Last month I proposed that, to attract young people back to the ranches where they were raised, they must see ranching as both profitable and fun. I seriously think that the ongoing challenge of making and keeping a ranch profitable is, in fact, fun.
Therefore, the current generation should embrace the challenge of profitability with excitement and energy. I also presented the following slide which I often use in talks as an introduction or summary or both.
To manage for profit:
- Reduce overheads as much as possible.
- Achieve excellent cow herd reproduction.
- Market well.
- Then improve three key ratios:
- Reduce acres per cow.
- Increase cows per FTE (full time equivalent in labor).
- Reduce fed feed vs. grazed feed.
Looking at this holistically or from a systems perspective, you should quickly see a lot of interconnectedness between the items on the list. They are not just six managerial areas or sets of activities that can be considered independent of each other. I will note a few of the many connections and you will probably see more.
For instance, we strive to reduce overheads as much as possible. Overheads are the land, facilities, fences, stock water systems and whatever else is attached it; and also people and the equipment and tools enabling them to do their jobs.
Now, yes, we do need overheads to operate. But the most obvious and justifiable to cut are buildings, equipment and sometimes people.
After reducing total overheads as much as possible, we might be tempted to say, “Job done.” However, what if, by reducing cow size and milking ability and by grazing better, we increase carrying capacity and then reduce the number of acres needed per cow? We have now reduced overhead per cow.
And then, through better organization and time management or decreasing hay feeding (fed feed), we can increase the number of cows one person can take care of. We have not further reduced total overheads, but we have reduced overhead per cow.
I have often seen increases in cows per FTE work almost perfectly in sync with reductions in acres per cow. In other words, as the stocking rate increased as a result of improved carrying capacity, the people were able to take care of the larger number of animals on the same acreage.
As cow herd reproduction improves, we have more animals either to sell or to add to the size of our herd. I become more and more convinced that to get good cowherd reproduction in a low-input (fed feed) environment, the keys are; calving at the right time of year, good grazing management and culling the right cows and selecting the right bulls.
Marketing well is a no-brainer, and too many of us just sort of let it happen. We need to become intent on becoming good marketers.
Good marketing is much easier with calves that are born in a relatively short calving season (good reproduction) and that are uniform in type. I think we are also getting a message from consumers that our marketing will be helped when we have a good story to tell about our soil health practices and animal handling techniques.
When we breed cattle to fit our environment, change the calving season as part of low input management, and change the way we graze, changes in marketing will be required for good success.
Now on to three ratios:
Acres per cow: Think of the economic power of doubling your stocking rate. I know several people who have doubled stocking rates and are still seeing improvements in carrying capacity. Who knows where this will end?
For the cost of water system development and fencing, they have essentially bought another ranch. These costs are low (very low) compared to the cost of land. A good friend told me he didn’t even have to pay property tax on the second ranch which was actually superimposed on top of the first ranch.
Most ranchers who have cut acres per cow by half or more have not increased manpower and have not added equipment or tools. They just need a little more help for three or four cattle workings each year—branding, weaning, shipping and preg checking. What then happened to overhead cost per cow?
Cows per FTE: Assume you pay a ranch employee $30,000 per year. After withholdings, the paycheck isn’t that big. You have attendant costs such as housing, on-ranch transportation, tools, horses, help with insurance, etc. In most of my situations, I found the total of salary plus attendant costs came to nearly $70,000 per year.
If through better organization of activities, people, and herds, the employee can now care for 800 cows rather than 400 cows, that is a change from $175 per cow to $87.50 per cow. That should all come from working smarter, not harder.
Fed feed vs. grazed feed: Every time you put a machine between the mouth of a cow and her feed source, you have just added cost. Sometimes that cost has a payback and is justified, but often (too often) it is simply taking money out of your pocket.
Having worked mostly in the north in places that get snow, I have become convinced that, the more you can replace “fed” days with “grazed” days, the better off you will be.
Again, look at the slide I mention above that I use in my talks. How much of this is facilitated by your passion, ingenuity and life-long learning bringing together the skills for excellent grazing practices and for producing cows that fit your environment and management?
Add to that a willingness to change calving seasons, to consider different marketing alternatives and to continue to seek better ideas. If you can follow the chart as a systems thinker with the listed ideas in mind, you should become a more profitable rancher.
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].