Credit committee invited to a pregnancy check
NORTH PLATTE, Neb. — A banker reviewing a cattle operation’s borrowing plan asked how soon a group of replacement heifers would generate revenue. The rancher opened the gate and offered to introduce him to the person in charge of that department.
The bull stood beneath a cottonwood tree, chewing and giving every indication he had already reviewed the proposal.
“Does he have a timeline?” the banker asked.
“He has a breeding season,” the rancher said. “I’d let him finish chewing before you ask him for quarterly guidance.”
The banker remained on the safe side of the gate. The rancher approved of the decision. It was the first time that morning they’d agreed on an appropriate level of risk without opening a spreadsheet.
Cow-Calf Financing and Replacement Heifers: The Inventory Eats While You Wait
The rancher’s daughter explained the numbers. A heifer held back for breeding is one the family could have sold. Keeping her means giving up that check and paying to develop her. Even if she breeds on schedule and raises a healthy calf, the family has expenses for months before there’s a calf to sell.
She showed the banker a line for feed and another for veterinary work. He asked why the income column was empty for so long.
“That’s the part where we raise the cow that raises the calf,” she said.
Her worksheet, which she handed across the hood of the pickup, shows the first eighteen months of a replacement heifer as a column of expenses with one empty cell at the bottom marked “calf.” A second sheet shows what the same animal would have brought at the sale barn, a figure that appears in the column marked “what we gave up.” The banker studied the two sheets for some time and asked whether the bull had a copy.
The banker nodded. His own employer had spent eighteen months remodeling its lobby, during which time the branch took deposits through a window that used to belong to a fast-food restaurant. He could see how long a project took when the people doing the work insisted on finishing it properly.
He still needed an answer for the credit committee. The rancher suggested bringing the committee out to help at pregnancy check. They could receive the first progress report directly from the veterinarian.
The veterinarian, reached by phone, said he would be glad to host the committee. “I’ll give them each a sleeve,” he said. “Nothing clarifies a lending decision like an arm up to the shoulder. Most of them stay for the first cow and ask to leave before the second.”
The rancher’s daughter offered the banker a pair of boots from the truck. He looked at his loafers, looked at the pen and said he would be happy to review the proposal from the fence. The rancher said that was how most of his lending relationships had worked for forty years.
USDA Farm Loans for Livestock Operations: A Return on Four Legs
USDA operating loan programs can cover eligible livestock purchases and operating expenses, and the agency also offers farm ownership loans for land. On a cow-calf operation, the financing calendar has to account for the time between committing money to breeding stock and receiving revenue from the calves it produces.
The rancher and his daughter showed how many replacements they planned to keep, which older cows they expected to sell and what they would do if forage ran short. The banker asked about keeping fewer heifers this year. They ran the numbers. It lowered near-term borrowing and left them with fewer young cows coming into the herd later.
A person familiar with the bank’s credit committee said the members were split on the proposal. “Half of them wanted to see a timeline,” the person said. “The other half wanted to see the bull.”
On the way back to the pickup, the banker looked over his shoulder at the bull.
“Anything else he can tell me?”
“Sure,” the rancher said. “If you want him to accelerate the timetable, tell him yourself. He’s been very receptive to feedback from behind that fence.”
Five Humorous Observations
- The banker asks the rancher how soon the heifers generate revenue. That’s a great question to ask a guy whose whole business is waiting for something to be born.
- The bull stood under the tree chewing like he’d already read the proposal. He’s the only one at that meeting who didn’t need a spreadsheet to know he’s doing fine.
- The branch took deposits through an old drive-through window for eighteen months. And the banker’s asking the rancher about timelines. Pal, you’ve got a lobby that’s been closed since the last president.
- The vet says he gives the committee a sleeve. A sleeve is the only thing in that meeting that’s actually going to be used.
- Half the committee wanted a timeline and half wanted to see the bull. That’s the entire banking industry. One half runs on numbers and the other half runs on curiosity.