How to Start a Cattle Farm
Cattle farms make up a large share of U.S. agriculture. Not only has the industry grown, but overall cattle weight has increased over the years. By today’s standards, regular market-weight cattle weigh 1,300 pounds, supporting many Americans’ diets.
So, whether you are looking to start a hobby farm on your property or a large operation, your contribution to American agriculture holds great significance in keeping Americans fed, and the economy flowing.
Business Description
Cattle farms come in many forms. For instance, a hobby farm is typically a small operation run on a homeowner’s land. However, cattle farms also operate as mid-size to large operations on individually or business-owned land.
Two common types of cattle farms are
- feedlots—farms that purchase weaned calves and raise them to be sold to meat processors.
- cow-calf operations—farms that breed cows and raise the calves to be sold to dairy farms, grass-fed farms, or feedlots.
In both types of farms, a cattle farmer is responsible for raising, feeding, and maintaining the herd’s health. Farmers must also maintain the grounds and administer medications or vaccinations to prevent illness and disease. Cow-calf farmers also assist in the breeding process.
Industry Summary
In the U.S., there are over 818,000 beef farms, generating $78 billion annually. As meat and poultry hold one of the largest segments of U.S. agriculture, it is no surprise that the industry has seen continual growth. Over the last five years, cattle farming has grown 0.6% yearly, and in 2022, the industry has increased by 4.6%.
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Industry Trends
Although there has been growth over the last few years, cattle farms face several hurdles that can affect growth and profits, such as keeping up with the rate of economic growth:
Consumer Demands
Consumer demands largely determine growth. For instance, dietary trends, weather, and diseases play a part in the fluctuating value of red meat. With a huge focus on health, the amount of red meat consumed by Americans has declined over the years.
Maintenance Costs
With the rising cost of supplies and materials, cattle farms have become costlier to maintain. Increased costs affect food, water, medication, and materials.
Because cattle require plenty of land, the cost of maintaining the land is a significant consideration. For instance, a cow grazes for six or more hours each day and drinks about one gallon of water per 100 pounds of body weight.
With the average full-size cattle weighing 1,300 pounds, each cow drinks about 13 gallons of water daily—pregnant and dairy cows need twice that amount. In areas of drought, the demand for water alone can hinder your growth and could become a large expense.
Herd Loss
Another challenge is unexpected losses, which directly affect your farm’s profits. For example, widespread disease and weather conditions are hazards. Weather such as hurricanes, tornados, and drought cause significant herd loss or force farmers to downsize. In addition, illnesses such as respiratory and digestive conditions are leading causes of illness-related cattle loss.
Target Market
Small operations, such as hobby farms, may sell cattle directly to consumers, but most operations sell their cattle to other businesses. For example, a cow-calf farm may market to other cattle farms like feedlots or dairy farms. Conversely, a feedlot or beef farm sells its cattle to meat packers who process and sell the meat to grocers and restaurants.
Some cattle farm operations will set up fixed-price contracts with packers and sell their cattle before they reach market weight. This strategy stabilizes the value of beef for farmers since the value fluctuates based on market demands.
However, many contracts may have an open price, meaning the meat packer has agreed to purchase a set amount of cattle, but the price changes daily based on the market.
Checklist for Starting a Cattle Farm
Are you thinking about starting a cattle farm? It’s a big decision, but it can be a rewarding and profitable venture. Here’s a checklist to help you get started.
Step 1: Write a Business Plan
When it comes to starting a cattle farm, there are many important factors that need to be considered. One of them is creating 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.
A business plan is an essential tool for any business, but it is especially important for a cattle farm. There are a number of reasons why a cattle farm needs a business plan.
1. 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 stability and your ability to repay the loan.
2. A business plan will help you to track your progress. As your farm grows, it is important to keep track of your progress. A business plan will help you to do this by setting milestones and objectives. You can then review your progress and make necessary changes to your business plan.
4. A business plan will help you to avoid pitfalls. There are many potential pitfalls that can occur when starting and running a business. A business plan will help you to identify these pitfalls and avoid them.
Related: How to write a business plan
Step 2: Name the Farm
When it comes to naming a cattle farm business, there are a few things you need to keep in mind.
First of all, the name of your business could be reflective of the type of operation you run. Are you a small, family-run farm? Or are you a large-scale commercial operation? Your name could reflect the size and scope of your business.
Another consideration is the location of your farm. If you’re located in a recognized region, you might want to consider incorporating the region in your name. This will let potential customers know your business is local.
You’ll also want a name that’s easy to remember and pronounce. After all, you don’t want your customers to have to guess how to spell your farm’s name when they’re looking for it on the internet or in the phone book.
Finally, keep in mind that the name of your cattle farm business should be unique. You don’t want to choose a name that’s already been taken by another business. Not only will this make it difficult for customers to find you, but it could also get you into legal trouble.
Related: Tips on naming a business
Step 3: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a cattle farm business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
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The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
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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.
Some popular LLC formation services include:
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Step 4: Apply for Business Licenses and Permits
Before you can start your goat farm, you will need to obtain the proper licenses and permits from your local government. Check with your state’s Department of Agriculture to see what regulations apply to raising cattle and selling meat.
Additionally, a local business license and sales tax permit may be needed as well.
Related:Â Common business licenses, permits, and registrations by state
Step 5: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a cattle farm business is another. Â The cost to start a new cattle farm business can be quite high, especially due to the cost of land.
Banks are typically going to want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Related:Â Finding the money to start a business
Step 6:Â Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
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Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 7: Get your Marketing Plan in Place
If you’re thinking about ways to promote your cattle farm business, there are a number of options available to you. Here are just a few of the many ways you can get the word out about your business and attract new customers:
One of the best ways to promote your cattle farm is to get involved in your local community. Make sure you’re active in local events and organizations and that you’re letting people know about your farm. You can also promote your farm through word-of-mouth marketing by making sure that everyone who comes to your farm has a positive experience.
Another great way to promote your farm is to create a website and social media accounts. Make sure your website is professional and up-to-date and that your social media accounts are active and engaging. Use these platforms to share photos, updates, and special offers with your followers.
Finally, don’t forget about traditional marketing techniques like print ads, billboards, and radio spots. These can be effective in promoting your farm to a wider audience.
By using a combination of these marketing strategies, you can be sure that more people will learn about your farm and what you have to offer.
Related:Â Low-cost ideas to market a new business
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Step 8: Get Business Insurance
As a cattle farm owner, you need to make sure your business is properly protected with the right insurance coverage. There are a variety of insurance policies that can be tailored to fit the unique needs of your cattle farm business. Some of the most important insurance coverage for a cattle farm includes:
Property Insurance: This type of insurance protects your farm buildings and equipment from damage or loss due to a variety of perils, such as fire, wind, hail, and theft. Liability Insurance: This type of insurance protects your business from being held liable for bodily injury or property damage that occurs on your farm. It can also provide coverage for certain legal expenses if you are sued.
Cattle Insurance: This type of insurance protects your cattle herd from death or disease. It can also provide coverage for lost income if your cattle are unable to be sold due to illness or death.
Workers’ Compensation Insurance: This type of insurance is required in most states if you have employees. It provides coverage for medical expenses and lost wages if an employee is injured while working on your farm.
Business Interruption Insurance: This type of insurance can provide coverage for lost income and expenses if your farm business is interrupted due to a covered event, such as a fire or severe weather.
There are additional types of insurance coverage that may be available for your cattle farm business, depending on your specific needs. An insurance agent can help you determine which types of coverage are right for your business.
Step 9: Hire Employees
Depending on the size of the farm, employees may be needed to help with farm chores, such as feeding, watering, and cleaning the cattle’s living environment. A farmhand typically earns $16.62 per hour, whereas marketing managers and accountants cost slightly over $20 per hour.
Each state has different requirements for hiring employees. Related:Â Hiring your first employee
How much does it cost to start a cattle farm business?
Starting a cattle farm takes an investment of time and money. Expenses such as business formation costs, land and cattle purchases, and supplies influence the initial costs of getting started in this industry and assessing season-to-season overhead.
Business Formation. As with any business, you will need appropriate licenses, insurance, and permits to begin. Each state varies in costs and required permits.
Land & Facilities. The land purchase will use a large portion of your start-up costs unless you already have land. Depending on your cattle, you may need to purchase a considerable amount of land and pastures to support your herd.
For instance, one cow needs between one to two acres of land unless you supplement their diet with feed. According to the United States Department of Agriculture, in 2021, farm real estate’s average cost was $3,380 per acre.
Additionally, facilities such as a barn, water sources, shelter, etc. will need to be set up as well.
Livestock. After you have licenses, permits, and land, you will need to consider cattle costs. Usually, the cost of a cow is based on weight and runs between $1.35 – $1.65 per pound. So, a 700-pound calf could sell for between $945 – $1,155. Steers (male cows) typically sell at a higher price per pound.
Supplies. You may need fencing, feeding and watering troughs, feed, and medical supplies. A barbed wire fence is commonly used as cattle fencing and can cost anywhere from $1 – $8 per foot. Feeding your cattle is another consistent expense. Hay or feed costs vary from $1.50 – $4 per day for each cow. For reference, cows typically stay at a feedlot for four to six months before being sold to a meat packer.
How profitable is a cattle farm business?
The farm’s income comes from selling calves to feedlots or full-weight beef cattle to meat packers. Cattle usually sell by the pound, so heavier cattle sell for higher prices.
For example, if you buy a calf at 700 pounds for $1.35 per pound, then six months later, you sell the cow to a meat packer for that same price per pound at the market weight (roughly 1,300 pounds). You would make back what you purchased it for and then nearly double your investment. However, remember that you would subtract the cost of raising the cattle to weight from the profits.
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.
Are there grants to start a cattle farm business?
While it’s extremely rare to find a grant to start a business, there are occasionally state grants for farms, especially for beginning farmers and ranch owners. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Check with your state’s Department of Agriculture, Farm Bureau, Farm Service Agency, Extension office, and others to see if they have money or other resources available.
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?
Final Thoughts
Starting a cattle farm can be a great opportunity, especially if you already have the land or the revenue to purchase many heads of cattle. Otherwise, the overhead costs can easily surpass the profits made from sales. Nevertheless, cattle farming has seen overall growth, but to have that growth and success, you will need the right environment and finances to support the farm.
2 Responses
Thanks for explaining how you need to consider the costs of cattle once you acquire the permits and land for your farm. My uncle bought a plot of land to start a cattle farm last month and has all the proper permits. I’ll help him find a cattle sale that offers bulls and cows for affordable prices to start his farm.
Best of luck to you and your uncle! Let us know if we can answer any questions!