As I start this article, beef steer prices are $1.18 a pound. As a reference point in 2014 about this time they were bringing $2.90 a pound. There aren’t very many businesses that are run that can sustain a 60% drop in their sales price. So what does this do for prices for cattle ranches for sale in Montana? It doesn’t make it easy for Montana cattle ranchers that are highly leveraged and it could possibly put a few more Montana cattle ranch properties on the market for buyers.
Last March we went to a few cattle auctions to get a better idea of the current state the Montana ranchers are facing. Many of them seemed optimistic that the future trends of cattle prices will rise. They are looking at this lean year as just that and waiting for prices to rise. These ranchers have the grit to get through. However, we are going to look at the possibilities of buyers and sellers when it comes to cattle ranches for sale in Montana. Let’s look at it from both perspectives.
After being in the driver’s seat for some time it looks like we might be trending toward a buyers market in cattle ranches for sale in Montana. The lower beef prices reduce income for all ranchers. That income can be shown as a reason per lower acre prices. That lower return on the ranch could affect what a buyer is willing to pay. It also puts pressure on Montana ranchers that are highly leveraged. Those ranchers that owe the bank a great deal and had their sales prices drop the last two years might be forced to sell or turn it over to the bank. Distressed property sales in cattle ranches for sale in Montana, if there are many, would drive acreage prices down.
In today’s USA, ranchers and business owners, in general, are concerned about potentially harmful regulations, lack of enforcing commodities trading laws or just plain price manipulation. Uncertainty is the name of the game in government regulations these days for every business and cattle ranches are not being left alone. Uncertainty is not what Montana cattle ranchers need in today’s uncertain times. Regulations can come out of nowhere and by any of a number of government agencies. Not enforcing futures or commodity trading leaves cattle ranchers uncertain as to what to do now and in the future. Whether it comes as required Veterinarian care, greenhouse gas or dust and ammonia regulation or any of the other thousands of laws affecting cattle ranchers, it makes present Montana cattle ranchers concerned about returns and long-term viability.
The demographics of cattle ranches for sale in Montana are the overwhelming majority of ranchers are 60+ and trending older. The largest growing age group in Montana is 85+. This brings into play a number of factors for a profession that is very physical in nature. Owners become concerned with keeping up with all the tasks of running a ranch and a Montana ranch is even more challenging. Fences have to be mended, animals tended and fed in the dead of winter, government paperwork, water issues with the cold of winter, house repairs, equipment repairs and on and on…Being a Montana rancher is not easy!
Montana cattle ranchers have other issues that weigh on their decision to sell or not. With their average ages 60+, they are concerned about their children. If they have children that aren’t interested in the Montana cattle ranch that becomes a challenge. Especially as they are struggling to keep up with the daily physical tasks of owning a cattle ranch in Montana. If the child has no interest in coming back to the ranch and carrying on the name, timing becomes a major issue vs ability of the owner to carry on. If the Montana cattle ranch owner has multiple children some of which are interested in the ranch and some that aren’t, it becomes that much more complicated. Is there a way to pass it on while still compensating those not interested? Is the cattle ranch owner putting the child that is interested in carrying on the ranch under financial stress by borrowing money? Is that fair?
Will the children use the ranch or the money from the sale wisely? Does the rancher have someone they can trust to watch over the money in a dishonest world? Does the child have the financial abilities to manage the money? This becomes a very complicated situation quickly. If the owner has multiple kids it is very unlikely that all are financially savvy and ready to deal with the newfound wealth. How does the cattle rancher deal with these issues?
The last issue I want to bring up for the seller in this article on cattle ranches for sale in Montana is the likelihood that this is the largest asset by far in the owner’s estate. These are issues that ranchers know about but most don’t want to put pen to paper to see what their tax burden is going to be. There are capital gains that are 20% on anything held over 2 years but also the 3%+ of Medicare tax that goes with it. Then you have business property and other depreciated assets that are taxed at a whole different level. I very much recommend sitting down with a tax adviser before even considering the start of this process. This needs to be weighed against the stepping up of cost basis if the Montana cattle ranch is conveyed at the time of death. The other thing I wish clients would do is to consider a long-term plan if they are thinking they might put their Montana cattle ranches for sale. I can help maximize the value of the ranch if we have several years to compile and enhance things that might enhance value to a buyer, especially, a recreational buyer.
