Wondering about this?

[roly]

In Saskatchewan gas is $1.10 a Lt it has cost me $520 to put my car on the road and a 640 acre farm is $300.000

In the UK gas is £1.6 ($ 2.24 ) a Lt it cost me £915 ($1910 ) to put my car on the road and a 50 acre farm is £450.000 ($939.000)

Yes the grass is greener on the other side

[roly]

In Saskatchewan gas is $1.10 a Lt it has cost me $520 to put my car on the road and a 640 acre farm is $300.000

In the UK gas is £1.6 ($ 2.24 ) a Lt it cost me £915 ($1910 ) to put my car on the road and a 50 acre farm is £450.000 ($939.000)

Yes the grass is greener on the other side

[farmers_son]

I have been to the UK and the grass was real green over there, literally.
Beautiful country, nice people too.

[blackjack]

...and f_s that is what will happen...more absentee owners...while cswilson is stuck to his piece of property those other native saskatchewan dudes out working here in alberta will go back and push his land values up above what his cows will be able to afford...then he will be stuck wondering what happened when his low cost efficient cows can't compete with the businesses from other industries...one thing horse is right about...along there is a tax dodge for those that make money outside the business of farming ...there will always be people willing to run a cow to beat the tax man...

[coppertop]

I think in Alberta we need to do a realty check and recognize that we are a lot better off than we were before BSE, not in cash flow but in land values.

When I hear roly compare land and gasoline values it does make me realize that we are very fortunate here.

[kpb]

roly, I don't doubt that the prices are much higher in Britain but cattlemen there are not trying to make a living off of 50 acres without government support. Here we are attempting to maintain an industry that does not receive regular government subsidies. We would like to keep it that way if we can.

In regards to land, farmers_son, it has always been so that ranchers move from an area that is becoming popular and developed to areas that are cheaper and far from towns and cities. The reasons 100 years ago are the same as those today--cheap land is the only way to make a profit raising cattle. You don't have to move to Sask. to do this--there is lots of cheap land in northern Alberta. I think the secret to success in cattle country is to run an extensive, paid-for operation on lots of cheap land with efficient cattle that calve in the spring. Hire someone to custom cut your own hay on unfertilized hayland. Feed with a half-ton and a bale hauler(or like cswilson, with horses). Raise your own replacements.

Your costs would be next to nothing--no transportation costs to pasture, no land costs, no machine costs, custom hay cutting and baling will cost about $10 a bale so, say, $60 to feed a cow over the winter. I think your margins on this kind of operation could be $400 per calf.

If you bought a ranch in northern Albert for, say, $800,000, you could run 250 cows, feed them and, with current prices, net out, I think, more than a 10% return on capital.

I think that will work. I don't think running cattle on a section in central Alberta where the land prices are $2,000 an acre and rising and you've either got to buy winter feed or transport the cows to summer pasture and pay pasture rent of $30 a month, then ship them home, will work anymore. Sure if your land is all paid for you and you've got no kids you can scratch out a living. But you're really only deluding yourself because all that money you could get out of the land is not generating a good return. Or at least not the return you can get somewhere else or in a comparable investment.

kpb

[rkaiser]

The land of illusion Mr.Wilson, the land of illusion.

Drove into town this aft - and saw the illusionists in action. Multithousand dollar tractors pulling multithousand dollar machines,putting mutithousands of dollars worth of fetilizer (soon to be followed by multithousands of dollars of chemicals) on their land telling those who look on that they are actually making the money to buy all this stuff with the comodity that they are producing.

Not much better at the action market where the new pickups pulling aluminum trailers leave the same impression on the town folk. Across the street at the diner, the restaraunteur pulls the best magic trick of all, setting wonderful D1 cow beef in front of a customer with more wool over his eyes than the broke back cowboy himself.

Alberta, the land of illusion.

[grassfarmer]

Good posts kpb and rkaiser. As you say kpb, rented land or grazing arrangements looks to be the big opportunity here in the future. I know I have enough of a landbase that I won't be in a rush to buy more land - the opportunities to rent, graze, buy feed around here are commonplace if you are prepared to think outside the box.

I think the subsidy issue is actually a bit of a red herring - the money paid out is all bid into inputs, land prices, fuel , machinery etc leaving no great benefit to the producer. I know friends of mine with a large, high quality operation in Scotland running 450 beef cows, 1000 breeding sheep, growing all their feed and fattening all their progeny got the equiv. of $293,000 subsidy this year. That may look huge to readers in Canada but believe me I would rather be farming here than there - you really are no better off at the end of the day with these seemingly huge sums.

[pmckenna]

We sure have a lot of land under water in Alberta this year. Outcome unknown.

Secondly, why not to rent out land to larger operations? It's time has come. Business for lifestyle may not be always viable in all cases.

Keep the land (it'll only go up, we all know that) and let specialists do the work, at least for some.

Any comments about this?

