Drought conditions in much of the western United States have improved, leading to opportunities for cow-calf producers to rebuild beef cow herds. Given lower beef cow herds, many producers will need to borrow funds to purchase replacement heifers. We investigate how financial positions are impacted by leveraged replacement heifer purchases. The results are useful to producers and bankers. We suggest alternatives for financially struggling producers, including delay rebuilding to avoid significantly increased financial stress

Intensive capital requirements relative to cash flows available inhibit the entry of beginning producers into the cattle industry. Here, we propose and analyze a strategy for beginning ranchers to build a herd. Over a three-year cycle, new producers borrow cash needed to purchase 450- pound heifers in the first year, breed heifers, sell open heifers and bull calves, retain heifer replacements, rebreed the two- year-old cows, and eventually sell bred two-turning-three cows 27 months after the initial heifer purchase. The goal is to retain a group of debt-free heifers. Analyses conducted over 14 cycles of 27 months each across three cattle markets, Oklahoma, Nebraska, and North Dakota, indicate that this herd- building strategy appears to be financially feasible for new producers, in most cycles. Positive net cash flows occurred for producers in Oklahoma for 13 of 14 cycles, 11 of 14 cycles in North Dakota, and 10 of 14 cycles in Nebraska. Positive net returns were realized in at least 12 cycles in each location. Sensitivity analyses were conducted on revenues and costs to evaluate the robustness of the strategy.

An aging farm population, increasing demand for beef and lessening drought conditions suggest opportunities for new beef producers. However, high cow prices and land values may create barriers to entry. This paper evaluates leasing and purchasing options for both land and cows. Investment and operating cost assumptions are explained along with loan alternatives for beginning operators. Whole farm financial statements are generated and resulting net cash flow, line of credit and total debt levels are projected for five years. Leasing cows and land is found to be a viable means of entry. Only with outside income can cows be purchased; significant levels of outside income are needed to purchase land.

The drought of 2011 forced many cow-calf producers in the U.S. Southern Plains to liquidate cow herds. Rebuilding cow herds poses financial challenges for many, perhaps most, producers. While liquidation strategies varied between individuals, producers who completely liquidated breeding herds will likely face significant cash flow challenges to rebuilding. Here, we develop and analyze three rebuilding strategies, including slow-rebuilding using summer stockers, fast-rebuilding by purchasing bred cows or cow-calf pairs, and cow leasing with heifer retention. Our analyses indicate that rebuilding appears to be financially feasible for producers with healthy pre-drought financial positions.

Managing risk is required for many farm enterprises to be profitable. Contractual arrangements — such as livestock leases — can be crafted to lend or transfer capital, while also sharing risk. The terms of the agree- ment depend on the contributions of the owner and caretaker, as well as the motivation for the lease. A lease agreement may be the means for an older owner to compensate a livestock caretaker. A pasture producer or owner may also use a livestock lease agreement to generate income without committing labor or additional capital. Through lease arrangements, the livestock owner shares with a caretaker the production risks, expense, and returns. While the owners may give up a portion of the risk, they may also give up some of the decision- making power. For a successful relationship between the owner and caretaker, the following elements should be present: