August 6, 2020
Occasionally I see or hear someone’s description of the ranch of the future. So far, I haven’t seen or heard one that I think does a very good job; and this one may do no better. Let’s consider cattle ranches that, in addition to cattle, may have other livestock or cropping enterprises.
I see all types and kinds of cattle ranches. There are several types of hobby ranches. Some are owned by wealthy people who want to have a fancy showplace where they can enjoy the scenery and outdoor activities.
Without wanting to offend, I struggle to call them ranches. They seem like recreation venues situated on a pretty piece of real estate; and I can’t fault anyone for wanting to add that to their lifestyle.
Other owners act more like investors wanting a place to store and protect wealth. I usually find them to be serious about ranching profitably. If they don’t, they will have trouble protecting their wealth.
I am acquainted with several of these ranches that are making good annual returns. I also know of some where the owners are tired of subsidizing the ranch from other earnings. Several of them have asked me if it is possible for a ranch with no indebtedness to make enough operating return to pay the property tax, all routine maintenance and the operating costs. My answer is that it can if you will manage it—meaning that changes will have to be made.
Then there are family ranches that have been owned and operated by a family for a few years or for several generations. They are the most common and range in size from quite large to very small.
Many small cattle farms or ranches have one or both spouses working a day job away from the ranch to provide insurance and a basic family living. In other cases, one spouse works full time on the ranch. Some of these operators are happy to stay at their current small size and just enjoy the amenities offered by owning and operating a small farm or ranch. Profitability is seldom high and often is not high on the priority list. Others are seriously trying to grow their ranch into a larger full-time operation
So, there are many types and sizes of cattle ranches. According to USDA data from 2019, 62% (well over half) of the beef cows in the U.S. reside on ranches of fewer than 200 cows. More than quarter (27%) are on ranches with fewer than 50 cows. In some cases, these smaller herds of cows are part of a grain or cash crop farm. So, trying to define the typical ranch is very difficult.
As I look at ranches with more than 200 cows operated by at least one full-time family member, I think I see a few trends emerging. These are not yet, and may not become, strong trends. But I think they will be important and place a new look or new characteristics on the “ranch of the future.
One trend is a slow, yet impressive movement among farmers and ranchers to understand principles and adopt practices of soil health improvement. After a decade or more of distortion and terrible miss-use of the word “sustainable,” I hope we can maintain the proper definition of “regenerative.”
If your practices don’t result in quantifiable improvements in soil health and biodiversity with attendant reductions in the use of and need for chemical inputs, they are not regenerative. If, in your ranch of the future, you are going to claim to use “regenerative agricultural” practices, please walk the talk and get the results.
This trend toward better management of soil health is bringing cattle and other animals back to farms. Enterprises are being stacked to take advantage of symbiotic relationships where one plus one equals more than two.
There is a new increase in mixed enterprise farms and ranches. This comes from understanding that diversity of crops, animals, insects, birds, etc. is one of the principles upon which regenerative agriculture is built.
As this type of on-ranch management expands, there is an interesting increase in attempts to market farm and ranch products directly to households and small retail outlets. So, far there have been varying degrees of success, but direct marketing seems to be increasing.
With full time operators there is a trend toward fewer but larger ranches. This is driving a more significant trend of a separation of ownership and management. While this is slow, it is happening.
More people with wealth are seeing agricultural land as an excellent way to protect and store wealth. Its market ups and downs don’t correlate with stocks and bonds; and land will always have its intrinsic value. The operating returns will seldom be high; but operating returns on well managed ranches plus land value appreciation will typically beat the S&P. The problem is that not enough of them are well managed.
The combination of higher ranchland prices, relatively low operating rates of return, land value appreciation and the size of ranch required for a sufficient income for one or two families is making ranchland ownership more attractive for those who can pay cash and use land as a store of wealth. Simultaneously, it becomes less attractive for operating ranchers who will need to use debt to buy a ranch that will not generate enough return to cover the interest rate.
This will provide many opportunities for ranch-raised young people, who can’t return to the family ranch, to instead manage good investor-owned ranches. I have a group of friends who have become top notch managers and are managing for absentee owners who want and sometimes demand profitability. I think that trend will continue.
One other trend is the rapid adoption of technology. This will continue because there are a lot of talented and inventive people developing new technology, eager salespeople trying to sell it and farmers and ranchers (too often gullible) ready to buy.
This is my greatest area of concern; just because we can doesn’t mean we should. (There is something “cool” about new technology.) There is and will continue to be wonderful technology that will make life easier and your ranch more profitable. But there will always be some that will do neither.
It is often ranch specific. What is good for one ranch may not be good for another. Some will certainly not make your ranch more profitable. I will be brave enough to suggest that much ranch technology will cost more than it returns. Be careful. Understand what you’re buying and do your arithmetic.
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.
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