[coppertop]

kpb, there are a couple of drawbacks to cattle ranching in the north, particularly some areas of the Peace.
In some areas water is an issue, operations are reliant on dug outs even for domestic use.

The remoteness is another issue, long distances from markets for cattle, plus long distances from services such as schools, hospitals etc. for people living on the land.

There are certainly some areas where land prices are significantly less than in most other areas of the province, but Land prices in the areas closer to large northern urban centres are creeping up in value, so there are many things to weigh before a producer would choose to sell in central AB and relocate north.

[farmers_son]

Pmckenna: You asked for comments about renting to larger operations. About three years ago a Hutterite colony rented quite a bit of land from surrounding landowners.

What has happened this year is the colony has stopped renting the land. The landowners no longer have the ability to farm their own land for various reasons. The impression is the Hutterites are trying to force the surrounding landowners to sell to the colony. No other renter is willing to come in this year and there is the concern that it would be a one year shot anyway because next year or as soon as it looked like there was a profit in farming the Hutterites would chase the renter out.

The decision to rent out your land is a major strategic decision. Producers need to realize that once they go down that road they quickly loose the ability to farm the land themselves, whether for equipment reasons or because the cash flows have changed. Maybe existing labour went elsewhere and is no longer available.

Anyone considering renting their land needs to keep in mind the impact on their CAIS reference margin due to downsizing.

[farmers_son]

Kpb and others: High priced land, low priced land. The land will be a good investment if it can generate sufficient contribution and well as growth in market value. Unproductive land may not be able to generate any contribution to fixed costs at all. I define contribution as annual revenues minus variable expenses. The money left to pay taxes and other fixed costs.

So which is a better investment, high priced land or low priced land.

I did a simple spreadsheet to calculate which is the better investment. A quarter of land purchased for $2000 per acre which was capable of generating $80 per acre contribution, taxes $500 per quarter would earn a 5% return assuming the land was worth $3570 per acre after 20 years.

By comparison land which could be purchased for $200 per acre which only earned $7.50 per acre contribution, paid $300 per quarter taxes would have to be worth $374 per acre after 20 years to generate the same return.

Both the high and low priced land would have had to appreciate by 78% over 20 years.

While given these assumptions both high and low priced land would be roughly equal quality investments the investors ability to cash flow any financing costs would have to be considered as either investment could not generate sufficient cash flow to cover financing payments.

[blackjack]

...well kpb normally i agree with you on your knowledge of the ranching business ... our operation moved from east central many years ago cause of the difficulty of putting up enough feed to get through the winter ...to an area that grew the supply of feed we needed... we found it has been easier to move the cattle than the feed...but then again we have done most of the trucking ourselves ...as like it is with buying cattle it only works if the price is right... the same for buying land...my opinion...by the way the land where i live now will produce 5 times as much forage year in year out as the land out east...

[kpb]

farmers_son, are we to be land speculators or ranchers? Land has gone up but it can also come down. I grant that we all attempt to buy land at the lowest price possible but my point in posting in this thread was to show that there are parts of Alberta where the land can be bought now and can return in excess of 7% cash flow to its ranching owners based on the cows alone. There are other parts, mainly in the south and central areas, where this is not possible.

I have owned land in both places for many years and you are correct in that land that originally cost more will quite often appreciate more also. This has been my experience, for sure, although my north ranch has also grown in market value. But it is not possible, in my opinion, to buy enough land in the south and central to put together an economically viable ranch that will provide a good return on dollars invested. This is possible, still, in the area northwest of Edmonton--which I am familiar with--and likely also around Grande Prairie and Peace River.

blackjack, as you said you and I rarely disagree and I always read your posts with interest because our operations are so similiar. I don't think we disagree here, either. My southern ranch has been a great place to background calves and have a cow-calf herd in the past because of the proximity to grain, good weather and good markets. The land up north will graze almost the same number per quarter as down here but it's far away from markets.

blackjack, my problem now is getting the animals up there. It's a five-hour ride from the south to the north ranch which cost me just over $1,600 last summer. At 40 pairs per load that's $40 per pair up and, say $50 back (you need an extra liner for the growth in the calves). I've thought about transporting my own, which you said you do, but have wondered about the costs of running my own liner??? The other alternative is to buy steers to use on the grass up there from markets up there. We've done that before and it has worked very well.

Although I run a cow-calf, background and grass operation which has, in the past, helped us through the bad times, the point of my original thread was that it is possible today to buy a ranch, run cows with an efficient, low-cost operation, sell the calves and make a good return on your money. In Alberta. Without appreciation on the land. But not, I think, in the corridor. So, if I have money invested in the corridor and I want to remain in the cattle business as my sole income, maybe I should take my dollars out of the over-priced land here and put them somewhere they can give me a better return.

kpb

[PureCountry]

blackjack, if you don't mind my asking, where did you move from and where to? Just curious.