Are you seeking a business opportunity that combines your love for nature and animals? Then, starting a cattle farm may just be the perfect fit for you!
There’s more than meets the eye when it comes to starting a cattle farm. Sure, cattle ranching may seem like a romantic business with beautiful vistas and cows grazing peacefully. However, building a successful and profitable cattle operation takes grit, business savvy, operational expertise, and plenty of capital. If you’re ready to explore the world of cattle farming, this guide will provide you with an overview of the business, step-by-step instructions, and answers to common questions.
Business Description
A cattle farm is a business that raises cattle for various purposes, primarily for meat (beef), dairy products, and breeding. The farm may also sell calves and cows to other farms or businesses. Revenue comes predominantly from selling fattened cattle by the pound. Additional income may come from selling calves and older cows for breeding stock or even organic manure.
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Industry Summary
The cattle farming industry in the United States is a significant sector of the agricultural economy. According to the United States Department of Agriculture (USDA), annual beef production totals about 27 billion pounds, with cash receipts of around $66 billion.1 The industry’s size and projected growth are driven by several factors, including increasing demand for beef and dairy products, technological advancements in cattle breeding and management, and favorable government policies
Steps To Start A Cattle Farm
Step 1: Write a Business Plan
A cattle farm is a complex business. There are many moving parts, and it is important to have a plan in place to ensure the success of the farm. A business plan is a document that outlines the goals and objectives of a business. It also includes a detailed plan of how the business will be operated and how it will generate revenue. There are a number of reasons why a cattle farm needs a business plan. A few of these include:
Clarifying your vision and objectives: A business plan compels you to define your vision for the farm. What kind of cattle will you raise? Are you focusing on beef, dairy, or breeding? How do you envision the growth of your farm over the next five, ten, or twenty years? This clarity is useful in creating a roadmap and in setting realistic goals.
Financial planning: From purchasing land, cattle, and equipment, cattle farming requires substantial investment. A business plan helps you calculate these costs and project profits to see if it is a feasible business.
Financing: A business plan will help you to secure financing. If you are looking for financing from banks or other lending institutions, they will want to see a business plan. This document will give them an idea of your farm’s financial feasibility and your ability to repay the loan.
Related: How to write a business plan
Step 2: Source Funding
Starting a cattle farm can be expensive, and after writing the business plan, the next step is to make sure you have access to the funds. Let’s look at some common funding sources for a cattle farm.
Personal savings are the starting point when looking to finance your cattle farm. This approach lets you leverage your existing funds to start the operation without worrying about repaying loans or meeting investor expectations. Given the high starting cost, outside funding will be necessary if personal funds aren’t enough.
Turning to bank loans is a popular option, and many commercial banks, agriculture banks, and credit unions offer agricultural loans specifically tailored for livestock farming. The Small Business Administration (SBA) and the United States Department of Agriculture (USDA) provide loan guarantees, reducing the risk for banks and encouraging them to lend to aspiring farmers.
There are several government grant and subsidy programs that are sometimes available for starting or expanding a cattle farm. These are often provided through a state Department of Agriculture or Extension office.
Last, consider seeking out investors who are interested in the agricultural sector or friends and family who would invest in your business. While this can be a substantial source of funding, it often involves giving up a share of the business, so weigh the pros and cons.
Related: Finding the money to start a business
Step 3: Register the Business
Starting a cattle farm involves various legal steps to ensure that your business is properly registered and compliant with local, state, and federal regulations. Requirements vary by state, but here’s an overview of what you need to do.
Choose a business structure:
- Sole proprietorship: This is the simplest and least expensive business structure, ideal for individuals starting a small-scale cattle farm. The ease of startup and lowest cost are the main advantages. However, this structure offers no liability protection, meaning your personal assets could be at risk if your business encounters any legal problems.
- General partnership: If you’re starting the farm with one or more partners, a general partnership is an option. This structure allows you to share the responsibilities and profits of the business but, like a sole proprietorship, it offers no liability protection.
- Corporation: A corporation is a separate legal entity that provides liability protection to its owners. However, it is more complex and expensive to set up.
- Limited Liability Company (LLC): An LLC combines the advantages of a corporation and a sole proprietorship or partnership. It offers liability protection like a corporation but has administrative requirements.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
Obtain business licenses and permits: The specific licenses and permits you’ll need depend on your location and the nature of your cattle farm. They could include a livestock dealer license, a feedlot permit, or a dairy farm license. In some areas, there are regulations for water use, waste management, and zoning to consider, so check with your local and state government to determine what is required.
In addition, there will likely be a variety of general business registrations needed before opening. These could include a business license, seller’s permit, and Employer Identification Number (EIN).
Related: State guides for general business licensing
Step 4: Acquire Property & Set Up Operations
Now comes the exciting part of starting a cattle farm, where you begin setting up the operations.
The first task is to acquire a suitable property. The size and location of the property will depend on the scale of your operation and the type of cattle you plan to raise. While choosing the property, ensure that it has enough space for grazing, feeding, and sheltering the cattle. It’s also important to consider the quality of the pasture and the availability of water sources for the herd.
