We at Underwood Farms track our cattle very closely. We operate a registered Hereford herd. When an animal calves, we catch the newborn in the field, place a tag in its ear, weigh it, and steer the calf if it does not have the prospects of becoming a herd bull. We then record all of the information in a spreadsheet.
We understand the need for an animal ID system, and we support the stated goals of the system. We believe, however, that a national ID system will be quietly fought tooth and nail by most cattle farmers, and we understand their reasons.
There are a few reasons that most farmers oppose an ID system.
First, most farmers don’t know how many calves they have in a year. Most have herds with ratios of about 20 cows to one bull, and they get the cows up once or twice a year and take any calves that look to be between 300-700 pounds to market. They don’t know the dam or sire of the animal themselves, and they never tag/brand the animal.
Second, most farmers do not report a lot of their income from cattle sales to the IRS. Without a tracking system, and without dealers/purchasers being required to ask for a tax ID number, there is a tremendous amount of unreported income in the cattle business. By the way, the rules are so complex, that most farmers would have to have MBA’s, spend hundreds of hours tracking herd inventories, cost basis, and tax code changes just to know how to fill in their tax returns. For example, cattle can be depreciated, but only once they are mature cows or bulls. Further, you can take advantage of the small business section 179 accelerated depreciation for mature cows, but not heifers. When an animal is sold, you can recognize the cost basis of the animal (including all capitalized expenses) as recapture at a 25% rate rather than at an ordinary income rate. If the animal actually appreciates from the time that you purchased it, you can recognized the gain as capital gains. The bottom line is that no one knows these rules, and most cattle farmers don’t bother. The lie to the USDA for government payments, and they put whatever on their tax return that will cause them to not have to write the government a check.
Third, many farmers distrust government. They view government as a racket designed to take away their property rights, impose more rules and regulations that cannot be followed in reality, and create programs offering perverse incentives to write them and other farmers checks for something other than the value of the crops being produced.
Cattle Economics – An Overly Simplistic Estimate for Virginia Farmers
Most farmers are in the cow/calf business. In other words, the sell calves once or twice a year. A rough summary of the economics of the business are provided to allow the lay person to understand some of the considerations that of farmers when decided to support an ID system.
The economics of the business are as follows:
Cow production:One calve per year for 7 years on average Cow salvage value: $300 (really $600, but half die or get injured with no value) Annual cow cost: $100 per year (based on above data)
Cow carry/breeding cost: $200 per year (feed/medicine/minerals excl land & labor)
Land cost: $100 per year(rent/fertilizer/fencing) Overhead: $100 per year (tractor repair, diesel, farm truck) Revenue from an average yield of 450 pounds per animal:$500
In other words, expenses are about $500 per year, and revenue is about $500 per year. Those who make money do so by cutting corners. They rent land and don’t fertilize it, planning on leaving it in a few years. They don’t worm and vaccinate their herds. The feed poor quality feeds. They don’t dispose of dead cows. Cutting all corners possible, they maybe make up to $100 per head per year excluding labor. The most optimistic cattle farmer likely doesn’t think he makes more than that.
At a profit of $100 per head per year before labor costs, and at a labor cost of $15 per hour, how many hours can be dedicated to cows for working, tagging, etc?