This column will soon come to an end and I thank BEEF for the opportunity to write this column for all these years. As a result of the articles and without spending on advertising, I have had many opportunities for consulting, speaking and managing. These opportunities have led me to many people from whom I have learned much.
Much of what I have written has been learned and borrowed from others. With no desire to plagiarize, I have written with the intent of helping others become better managers and improve their operations. I thank all who have been my mentors and teachers; but space and time won’t allow me to name them all.
I should, however, mention a few. Drs. James Wiltbank, Bob Bellows, Keith Gregory, Larry Cundiff and Don Adams all played an important part in adding animal science to my training in ag economics. Then along came Alan Savory, Stan Parsons and David Pratt who introduced me to concepts of better grazing, running a ranch as a business, and holistic or systems thinking and the complexity all that entails. Now, skipping many who have been very helpful and great mentors through the years, I am learning much from Dr. Allen Williams, Gabe Brown and many good farmers and ranchers about the importance of soil health and how our farming and ranching practices either move it forward or backward.
Following is a very brief review of concepts that I have tried to present to readers and help them understand how the ideas can improve their profitability and quality of life:
Five Essentials of Profitable Ranch Management: I have become convinced that they are the essentials.
- Your approach to management must be both integrative and holistic.
- “Integrative” implies that you become educated by collecting ideas, information, knowledge, experience, etc.
- “Holistic” implies that you will use all your integration to make the best “holistic” decision, doing your best to recognize the interconnectedness of all of the parts comprising the whole.
- Continuous improvement of the key resources—land, livestock and people.
- Continuous improvement of land is almost totally dependent on understanding the principles of soil health and eco-system functions and then using practices for farming and grazing that are aligned with those principles. Farmers and ranchers need to do much better.
- Continuous improvement of livestock comes from improving herd reproduction rates, functionality, health, mobility, disposition, longevity and adaptation to low input management while producing acceptable (not exceptional) growth rates and carcass traits.
- Continuous improvement of people results from creating an environment in which people want to excel and then providing the tools, training, and freedom to do it. Then recognize that leadership (your leadership) is best gauged by the voluntary response of those being led. Invest in the ongoing education of your team.
- Use of good planning and decision making tools.
- With today’s computers and smart phones, we can easily collect, store and present financial and production information. There are mapping and planning tools for grazing management. Use good tools to make good economic decisions.
- War on cost.
- Those who can produce at the lowest cost get to stay in business much longer than those who have high costs, and there are huge differences. Especially attack overheads and fed feed.
- Emphasis on marketing.
- Some of the best changes in profitability have happened when ranch owners and managers have worked to find ways to add value or even to retain values already built in but not recognized. This is especially true in the sale of market cows. Some people call them “culls” when only a few really are. The rest have good value.
Four areas to manage:
- Production We love production; and, as a result, often ignore the others.
- People Don’t ignore the people—especially family. Much can be gained by managing relationships with vendors, cattle buyers, tax accountant, neighbors, etc.
Three ways to improve profit: (from Stan Parsons and David Pratt)
- Reduce overheads
- For existing operations that want or need to make rapid financial progress, reducing overheads is the place to start. It is much easier mentally than emotionally—you just can’t imagine operating without that tractor or stock trailer, etc. The biggest and quickest turnarounds that I have seen have been a result of dramatic reductions in overheads.
- Increase turnover
- There are two ways to look at this: 1) Total volume of sales which can result from additional land, additional enterprises or larger size of operation. 2) Using your ingenuity and better management to create a higher turnover or more units of salable product without changing the amount of land and with minimal or no change in overheads.
- Increase gross margin
- Gross margin is total returns (total sales plus or minus inventory change) minus direct costs. The direct costs for cattle are mostly feed and vet costs (meds and services). This means that you don’t spend money that will not bring a return significantly greater than its cost.
You might be tempted to say that there are many more ways to improve profit. I will say that anything you propose will fit under these three.
Focus on whole ranch profit or profit per acre and not production or even profit per cow. Focusing on production per cow has resulted in bigger, higher milking cows which have led to lower stocking rates, lower conception rates (and/or higher supplementation costs) and fewer pounds produced per acre. Those bigger but fewer calves sell for less per pound.
Major determinants of profit:
- Enterprise mix and choices
- Overheads (Including people)
- Stocking rate, which is affected by:
- Cow size and milking ability
- Range and pasture management
- Fed feed vs. grazed feed
- Calving season
- Herd fertility and reproduction rate
- Careful use of feed supplements and other direct inputs
You have probably noticed that I did not include weaning weight on the list. In a given environment, increased weaning weight always comes with a cost. The most notable costs are feed. Less notable costs are the reductions in stocking rate and herd fertility that accompany bigger and higher milking cows.
Observation skills for managerial excellence:
- Plant diversity and soil health
- Animal health and condition
- People abilities and relationship skills
- Interconnectedness of the above
Excellent management is the successful combination of art and science. Observation skills combined with the ability to take corrective action differentiate between mediocre and excellent. Learning to see the conditions of animals, plants and people and then to observe the interconnectedness between animals, plants and people in an ever-broader context makes for better use of biological and business principles.
Become a systems thinker: A systems thinker is always trying to better understand the complex relationships connecting all the pieces of nature—soil with all its insects and microorganisms, birds, wild and domestic animals, insects of all kinds; climate and its changes from season to season and year to year; the economy and market system; people and their interactions with each other, nature, climate and the economy.
He/she understands that all of this is interconnected and, when one part changes or something is added from outside, there is never a single response; but many things change. Systems thinking, along with good integration of knowledge and ideas, enables holistic management and continually better decisions.
When all of the above is understood and interactions accounted for, a summary statement would be as follows:
For profitable ranching:
- Reduce overheads as much as possible
- Achieve excellent cow herd reproduction
- Market well
- Improve three key ratios:
- Acres per cow
- Cows per FTE
- Fed feed vs. grazed feed
To be continued next month. For much more detail on this summary find all of my articles at: https://www.beefmagazine.com/blogger/burke-teichert
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]. The opinions of the author are not necessarily those of beefmagazine.com or Farm Progress.