Once you have secured a suitable property, the next step is to set up the necessary infrastructure for your cattle farm. This includes fencing to secure the property, barns or shelters for the cattle, and troughs for feeding. You may also need to invest in farm equipment, such as a tractor, and supplies for the cattle, such as hay and grain. To keep the cattle healthy, it’s essential to provide clean water, a nutritious diet, and a clean living environment.
Step 5: Prepare to Launch!
As we wrap up our guide for starting a cattle farm, there are a range of additional tasks that will need to be tended to. Everyone will have different needs, but here are a few common ones to look at:
Business insurance: Common types of insurance for a cattle farm include general liability insurance, property insurance, and livestock insurance. These coverages protect against various risks like property damage, accidents on your farm, and the health of your cattle.
Setting up bookkeeping: To track expenses, income, and prepare for tax season, you can either hire a bookkeeper or utilize software solutions like QuickBooks, FreshBooks, or Xero.
Opening a business bank account: Setting up a dedicated bank account for your farm helps in managing finances efficiently.
Creating a marketing strategy: Depending on your business model, you may want to work on a strategy to promote your farm. This could include creating a logo, building a website, and utilizing social media or local advertising. Consider attending local farmers’ markets or joining food cooperatives to increase visibility. It’s worth noting that in some states, you must register your livestock brand with the state’s Department of Agriculture.
Common Questions When Starting A Cattle Farm
How much does it cost to start a cattle farm?
Starting a cattle farm can be a substantial investment, with costs typically starting at $1,500,000, though land prices can push this number much higher. Here’s a breakdown of the typical costs involved:
Land and facilities: Estimated at $800,000 – $1.5 million. Includes cost to purchase suitable grazing acreage, existing barns/infrastructure, plus any needed upgrades like perimeter fencing, equipment sheds, water, and feed troughs.
Startup cattle herd: Around $500,000 for purchasing breeding cows, bulls, calves, and weanlings.
Farm equipment: Roughly $100,000-$150,000 for essentials like trucks, tractors, squeeze chutes, Balers, etc.
Initial feeds & supplements: Approximately $75,000 for hay, grain silage, vitamins, and minerals to cover the first 6-12 months.
Business registration & licensing: $1,000 for incorporation filing fees, livestock dealer licenses, brand registry, etc.
Insurance coverage: $5,000 for the first year to cover general liability and cattle mortality.
How profitable is a cattle farm?
Determining the exact profitability of a cattle farm can be challenging as it depends on a variety of factors like location, scale, management practices, and market conditions, but a cattle farm with a herd of 200 cattle could generate around $300,000 in annual revenue.
Assuming an average selling price of $1.50 per pound for fattened cattle and an average slaughter weight of around 1,250 pounds, a cattle farm selling 200 head per year would produce 250,000 pounds of beef. At $1.50 per pound, that equates to $375,000 in annual beef sales revenue. Factoring in approximately 20% calf and cull cow sales, total yearly revenue could reasonably reach $300,000.
Variable operating expenses, including feed, veterinary services, transportation, and cattle purchases, would likely cost about $125,000 for a 200-head farm. Fixed overhead costs like interest, repairs, insurance, taxes, and labor might total another $100,000.
That results in $75,000 in potential average yearly pre-tax profit for a cattle farm with 200 head of cattle at today’s beef cattle prices and reasonable efficiency.
Of course, profitability ultimately depends on factors like cattle weight gain, operational costs, and cattle market prices. But with diligent management, mid-sized cattle farms can profit from $50,000 to $100,000 per year.
Often, small to midsize operations have difficulty making enough on cattle alone to sustain the farm. So, many farms also generate income from other sources. However, cattle farming can be a great way to make additional income each year for a small operation. Mid- and large-size operations generally do better at sustaining profits when they keep overhead costs low.
What skills are needed to run a cattle farm business?
Farming can be a rewarding business venture but requires work and sharp business acumen. Although many tasks can be hired, certain skills will help your cattle farm thrive.
Operational organization: The farm has countless moving parts between raising cattle, cleaning stalls, selling your herd, and planning for the next season. Owning a cattle farm requires organization. You must be able to manage your time to accomplish daily tasks and keep your cattle healthy and thriving.
Should you hire employees, such as farmhands, veterinarians, accountants, and marketing managers, you must organize and manage your employees to ensure the operation runs efficiently. So, it is helpful to come into the business with expert organizational skills.
Cattle knowledge: Cows often keep to themselves by grazing for most of the day, but they still require attentive care. Certainly, you could hire skilled employees to help with the fine details of cattle farming, but knowing what to watch for in illnesses, injuries, or potential harm can protect you from herd loss.
Also, to ensure efficiency and profits, it helps to know how to feed and water your cattle to raise them to competitive market weight. Similarly, when breeding cattle, learning how to care for pregnant and lactating cattle helps promote healthy offspring.
Understanding of economics: Since beef sales fluctuate based on market demands, it is valuable to understand how the beef market works. On that same note, understanding the economy and current market trends helps assess profit margins, potential growth, and possible declines.
Marketing: Whether the beef market is up or down, you will need to sell your cattle for profit to keep operations running. So, having a marketing plan can help you succeed in this area. However, if marketing and sales are not a strength, it may help to hire a marketing manager to coach and assist with your marketing plan.
What is the NAICS code for a cattle farm business?
The NAICS code for a cattle farm business is 112111.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?
