Leasing Beef Cows

in-too-deep

Well-known Member
Morning All,

Have a friend and neighbor who has approached my wife and I about leasing us some of his cows. He's looking to retire from cattle in the next couple years, but doesn't just want to sell them flat out and he wants to see us grow our herd. Basically, the terms go like this: We choose the cows (maybe 15 or so bred females) We feed them, care for them, vet bills, chores, fence, pasture, the whole thing, just like they belonged to us. Come time to sell the calves, he would receive 1/3 of the proceeds and we would keep 2/3. Terms would then be re-negotiated after 12 months. Don't know how an actual purchase would go, but this is more of a rental kinda thing. We pay 1/3 of the calf crop for the use of the cows 12 months at a time. Right now is a poor time to buy cows, because they're so high-priced. On the other hand, 500 lb calves are topping $3, so it's a good time to expand the herd. Leasing might work?

Make sense?

Has anyone ever done such a thing?
 
Linda and I bought a beef herd in '83. we paid "open cow" price for all the females although most were bred back. Made an agreement with the seller that they would get the bull calves the following spring, and we would keep the heifer calves. Worked well for us, as we wanted to grow the herd at that time.
 
Personally I would rather have a set dollar figure but that agreement might work too. Put a pencil to the figures and any agreement that is OK with both of you should work.
 

I think 1/3 of the calf crop proceeds would be more than I would be willing to pay to lease the cows. 3 to 4 yrs of lease payments would pay for some quality cows.
 
If the goal is to move forward without debt then it sounds OK. You maybe could do better but take what you can get when you can get it.

Rick
 
Good question. Hadn't thought about that. Neither of us would get any income from the calf that would've been, and I'm out the feed I put in her. Hmmm. I suppose it'd be like if one of my cows dies.
 
I see what you mean. Dollar amount is easier to plan with. However, paying in calf proceeds allows for some wiggle room with the markets if they go up or down from when the agreement is made.
 
Agreed. Way too steep, even at these calf prices.
I would love to have no risk and still get back 1/3
for doing nothing wouldn't you? On $1200+ feeders,
that's a nice chunk of income you're losing.
 
(quoted from post at 11:54:13 10/20/14) Good question. Hadn't thought about that. Neither of us would get any income from the calf that would've been, and I'm out the feed I put in her. Hmmm. I suppose it'd be like if one of my cows dies.
wouldn't let it pass as "I suppose". He might be thinking that, "I left you with a healthy cow, so I want a healthy cow back at end of lease or pay me what she was worth when I left her with you".
 
So, how about leasing as a means to purchase the cow? For example, I take care of the cow, and pay him 1/3 of the calf crop for a number of years 3? 4 years? At the end of that predetermined time, the cow would be ours free and clear. That seems to make more sense than just renting.
 
People out here do it all the time.

One third rent is pretty good terms; last I heard, it was 50-50, but that's with the owner footing the vet expense.

Also, if one dies, you just bought her.

Allan
 
What's the incentive for the person who is leasing? Pay all the bills except vet and then give back 1/3 of the income?
 
To many loose ends on a deal like that. What about the aging cows (decreasing in health and in value)? What about if one dies, or something happens to one and it needs taken out of production and sold? What if some of them end up not bred and don't have a calf? What would you do on replacement heifers for the decreasing cow number. What will you do when the bull needs replaced? If he provlding pasture and hayground, what are you going to do on a dry year when hay will have to be bought? I would say no to this deal. It would be alot better deal if he sold you the cows and rented you the land. That would be alot better way of handling it. If he considering financing you to get you started, then selling them to you on some sort of contract with dollar figures would be the way to go I would think.
 
Those type arrangements work if the person leasing the cows has plenty of cheap pasture, hay and feed, otherwise, the 1/3 the owner is getting is most, if not all of the profit.
 
Maybe instead of lease a straight out loan.with what the banks offer on interest he might be better of selling to you and you pay him interest and principal payments instead of selling the cows and putting the money in the bank and getting interest from the bank.
 
There are numerous reasons why the lease will and won't work. On the owners part, he isn't paying a bunch of income/capital gains tax. Your part, you aren't borrowing a bunch of money.
I leased a bunch of cows, back in 1995, and lost my butt. I didn't have all the bases covered. I think I could do it now, but there would be LOTS of things in writing.
Make sure you know how pays for the deads, opens, and OLD cows. Your bulls or his? Is his calving time frame going to work for you?
I wouldn't do it for less then 70%, IF he replaces the old cows. If YOU replace, and retain ownership of the new cows, then maybe 1/3 2/3s would work.
email me if you want to talk about it.
 
My gut tells me that "sort of" owning cows is not a good idea. You're right, it's a terrible time to buy and a good time to sell so that makes it tempting.

How bred are these cows? The pitfall I see is that you are gambling on the cattle market 15 to 18 months from now vs. the feeding of 15 pregnant and nursing mamas without the recourse of their salvage value if they don't calve or lose a calf.

Do you have enough feeding plan for the extras now that we're getting into winter? How is your pasture capacity with the current group? What is your current margin? Is there enough left for your labor after you peel off a 1/3 of it?
 
in-to-deep: The lease will work IF you have a good working relationship with the owner of the cows.

The fellows that say the owner is doing nothing and receiving a 1/3 of the calves is forgetting the owner has a capitol valve of the cow. Which a breed cow right now can easily bring $2000-2500.

Just spell out what happens if the cow dies, or she is open, or the calf dies. These are the big things.

The question I have for you is? Do you have the pasture and feed for the additional cows??? IF you can answer yes then I would go for it. If you don't have the feed or the pasture then I would pass.
 
Yes, I have some cows on shares. I also get summer pasture in my deal so it's not the same split but 2/3 sounds good for what you are doing.
 
Think "cash flow" It is easier to make something
work when you can live off the proceeds and not
have to shovel them all back into the program.
I've had both owned and share cows for many years.
Still do.
 

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