulls to the cow herd after calving
depending on the age of the cows, the breed and whether a premium exists for pregnancy tested in calf
(PTIC) cows. The cows are then either sold as PTIC if feed becomes tight or retained on the property
for calving.

Weaner steers
Weaner steers are typically purchased from southern New South Wales and Victorian weaner sales and
a premium is often paid to secure quality lines. Six to eight month old Angus, Shorthorn or Hereford
weaners are preferred, or a cross including these breeds. The business has found that any additional
cost of purchasing a good line is repaid through the improved weight gain and increased marketability
of the cattle. These steers are generally sold through an ongoing association with a major feedlot when
they have reached feedlot entry weight of between 430-500kg after six to nine months.
Cam explains that Egelabra management look to the south for its weaner steers in March/April because
the timing of these sales fits well within their annual cycle of operations. They have also found that
these weaners meet their trading objectives of quickly adding condition and trading on.

Maintaining biosecurity
Introducing new stock to an environment can bring biosecurity risks. While the risk is relatively low
with steers, Cam is always wary of potentially introducing disease, such as pestivirus, when buying in
traded cattle..
Cam said Egelabra follows some simple steps to reduce their biosecurity risk:
 Find out as much as possible about the history of cattle being bought.
 Apply a quarantine drench and vaccination on arrival at Egelabra.
 Segregate new cattle for several weeks in quarantine paddocks.

Key messages
 Trading decisions should be based on budgeting.
 How cattle will be on-sold and their marketability should be considered prior to purchase.
 Flexibility, such as the ability to readily move from weaner steers to cows and calves, is
important in a trading operation.
 Unless compelling circumstances arise, such as timely rainfall, do not retain stock or alter the
target market once animals are finished to specifications.
Find out more
Confident Livestock Marketing is a one-day workshop to assist cattle and sheep producers to
understand and apply market information in their business decisions.
Separate workshops are conducted for cattle and sheep markets.
Participants will learn how to:
 Identify market information relevant to them;
 determine a ‘fair’ price for their stock;
 identify good selling or buying opportunities;
 estimate future prices using historical price movements; and
 construct a trading budget and assess best, average and worst case scenarios.
These practical one-day workshops include theory, practical examples and activities. Contact the More
Beef from Pastures State Coordinator for your state to express interest in attending a Confident
Livestock Marketing workshop.
Taking Profits
Management isn't just about production; it's about marketing and analyzing the markets, says Dave
Delaney, vice president and general manager of ranching operations for King Ranch at Kingsville, TX.
The lesson is that a good manager retains marketing flexibility and options, and looks for buying and
selling opportunities. He's referring to the startling results of a study recently completed by the
Wes Ishmael | Nov 01, 2009
“Management isn't just about production; it's about marketing and analyzing the markets,” says Dave
Delaney, vice president and general manager of ranching operations for King Ranch at Kingsville, TX.
“The lesson is that a good manager retains marketing flexibility and options, and looks for buying and
selling opportunities.”
He's referring to the startling results of a study recently completed by the King Ranch Institute for
Ranch Management (KRIRM). It reveals that over the past eight years King Ranch has made the
equivalent average profit of $300/calf raised by selling those calves and then buying back others to
background, stocker and feed. If King Ranch had simply retained ownership in its own calves through
its own feedyard, the average profit for those eight years would have been $8/head.
Delaney is quick to point out that the study doesn't account for risk management. In fact, he was
reluctant to make the study public out of fear the results would blind folks to the reasons that such a
profit swing is possible.
It has everything to do with financial concepts that allow cattle producers to overcome two basic but
vexing marketing challenges: low margins and infrequent sales.
“A critical concept to understand is that in a low-margin business such as groceries, the merchandise
usually turns over rapidly,” explains Barry Dunn, KRIRM executive director, who directed the study.
“In a high-margin business such as diamond jewelry, the turnover is usually slower. Cattle marketing
typically represents the worst of both worlds: it's both low margin and low turnover.”

Exploiting value difference

A common practice called arbitrage counters the margin challenge. Many producers, especially those in
the stocker and cattle-feeding sectors, utilize it without necessarily thinking of it by that term.
“Cash market arbitrage is selling what is overvalued and replacing it with something that is
undervalued,” says Ann Barnhardt, who owns and manages Denver-based Barnhardt Capital
Management, Inc. Be it exploiting weight-based value differences in calves and feeders or age-based
value differences in heifers and cows, she explains arbitrage revolves around constant market analysis
in search of selling what's overvalued and buying back what is undervalued.
In the King Ranch example, Delaney sells the ranch-raised calves, which are a popular commodity
with buyers and bring more than the market average. He replaces them with calves purchased in the
soft parts of the commodity market.
“I'll buy and sell if I can make at least as much return on investment (ROI) on what I'm buying as what
I'm selling,” Delaney says. “When I started in this business in the 1970s, if you made $20 or $25/head,
that was a home run. Now, you can make $40/head, but the ROI might only be 2% or 3% because costs
have increased so much.” He targets 10% ROI.

Multiple transactions
King Ranch also increases what is termed the asset turnover ratio (ATR). In basic terms, it's capturing
the profit margin multiple times with the same assets invested.
“If a business has a 3% return and sells once a year, it will make 3¢ on every $1 it has invested in its
business,” Dunn explains. “However, if it's able to maintain that same margin and sell three times each
year, it will accumulate 9¢ on every $1 it has invested in its business.”
King Ranch has utilized this principle by having multiple enterprises and calving seasons, which
increase the frequency of its sales into more markets, while leaving its asset base unchanged, Dunn
says. The result is they have an increased ATR compared to production or marketing programs with
fewer enterprises that sell less frequently.
“If you can retain ownership in your calves and make $30/head, as an example, of if you can sell them
and make $30/head, sell them,” Delaney adds. “Every time you do that you multiply your return on
assets. Why do it just for fun?”
ATR is one challenge Dunn sees to retained ownership. “Marketing strategies that slow your business
should raise a red flag. You want to find ways to speed up the business cycle,” he says. That's not
saying retained ownership doesn't work for some folks. It is saying that ATR is another opportunity to
consider.
The King Ranch arbitrage and ATR opportunities are fairly well defined, yet flexible. They're
marketing calves from a cowherd with spring and fall calving seasons and replacing them with calves
of lesser value to background, stocker and feed in some combination.
There are more aggressive versions of these concepts, though. In the Bud Williams Marketing School
that Barnhardt teaches, the mantra is, “Sell when you can replace at a profit.” Period. Practitioners of
the Bud Williams approach sell and buy as many times as possible during the year with the aim of
building cash equity.
For more information about Barnhardt and the Bud Williams Marketing School, see
www.barnhardt.biz.
Next Page: Pulling the trigger

Pulling the trigger

All of this obviously is a simplified presentation of concepts that require plenty of brain sweat, if not
complexity, in their application.
In some cases, like the Bud Williams approach, exposure to market movement is minimized by selling
and buying within the same week. For others, who buy replacements later, likely future value must be
analyzed.
Delaney tends to utilize futures market prices with his local basis. He points out there are three other
common proxies for assessing future value: an index of monthly historical average cash prices, the
current cash market and the venerable school of wild guesses.
With those predictions in place, Delaney utilizes a decision-making spreadsheet that evaluates
comprehensive costs and calculates profit scenarios for a given set of calves. Last spring he ran the
numbers for King Ranch calves using five different marketing scenarios. The projected ROI ranged
from -10.5% to +27.4%. He's quick to add that he's not a market guru; he tries to be right 51% of the
time.
Barnhardt emphasizes, “You have to know the cost structure in every business. Few cattle producers
calculate their cost of gain when they buy, and when they do it's often woefully incomplete.”
Delaney and Barnhardt also stress that applying these concepts requires discipline.
But, Barnhardt adds with the excitement of a kid at Christmas, “You can make fantastic money in this
business consistently. The profit opportunities are out there everywhere all of the time.”
For the full KRIRM study, go to http://krirm.tamuk.edu.
Profitable cattle trading

Post by ddd75 » Sat Oct 14, 2017 6:36 am
living near 5 sale barns and at the height of the cattle market i would buy 800 lb heifers and breed them
to m bulls.. sell them as bred heifers. turned a 1100 dollar cow into 1800 in a hurry.

other then that best bet is to go to low volume markets and buy cheaper.. try to put together some good
groups of 20+ hd all same weights.. get them all lookin good with all the same tags.

by farmerjan » Sat Oct 14, 2017 9:57 am

On years we have grass and water, buying thinner cows with calves or heavy breds, then turning them
over when the calves are ready to wean.
Have managed to get a few nice cows and some keeper heifers over the years, and sold alot of middlin
ones in the process. Often we can put some weight on the cows, and the calves will bring okay prices.
Not alot of monetary gain, but enough to pay for a few of the pasture rents over the years

by True Grit Farms » Sat Oct 14, 2017 2:44 pm

Myself I'm buying thin young cheap bred cows, haven't lost any money doing that yet, but sure ain't
getting rich. My way of thinking is cattle are a gamble, and don't spend more than you can afford to
lose on them.