D22-Lancaster Fanning Saturday December 22,1984
Brockett’s Ag Advice
What About Leaiiog Dairy Cattle?
There are two types of leasing
for dairy cattle. One is between
“friendly” parties. In this case the
owner is trying to (a) preserve
some breedbig stock, (b) prove a
bull, (c) develop a sale animal with
records you will put on it, (d) build
part or all of a herd before going
into business, or (e) help the
dairyman get started. In any case,
the immediate, primary goal is not
to make money on the lease itself
nor is it to acquire animals. The
only dangers in this type of
program are (a) a misun
derstanding between the two
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By John E. Brocket!
Farm Management Agent
Lewistown Extension Office
parties as to who pays the bills, (b)
a loss of an animal, (c) failure to
put the kind of record on the
animal that is desired, (d) failure
of either party in business which
will disrupt the desired program.
I tisa good idea to get a contract in
writing drawn up between the two
parties. Even then some
disagreements are possible and
should be discussed by the two
parties. These types of leases have
been used in central Pennsylvania
for a number of years. They
usually accomplish the goals of
each party to a limited degree.
THINK AHEAD...
Read Futures Market* on Page 3,
CHRISTMAS JOY
Lease - Purchase
The lease-purchase program is a
completely different type ■of
contract. The purpose of the
leasing company is to make a
return on its investors’ money,
plus a return to the company for
administrative and management
costs. The leasing company really
doesn’t care about the cow records
because their primary goal as far
as the cows are concerned is to sell
them preferably to you. The
price of the cow is usually the price
paid for it or at least the one paid
for the original cow. Their return
would be the difference between
the price of the cow and the rental
charge plus salvage value of the
cow.
In most of the leasing contracts I
have reviewed, the cost to the
dairyman has been very high. In
some cases it has been as high as a
26 percent annual cost. As with the
machinery lease-purchases
discussed last week, dairymen,
considering leasing as an avenue
for acquiring ownership of dairy
animals should budget it out. What
is the cost of leasing in relation to
the cost of buying? Unlike
equipment, the additional risk to
the leasing company will probably
make the cost prohibitive.
Sometimes dairymen are tempted
to lease because they cannot get
the money to buy. I guess my
recommendation has to be if you
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don’t have the equity of the in
come-producing potential to buy,
you’ll get into trouble leasing.
Remember that a cow can only
generate a certain amount of
money. A reasonable rule of thumb
is that you can usually use up to 25
percent of the cash income per cow
to pay total debt payments
(principal and interest) plus rent
for anything. Example: a cow
producing $1862 worth of sales (use
Farm Market
(Continued from Page D2O)
China and host buyers to meet with market development projects,
growers at its annual meetmgs.
A media event which emphasizes
the safety and wholesomeness of
beef is planned with Velsicol’s 1983
contribution to the National Cat
tlemen’s Association. In 1984, NCA
used the $32,210 to publish and
distribute a brochure called
"Myths and Facts about Beef”.
The $97,758 provided to the
National Corn Growers
Association in 1984 is being in
vested in domestic corn markets,
specifically corn sweeteners and
alcohol fuels. In 1985, NCGA
Operation Trade Expansion
monies will continue to be used on
the sweetener and alcohol fuel
programs and other similar
Cap 350 lbs
milk sold per cow not produced)
including regular guaranteed sales
of breeding stock will handle $466
in total debt service plus rent. (The
debt service is for everything
being purchased except land used
to produce sale crops.) Some
farmers are more efficient than
that and could squeeze out up to
$652 per cow, while others would be
in trouble if they went over $2BO per
cow.
The National Pork Producers
Council is using the $20,539
donation made by Velsicol for
consumer education. NPPC’s
programs inform junior and senior
high school students and teachers,
as well as food editors, of the
healthfulness and versatility of
pork in American’s diets. NPPC
funds from Velsicol’s 1985 program
will sponsor a major media event
for 25 women’s magazine food
editors.
The American Dairy Association
participated in the first year of the
program and received $15,501 to
promote real dairy foods at the
National Restaurant Association
show.
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