A big part of the Jorgensen family's cattle business is focused on leasing herd bulls. This year alone, the South Dakota operation has 3,100 bulls on lease to producers in seven states.
For a Jorgensen Land and Cattle bull, customers pay between $1,400 and $1,700 on a 60- to 90-day lease. Bull-lease customers avoid surprises, such as a flunked semen test, or injuries prior to breeding season. If a Jorgensen bull gets hurt, he is simply replaced with another young sire ready to go to work.
"Most of our customers don't want to feed and manage bulls during the nine months of the year when they aren't being used," Greg Jorgensen said. "Our lease customers can run an additional 1.5 to 2 cows on the feed and forage needed to maintain a bull all year."
Jorgensen bulls are valuable to operators because the breeders follow all the rules that guarantee a great sire. A strict herd-health program is established by their veterinarian, including testing for trichomoniasis, bovine viral diarrhea (BVD) and Johne's disease.
To produce this many bulls, the Jorgensens buy the top half of bulls from multiplier herds, using Jorgensen Angus sires and females carrying the family's line of genetics.
"Most of our bull-lease customers improve uniformity of their calves by using a battery of our bulls," said Jorgensen, who runs the cattle operation with his father Martin, brother Bryan, son Cody and nephew Nick.
Given the success of bull leases, the concept of cow leases doesn't seem far-fetched. Extension educator Aaron Berger, of the University of Nebraska, believes today's high calf prices mean there is enough income from sales to give both owners and leasers a decent return. This is also a way to move new operators into an industry looking for growth.
Berger points out the average cattle operator today is 60 years old. Some are looking for ways to turn day-to-day management over, while still being able to take advantage of the market. At the same time, a new generation is chomping at the bit to get into the cattle business.
For that new generation, start-up capital is often hard to come by. Some estimates put the amount an incoming producer would have to borrow to get started in today's market at $180,000. That is just to purchase enough cows for a 90- to 100-head starter herd, and would not include pasture leases, facilities or feed costs.
Cash-Cow Lease. If the cow owner opts for a cash lease, income is established for the year. The owner may receive a partial up-front payment, with the remainder paid after calves are sold. Cash leases can be more of a burden for the operator, however, as he is paying out money for the lease, as well as mounting expenses, while calves are raised.
Share Lease. In a cow/calf share lease, if prices go up, owner and operator share the additional income, and the leasing cattleman conserves capital for emergencies.
Both parties determine their level of contribution to the total cost of the enterprise. Owners, for example, often contribute handling facilities or forage in addition to cows. The leaser should provide a solid estimate of labor hours and include costs for machinery, trucks and four-wheelers. Feed is the biggest variable cost, and it's important to plan how this cost will be divided.
Berger said typical leases range from an 80/20 arrangement to a 60/40 deal. Any way it's drawn up, a cattle lease needs to benefit both parties and be in writing. He added it should not be a one-season arrangement but a three- to five-year lease. A longer contract makes it easier to plan for grazing, feed and handling facilities. Revisit the lease annually to make adjustments based on current cattle and feed costs.
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