You might ask, “Is profitable ranching possible?” Even though good economists and Extension educators have told me that few or none of the ranches in America with 100 cows or less are profitable, I want to tell you that ANY ranch, regardless of how many cows you have, can be. Let’s examine some of the fundamentals of profitable ranching.

There are four areas that we must manage:

Neglecting any one will have bad consequences. A change in production will usually require a change in marketing and vice versa. A change in either will result in a change in your economics and perhaps in your financing. Any change will impact people; and, yet, it is people who instigate and implement change.

As Stan Parsons and now Dave Pratt have so clearly pointed out in their Ranching for Profit schools, there are three ways to improve profit:

Any management change you can think of will fit under one of these and then will have an effect on and probably cause change to the others.

For 20-plus years, I have been teaching that there are “Five Essentials” for approaching or dealing with these big strategic issues:

Related:7 “what if” questions every rancher should ask

Once we understand the scope of what we manage, the ways to improve profit and the “Essentials” for developing strategies and going to work on the tasks, we must recognize that it is whole ranch profit or profit per acre that we must improve and not profit per animal.

Why not profit per cow? You can change profit per cow by changing cow size or by changing the calving or weaning dates; but what if you have to run fewer cows and reduce the profit per acre? And that is the typical result.

Then we need to understand the major determinants of profit. These are usually not very well recognized or understood, but they are where we need to direct attention:

You will notice that I did not include individual calf weaning weight in this list. It is pounds weaned per acre that is truly important. If you come to understand why the items on this list drive profitability and how you can manage them to best fit your location and management, individual weaning weight will fall about where it should.

You may carefully increase it, but be careful. You may take more away from something economically important, like carrying capacity or pregnancy rate, than you add through weaning weight. Not to say that weaning is not important, but don’t take away more profit than you add.

This all implies that you should cut overheads, market well, use inputs wisely and improve three key ratios:

These ratios correlate very highly with profit and tie back to the major determinants of profit.  The cows per person ratio implies that unless you have a large operation, you will need to have other sources of income to be competitive because you don’t have enough cows to have a high cows per person ratio. In other words, a small herd cannot pay adequately for your full time.  Something must fill in.

When you recognize that almost none of the actions listed above are independent of the others, you should understand that, to make decisions for improved profitability, you should learn to be a systems thinker or even a better systems thinker.

As you come to understand these concepts and apply them in developing a shared vision for your operation and then proceed to make it happen on the ground, you will be able to enjoy profitable ranching.

Teichert, a consultant on strategic planning for ranches, retired in 2010 as vice president and general manager of AgReserves, Inc. He resides in Orem, Utah. Contact him at [email protected].