The buyer might be heading into opportune times. Bad times in an industry can represent low entry points for buyers with the right resources to buy low and wait for an inevitable recovery in beef prices and the inevitable rise in the land. The marginal producer goes away at these low prices. People reduce their herds and the weekend rancher gets rid of his herd. At some point, even with market manipulation prices will inevitably revert to supply and demand.
We talked about demographics from the seller side and it could play into the buyer’s hands if there are multiple people trying to sell in a market of Montana cattle ranches for sale. I doubt this becomes a national trend but in smaller markets, it could help drive prices down for buyers in small local markets with multiple properties for sale.
The long-term inflation trend also could be a buyers friend. No one knows when that happens but with our governments deficits and money printing the long term is in the buyer’s favor. If you don’t see the government balancing the budget anytime soon, real assets that would eventually inflate are an investment worth considering as long as the knawing on the leg is not too big. This is why many people including me prefer productive ranch land over something like gold or silver. Buying a Montana ranch right, holding it for several years and enjoying it while you hold it, pays both financial and emotional dividends and a potentially handsome return on your investment.
The trend of more crowded cities, more violent crimes and a craving to escape the city also plays well for values of cattle ranches for sale in Montana. You aren’t going to find crowds in Montana and you have a greater chance of running into an angry moose than violent crime. There is a reason that Big Sky and Bozeman are growing so fast. People want an escape from their stressful lives in the city. Some are looking for a weekend getaway, some are looking for a summer ranch escape and some are looking for Montana hunting ranches that offer multiple species. There aren’t very many places in the world where you can fly fish, hunt pheasant and hunt elk in the evening all on the same day. More and more people are discovering this. The trend is solid and is growing. If you take that with the trend of aging farmers and ranchers you may have good options in cattle ranches for sale in Montana.
While I bought my ranch in Texas as an investment, I have found the family memories to be as important as the returns I have seen on the value of my ranch. Every step you take you remember what happened and what age your children were. It is special beyond my ability to express it. These investments can pay lifelong dividends. Our ranch was indirectly responsible for my son getting a scholarship to play golf at the United States Air Force Academy. It was his dream to go to one of the academies and his getting bit by a Copperhead on our ranch led him to golf, believe it or not.
Another benefit is the hunting and fishing you get as a benefit of owning a ranch in Montana. There is something very fulfilling about increasing the quantity and quality of the wildlife that inhabits your property. The value of the property also will increase dramatically if you add inches to antlers or inches to the length of fish by managing the property well. If you buy a property with a creek that has small 8” trout but through time and stream management you increase the average size to 16” trout you have just made money. The same goes for opportunities to capitalize on the untapped potential of whitetail, pheasant or waterfowl hunting with the right marketing to draw people to a beautiful place that they will fall in love with.
No matter whether you are a buyer or seller considering cattle ranches for sale in Montana, I would love to help you on your journey. Please contact me if you need help on this journey. We have helped clients buy and sell Montana farms and ranches since 2005.
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Buzz Tatom is a ranch owner and has built, run and sold numerous businesses in his career. This gives him a unique background in helping Montana farmers and ranchers navigate the life decisions that we all have to face. Whether it is passing the ranch on to the next generation or planning for eventual sale, his talents and contacts help save clients money and navigate complicated transactions.
He still owns the 5T Ranch in Texas but now calls Big Sky, MT home. His background in Texas included finding run down ranches and rehabilitating them into show place properties. From building lakes, stocking fish, to managing for wildlife he has a proven record of increasing values of properties that have given families great memories and returns.
His successful business background allows him to have good knowledge in contracts, dealing with people and has a wide variance of knowledge from his experience in dealing with oil and gas companies on his properties to manufacturing background to knowing who to call to get answers.
He has a BBA from Texas Tech University and got his MBA from Southern Methodist University. While at Texas Tech, he played football and was a 3 year starter as a Tight End. He bought into a Printing company at the age of 24 and grew it ten fold by the time it was sold in 2011.
Buzz teaches part time at Montana State University and loves mentoring students. He has been married to the love of his life, Kathy Tatom, for 25 years and has one son(Tate) and 2 daughters(Sayler and Emmy).
His hobbies include hunting, fly fishing, improving the 5T and following his son Tate in his golf career at the Air Force Academy. His life is divided between family, volunteering, teaching part time at MSU and Church.