Balance

Posted July 1st, 2007 — Filed in Bud's Musings

We in the livestock industry should keep a proper balance of assets which are:

1. Money
2. Feed
3. Animals

If we start out with money and we use some of it to buy land that will grow feed, we will have feed to sell. This feed can be grain or hay or pasture. The grain can be sold. The hay can be sold, and the pasture can be custom-grazed to generate income. Or we can use it to feed our own animals. When we use animals as a way to sell our feed, the proper balance of our assets is very important.

If we buy animals, they cost us the money we pay for them but also the feed they will eat.

If we own animals, they cost us what they could be sold for, plus the feed they will eat.

If we sell animals, they return the money plus the cost of the feed they would have eaten if we had kept them. If we have too many animals for the available feed, then we must have money to purchase more feed or we must sell some of the animals. The sooner we get this in balance, the better it will be. When we sell animals, some of the money can be used for us to spend, the rest must remain in the business. This will allow us to have money to buy more animals as we grow more feed.

When we sell and how we sell our animals is very important. How much they gain will not help much if you loose money on them. It seems like proper marketing gets more important every year. A big animal that is gaining fast but is overpriced should be sold. The profit is in selling an overpriced animal, not in how much it is gaining. If it keeps on gaining but goes to being underpriced, when we finally sell that will wipe out the good gains, and we could even end up with a loss. If the animal is overpriced, it should be sold and an underpriced animal purchased to replace it. This is always possible because an animal can only be overpriced if another class or weight of animal is underpriced. Or we can keep the money and feed that they won’t eat if they are the underpriced thing.

Keep a balance and you can Smile and Mean it!