WHO WANTS TO BE A MILLIONAIRE?
This article was originally printed in the February / March 2001 issue of Tracking The Industry. . .
Bring on big business! Deer-farming just entered its own new millennium!
Never before has deer farming held such promise. Investment affordability and rate of return have finally stabilized to levels that average folk can count on and get excited about. GIC's gained popularity through stability. Now let's multiply GIC returns by many factors and offer the same stability. A phenomenal future is in store folks. Just listen to the rantings and rationale of this self-proclaimed, slightly trained economist.
I've been preaching the "good news" of fundamental deer-farming for some time now, but finally felt obligated to concretely research and figure the details. I owe it to inquirers, investors and deer farmers alike. I should've caught up on sleep first, though, because now I've managed to bolster even my own enthusiasm and my mind is spinning with an endless array of ideas. A future fully dependent on deer farming is a dream increasingly resembling reality.
As long as antlers dictate dollars, the breeding stock market will always be intact. Top-end stock will naturally earn top-end dollars, but affordable value on "good stock" really makes things happen in the world of economics. We are entering a realm of deer farming that Saskatchewan has not yet explored. Uninformed individuals feel faint; all others are exhilarated. Real economics has breathed new life into deer farming. Let's set our sails accordingly in a promising venture that even pessimists can't dispel.
Reality must eventually set in. While high-priced breeding stock prices are something we all strive for and something quite possible (see "Big Dollars for the Big Leaguers"), few of us will actually grow a "Jack-the Ripper." My conscience won't allow me to solely sell that dream to potential producers, but it is with the utmost confidence that I outline the real dividends to deer farming. Our market was built on the harvest of mature bucks and it will now grow by exponential gains in the very same manner. What was a highly attractive end market with $10,000 does should be absolutely irresistible with $3,000- 5,000 does. An industry that many bought into on speculation has finally lost its gamble. REGIS HAS NOW BE-COME RANDY AND I'M GIVING AWAY THE MILLION DOLLAR ANSWER.
It's really rather simple math. Buy every doe you can find and plan on four years for a big return. So far, people have spent huge dollars and hoped/prayed for the distorted market to hold for one more year while they recouped their investment or gambled on yet another year for a large payback. An industry can not be built on this kind of boom or bust mentality. It limits the participants, shortens market durability, and inevitably causes chaos when the unrealistic average value dips. We've got the corporate "big boys" playing our game now and they would just love to see stock dumped because they see the bigger picture. Go ahead and panic if you must, but I'll be there bidding on your does and my secure future. A wiser move may be to revamp the financial plan and simply add 1 or 2 years as an economic adjustment. Farm a few more deer to create the same incredible returns!
Whether a realist, a pessimist or an extreme pessimist - no one can dispute the fact that deer farming is secure and a financially sound if not phenomenal investment. Sellers need to momentarily forget the fantasy of selling $10,000 does and $15,000 breeder bucks. Breed up accordingly, but if it happens, smile and consider it "gravy." Don't "dump" does either as they provide the means to the real end. Buyers need to jump in now while some are yet contemplating. The market will receive enough investment demand (foreign and local) to drive any unreasonably low-priced stock back up to the healthy average.
There are two kinds of "realists." "Realist #1" (click here to view table) plans solely on getting the most for the least to begin with and growing every buck out to maturity. A scenario I paint for investors is not far off. Buy 20 bred does at $3,000 each. Plan on 1.5 weaned fawns per doe (allowing for significant death loss) at a 50:50 male - female ratio. Sell doe fawns each fall at an easy $1,200 each, holding back 4 as doe replacements to be bred at 1 1/2 years of age (re-sell 4 bred does annually to keep the entire herd relatively young). I've drawn data from five separate big buck buyers, brokers and ranchers. The 160-170" class bucks, I'm told, will bring $3,000-6,000 for the producer (actually an average quote of $4,500). Realist #1 always plans conservatively, so uses the $3,000 figure. With any genetic "breed-up", bucks ought to mature by 4 years of age. A $60,000 stock investment earns an astounding annual return, especially in year 4 at $61 200. At these rates, a 327 doe herd earns $1,000,000 annually after year 3. WOW!! Feed is already factored in and all other overhead (fence, corrals, breeding, etc.) is easily covered. At 2.5 comfortable /healthy deer per acre, the 20 doe herd involves a maximum 90 animals on 36 acres. Realist #1 turns out to be our very average deer farmer. Go figure!
Realist #2 (click here to view table) plans on making a nominally greater return than Realist #1 (annually $72,500) but for a higher entrance cost, hopes to cash in on some breeding stock "gravy". $5,000 does vs. $3,000 does should mean better breeding. With genetic get-up-and-go built into the herd from inception, does should resell at a higher than average price. Doe fawn sales, as well, are planned at $1,500 each. Realist #2 involves the same marketing scheme as #1, weaning 1.5 fawns/doe and maturing bucks to year 4 at a conservative $3,000 each. Perhaps the only difference would be an increased chance of higher class, earlier maturing bucks, a quicker return and, a piece of the "breeder buck" pie.
The Pessimist (click here to view table) plans on decreasing stock prices. The pessimist truly believes that the only realist is a pessimist. Wait though! Plan on buying does at $3,000 and reselling (4 per year) at only $2,000 each. Plan on selling doe fawns (except for the replacement 4) at only $1,000 each. Plan on a "give 'em away" $2,000/mature buck (less than half my quoted average). Weaning 1.5 fawns/doe, this still battles the best of mutual funds, earning $40,000 annually by year 4 (a 67% return annually!) Such a pessimist will soon be reclassified!
There remains the "Extreme Pessimist." (click here to view table) The Extreme Pessimist buys up a limit of GIC's every winter and begins each spoken sentence with, "Well, with my luck..." The Extreme Pessimist plans on buying $3,000 does and reselling them (4 annually) at $2,000. The Extreme Pessimist plans on selling doe fawns (except the replacement 4) at only $1,000 each. So far on par with "The Pessimist," bucks are given away as well at $2,000 each. The Extreme Pessimist however, plans on losing half the fawn crop annually, weaning a ludicrous 1.0 fawn/doe every year. Hold on! The Extreme Pessimist still comes out a winner with an annual 46.7% return ($28,000) after year 3. Suddenly, such a producer smiles, and adjusts his/her personal classification.
Ultimately, it is a "no lose" situation! A friend told me yesterday, "Yeah, but things never seem to quite work out as planned." Pick any plan and you come out pretty pleased, if not "totally pumped!" And I haven't touched on my own "Extreme Optimist" plan! One of my data sources stated, "the demand for hunt bucks has never been greater. It's hot right now!" Another source confidently claims, "we'll hunt every available buck. There is no end in sight." Considering conservative economics, such comments gain credibility. "The Realist" will buy up $3,000-5,000 does, hold onto all bucks to maturity, and push his/her annual income skyward. Pessimists can pout about and even plan on lowering prices and high losses, and will STILL emerge holding a handsome return. Our industry is now just beginning and we're going big in a hurry. If we don't take it there the corporate stakeholders will. Lower priced does are the ticket to security for all. In fact, it's so attractive most producers will build their herd rather than part with their money-makers.
Face it, who could look at the economics and then part with a $3,000 doe? One of us will wind-up with a whitetail windfall in the form of another quarter million dollar (U.S.) buck. The rest of us will simply grow out our windfall. Imagine...20 does, small acres, conservative prices and an easy $70 000+ annual income....same plan with more does.....Who wants to be a Millionaire? I'm an optimist and "That's my final answer!"
Randy (Regis) Barks
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