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July 9, 2015
Four years ago, I wrote my first article for BEEF. Now that many of you have read and reacted to many of my pieces, I want to revisit the foundational ideas from which I work. If I were to be critical of our industry, I would say that we deal too much with “how?” and not nearly enough with “what?”
And then, because of so much training in reductionist thinking, much of the forest is not seen or considered because we are looking at and working on individual trees. In much of my writing, speaking and managing, I have emphasized what I call “Five Essentials of Successful Ranch Management.” As I have progressed in management and learning over the years, I have come to believe that, when broadly interpreted, they are in fact the essentials.
Here they are:
Our approach to management should be both integrative and holistic. This means that we integrate into our thought processes, from as many sources as feasible, as much pertinent information as we have time and perhaps money to get. We then have enabled ourselves to make decisions holistically—taking into account and estimating the many effects of various changes that we might be considering.
We have a strong tendency to think of single inputs or changes yielding a single quantifiable output, such as the additional pounds resulting from implants or a wormer. We don’t often go to questions like, “Can I name and quantify all of the changes that would result from moving my calving season one month later?” Or, “What would change and what would be the effects (good and bad) of selling my haying equipment?”
We should strive for continuous improvement of the key resources—land, livestock and people. Naturally, we understand there will be setbacks, but we should expect the trend to be positive. We have a tendency to deal with short-term effects and shortsighted improvements when we should develop leadership that can bring people to a “shared vision” that can last, with updating, for a long time. This “shared vision” should give all stakeholders (owners, employees and others) a clear vision of what their future will be. On the other hand, a lack of vision and leadership—accompanied with mediocrity in the management of land, livestock and people—is why most ranches have difficulty transitioning to the next generation.
We need to acquire and use good analysis and decision-making tools. They need to be simple and reliable, easy to understand and use. This starts with good enterprise accounting information, including good separation of direct and overhead costs. You also need a few key production metrics such as animal days or AUMs per acre, weaned calf crop percentage, pregnancy rate, weaning weight, yearling gain and death loss percentage by age class.
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I also like to look at pounds weaned per acre and yearling gain per acre to get a picture of true ranch productivity as opposed to production per cow. Outside of seedstock operations, you don’t need much more than this to enable the use of good analytical spreadsheets to greatly improve the quality of decision making. If you provide all team members with good production and financial information, they will make better and better decisions.
Wage war on cost. We must do this because of competition. People don’t need to eat meat, and some don’t only because of price. When they do eat meat, it doesn’t have to be beef. So we need to produce our product using methods that can yield a profit for us and still be priced so the consumer will be willing to buy it. Then we must understand that our neighbors, who are usually good friends, are also our competitors. If they can produce a similar animal for $10 per cwt less than we can, they get to stay in business longer when tough times come.
Emphasis on marketing. I learned from a few very astute marketers that our operations were leaving money on the table a high percentage of the time—especially when marketing females. We can do better by considering best time, best place or sale method, and the package we sell—calf, stocker, bred heifer, open heifer, pregnant cow, etc.
Guided by the “Five Essentials” and considering that we must manage:
Economics and finance
and that we have only three ways to improve profit:
Improve gross margin;
and how interconnected these are, I come to the conclusion that we must make our choice of enterprise fit the land that we have or, for the few who are starting from scratch, buy land that fits the type of enterprise that we want.
Then we need to come to a “shared vision” which will declare “why we want to be in business, what we are going to do in this business (the strategic issues), and how we are going to do it.” In all of that, it comes down to becoming better marketers and reducing overheads to the lowest level possible without hurting long-term production potential and then improving three key ratios:
Cows per person
Acres per cow
Fed feed vs. grazed feed
In the context of the five essentials, these are the big drivers. So, that tells me that a young rancher should learn how to graze—I mean really learn how to graze from the soil up. What are we doing to the soil and how is the soil reacting to what we do? What drives increased productivity and health of the plants and animals?
I would then learn all I could about cover crops and no-till practices if I were doing any farming. I would learn how to graze more and feed less. I would arrange cattle in as few management groups as possible with a simple breeding plan that includes some level of heterosis. I would make sure that open yearling heifers were a profitable enterprise. I would learn low-stress animal handling techniques and just not assume that, because I am already good, there isn’t still a lot to be learned. I would breed and cull cattle to be very low maintenance, thus requiring very little of my time.
Ranchers need to learn to think holistically, put strategy ahead of tactics, don’t let convenience drive planning for profit and then learn what the big drivers of profit really are. We can wish and pray for favorable markets, weather and government regulations, but we must manage things we can control recognizing that we need contingency plans for the difficult times.
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Burke Teichert was born and raised on a family ranch in western Wyoming and earned a B.S. in ag business from Brigham Young University and M.S. in ag economics from University of Wyoming. His work history includes serving as a university faculty member, cattle reproduction specialist, and manager of seven cattle ranchers for Deseret Land and Cattle.
Teichert retired in 2010 as vice president and general manager with AgReserves, Inc., where he was involved in seven major ranch acquisitions in the U.S. and the management of a number of farms and ranches in the U.S. as well as Canada and Argentina.
In retirement, he is a consultant and speaker, passing on his expertise in organizing ranches to be very cost-effective and efficient, with minimal labor requirements. His column on strategic planning for the ranch appears monthly in BEEF magazine.
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